Awareness of a variety of risks, including those touching on the conflicts that can break out among HNW families, may have been heightened because of the pandemic. But it is clear that many wealthy families haven't yet created a process to handle these dangers.
A study of 183 wealthy family members and their advisors has found that 40 per cent of them haven’t set a way to identify, quantity and mitigate all of the risks they may face. This result comes at a time when risk management has been thrown into sharp relief by COVID-19.
Stonehage Fleming, the multi-family office, conducted the research during the course of the UK lockdown, assessing the impact of COVID-19 across several areas that determine the long-term sustainability of family wealth
The survey showed that family disputes are still considered to be the greatest risk to long-term family wealth (34 per cent), followed by the lack of future family leadership and direction (32 per cent).
Almost a quarter of respondents identified failure to engage the next generation as a key risk. Some 25 per cent stated that there had been changes to roles and responsibilities within the family, with the majority (71 per cent) of this group stating that the members of the next generation were playing a more prominent role.
This news service has spoken to a variety of insurers, consultants, banks and other industry players about whether understanding of, and appreciation about, risk management has increased since the onset of the global pandemic. So far the picture appears mixed. Certain risks, such as health, appear to be more visible, generating a response, such as in higher insurance premiums.
“This global health crisis has reinforced the need to formalise risk management processes, pay careful attention to leadership matters, and educate and engage the next generation,” Chris Merry, chief executive at Stonehage Fleming, said.
Matthew Fleming, partner, head of family governance and succession, at Stonehage Fleming said: “Our survey found that over a third of our participants think that there will be a permanent shift in the key priorities of their families as a direct consequence of the pandemic. Such shifts can also lead to beneficial discussions on the overall purpose of the family wealth, and we are pleased to see more families considering putting this into place.”
Giving more, under the radar
Among other findings from the Stonehage Fleming report, it found that just under a third of respondents actively contribute more to the community and wider society in the wake of the virus pandemic, with 57 per cent having supported projects or causes related to helping combat the pandemic or supporting those most affected by it. Even so, despite the increased focus on how families and businesses are contributing to their communities and society, 79 per cent of respondents still prefer to remain discreet.
The survey was distributed in mid-May 2020 and was closed in mid-July 2020.