HSBC Global Private Banking released its Global Entrepreneurial Wealth Report this week, which explores the views of entrepreneurs and those who have exited their businesses about the transfer of wealth through generations.
Globally, more than a third of entrepreneurs are considering exiting their business within the next five years, according to a new report by HSBC Global Private Banking.
Also, it is not just the older age groups who are planning their next steps: 34 per cent of those aged 18 to 35 are seeking to exit in the same time frame. Entrepreneurs planning to exit within the next five years are already starting relationships with wealth managers, planning how to invest in financial markets and thinking of new ventures, the HSBC Global Entrepreneurial Wealth Report finds.
Business transfer to family members is top of mind for entrepreneurs but many are underprepared, it reveals. Data for the report was gathered from 973 current and former HNW entrepreneurs across nine different markets: France, Hong Kong, India, mainland China, Singapore, Switzerland, the UAE, the UK and the US.
The report underscores the importance of advice around business and wealth transfer – a fact highlighted earlier this week from UBS and its annual study showing that those inheriting wealth overtook creators in terms of the sums involved. Such findings demonstrate why banks have developed teams to advise business owners on transfers, sometimes in the context of helping business owners to create family offices and other structures.
The firm said that nearly four in 10 entrepreneurs have started to transfer their wealth either formally or informally. Another 40 per cent are planning to wait until their later years – a trend that holds true across different regions.
But few entrepreneurs are talking about their wealth succession plan, the survey shows. There are some entrepreneurs who regularly talk about their wealth transfer plans with their family (36 per cent), with this being more likely for those who are currently active in the family business or are first-generation entrepreneurs who have involved the next generation.
However, this leaves almost two thirds (64 per cent) who haven’t yet spoken to their family about their wealth succession plan. Notably, 8 per cent say they never intend to, and this rises to 13 per cent for those with investable assets over $10 million.
Entrepreneurs also have concerns about next-generation preparedness, the firm said. They worry about the work ethic of family members (34 per cent), their desire to pursue personal goals (33 per cent) and a lack of interest in the business (33 per cent). Those with investable assets over $10 million have more specific concerns, in particular their own ability to cede control. For their part, nearly half of next-generation entrepreneurs coming into the family business do want to forge their own path, with 32 per cent largely aligned to the family values but intending to make changes, 9 per cent definitely planning to make changes and 4 per cent looking to redirect the business or start a new one, the firm continued.
Entrepreneurs around the world are also equally family-oriented, the firm added, with over 70 per cent wanting to preserve their wealth for the next generation or distribute it to them. Using the proceeds for charitable causes or sustainable/impact investing is a popular choice for entrepreneurs in India (70 per cent) and mainland China (58 per cent), while this is much less likely in the UK or the US (37 per cent each), the survey reveals.
Other key findings from the report show that entrepreneurs often have a global outlook, with nearly half living in more than one country or territory and three quarters trading with overseas markets. They are not just in search of business opportunities abroad: international investments and real estate are personal drivers.