FOREWORD | OUR RESEARCH | 2020 AND COVID-19 | 1. TRANSPARENCY | 2. RELOCATION | 3. FAMILY & GENERATIONAL WEALTH | 4. THE ADVISER OF THE FUTURE | ABOUT BDO
NEWVALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSDFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE | CONCLUSION
NEWVALUES, LEGACY AND RISK FAMILY & GENERATIONAL WEALTH
WHAT FACTORS ARE DRIVING NEWAND CHANGING ATTITUDES TO LEGACY AMONG HNWI FAMILIES? PLEASE SELECT A MAXIMUM OF TWO ANSWERS. GRAPHIC 10:
New values dictate the route forward that the next generation is forging, and diversification away from the inherited business or asset portfolio is far more common as a result. This impacts traditional structure of many family offices. “The current private client structure is siloed. Millennials hate hierarchy; they ask questions to challenge authority,” says one impact investment specialist, who believes this is because “they have seen authorities let them down”. Fundamentally, the markers of success have changed. Impact sits alongside, and in some cases above, profit in the pecking order. Next generation often “see failure as an opportunity to learn, whereas the traditional private client landscape does not tolerate failure,” adds the impact investment consultant. A ‘succeed at all costs’ mentality is no longer lauded and celebrated, instead being replaced by a willingness to learn through falling short. Incumbent wealth owners must understand the motivations of the next generation, and acknowledge that passing on wealth may need to be done completely and alongside the relinquishment of strategy oversight, even if this means successors risk undoing the work of the generation(s) before them.
THE IMPACT ON LEGACY The values-driven investment approach as an accompaniment to distinct philanthropic giving is a prime example of how the character traits of the next generation tend to lead their approach when it comes to wealth management. Our research shows this also has implications for legacy and succession planning discussions, with 48% saying that changing (next gen-driven) attitudes to social responsibility and philanthropy are driving new attitudes to legacy among wealthy families (Graphic 10). Younger generations’ desire to positively impact the world started the departure from status quo legacy thinking and current socio-economic conditions have accelerated this trend. Our research shows that, even where next generation is not the driving force for change, attitudes to legacy are still shifting. Graphic 10 indicates that more than two-thirds (69.2%) say this stems from the need to diversify investment portfolios amidst economic uncertainty. Another intergenerational trend is that individuality is more frequently triumphing over traditionalism.
18%
100%
heightening risks to family reputation (from increased media and public scrutiny)
50%
48%
25%
need to diversify
investment portfolios amidst economic uncertainty globally
69%
0%
changing (next generation) attitudes to social responsibility and philanthropy
27% 6%
increasing commercial opportunity in impact investing
other
‘OTHER’ FACTORS INCLUDE:
X Inflationary pressures/social instability/unemployment X Political environment may become very unfavorable for business and HN worth clients X Tax benefits X Leveraging opportunity via technology and innovation X Inheritance taxes
X Protecting the planet X Educating the next generation about their options X More QE means we should double the value of our retirement home X X understanding the world post covid
As one family office adviser observes, “even if next gen hits the buffers, they will have learnt something along the way”.
WORLD OF PRIVATE CLIENTS | NOVEMBER 2020 20
Made with FlippingBook HTML5