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
GRAPHIC 11: WHAT IS THE MOST COMMON REASONTHAT HNWIS FAIL TO SUCCESSION PLAN (SUFFICIENTLY)? PLEASE SELECT A MAXIMUM OF THREE ANSWERS.
Highest ranked among the factors hindering succession planning was another issue of intergenerational tension: the reluctance of the wealth owner to relinquish control. Any parent-child
THE SUCCESSION PLANNING STRUGGLE A vital element of private client considerations, succession planning frequently stalls due to intergenerational differences or administration
reluctance to relinquish control
69%
relationship can be a tough one to manage, and wealth can be a complicating factor. “Regular people have kids; wealthy people have heirs,” says one family office specialist. “It’s worth remembering that distinction.” Timing is key and concerns are
anxiety. The reasons for this are complex, and often human and
lack of time and the tendency to ‘put it off’ until later reluctance to discuss wealthwith family members the emotional difficulty of addressing questions linked to mortality lack of knowledge on how to communicate around succession planning
53%
interpersonal in nature. Our research reinforces
“Regular people have kids; wealthy people have heirs – it’s worth remembering that distinction.”
47%
conventional wisdom by showing that succession planning is a top three priority for wealth owners for the coming 12 months, but in spite of this it can still fall down. Family
31%
23%
not unfounded, with one consultant acknowledging that wealth has the potential to “stymie hunger, kill a part of the soul and distract from education”. Wealth owner desires to avoid impeding the personal development of the next generation must be balanced with an appreciation that there may never be a ‘perfect moment’ to have difficult conversations around finance – shown by 47.2% listing ‘reluctance to discuss wealth with family members’ as a key failing, with a further 23.2% pointing to ‘lack of knowledge on how to communicate around succession planning’ (Graphic 11).
dynamics play a crucial role, and disputes can arise from anywhere – but more often than not, from a failure to communicate and manage expectations. Delaying decision-making is a tempting and easy default option, evidenced by 53.2% of respondents identifying ‘lack of time and a tendency to put things off’ as a common cause for failing to plan sufficiently (Graphic 11), but in some cases lack of planning itself creates disputes further down the track. Issues rarely resolve themselves and a lack of planning means that small differences now can become chasms further down the line.
succession strategy disputes
20%
other
5%
OTHERS INCLUDE:
X Spoiled next generations X Heirs may have entitlement issues X Divorce of family members X Reluctance to forgo control during lifetime X Inability to commit to a decision despite taking much advice X Family members spread across
X Concern over long-term care costs X I have experienced these in the past and now discuss all with my family members X Different goals/knowledge between generations X Lives and priorities constantly in flux X It took us a decade to plan and implement the plan.
the globe makes intimate communication difficult
WORLD OF PRIVATE CLIENTS | NOVEMBER 2020 21
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