The $90 trillion wealth transfer aims to rebalance intergenerational income disparities as the Silent Generation and Baby Boomers pass on their wealth to their Millennial and Gen Z descendants. Getting ready for that, however, is another matter.
But when the inheritance in question is a multimillion-dollar asset or a multinational corporation, the question of preparation becomes more acute.
HSBC’s Entrepreneurial Wealth Report surveyed nearly 1,000 high-net-worth entrepreneurs to assess their plans for transferring wealth to their families.
More than a third of entrepreneurs said they plan to leave their company within the next five years. More than half of them want to keep the business in the family, which is an even more popular option for people with assets above $10 million.
But as is usually the case, succession is difficult.
Entrepreneurs have serious concerns that their children will not be able to take over the business or manage their assets responsibly.
One-third of those surveyed emphasized the work ethic of their offspring. Close behind were fears about the lack of interest in the family business, lack of knowledge and lack of skills to run it effectively.
There are also a significant number of people who want their children to break away from the constraints of the family unit and carve their own path in the business world.
“Families seem to be more interested in modern business and the modern economy than traditional things, and we know that’s a concern,” said Family Governance, Family, HSBC Global Private Banking.・Russell Pryor, office advisor and head of philanthropy, told Fortune magazine.
Seven out of 10 entrepreneurs say dealing with the next generation is a key factor in deciding when to exit a company.
But underlying these concerns, says Pryor, is a fear of letting go.
Just over a fifth of people with investable assets of more than $10 million have no plans to transfer those assets. Among all survey subjects,
Pryor said the habits depend on the level of family wealth and the age of the person holding the assets.
The latter may be related to the habits of one group in particular, the Silent Generation.
“The big thing about the silent generation is that they don’t talk about things a lot. And I think there’s still a lot of people who don’t talk about it.”
family outing
To help prepare, HSBC Private Banking is holding bespoke events for its wealthy clients as a seemingly luxurious version of light family therapy.
Father-son, mother-daughter combinations and everyone in between (even just children) attend special events organized by HSBC to prepare for inheritance and succession planning.
“I think the dynamics that are actually going on are really interesting,” Pryor said.
“It’s great to combine these events and provide opportunities for a wide range of conversations.”
This meeting provides an opportunity for families to understand what the transfer of their wealth is like and start a conversation with children about their inheritance expectations and whether they are prepared to take over the family business.
Children are also taught the technical aspects of wealth, receive an introduction to the world of investing, and gain insight into entrepreneurship and philanthropic opportunities.
“So you’re, in a sense, comprehensively exposing all the problems that exist right now,” Pryor said.
The conference provides an opportunity to network with a generation of heirs in similar situations who are unsure of how to navigate the daunting task of inheriting their parents’ estates.
It’s unclear how effective events like HSBC’s will be against obstacles such as denial, next-generation work ethics, and apathy.
But what is clear is that the stick-in-the-sand approach adopted by many current founders is not a permanent solution.
“Sadly, the transfer of wealth is inevitable when a person dies,” Pryor says. “How much you prepare for it is not inevitable. It’s a choice.”
