The author of this article, working with UHNW individuals, identifies how many such people haven't made plans to pass on wealth and businesses to families, but also found that they are motivated to hand over wealth. This seeming contradition prompts a number of thoughts.

The following article comes from Caroline Kitidis (pictured), who is the global head of the UHNW segment, HSBC Global Private Banking. The editorial team is pleased to share these insights and values feedback. The usual disclaimers apply to views of external contributors. Email tom.burroughes@wealthbriefing.com if you wish to respond.

Wealth and succession planning is rarely at the top of anyone’s agenda, but it is often the case that the wealthier the individual, the more likely this conversation gets pushed back for another day. 

When HSBC Global Private Banking recently carried out its first Global Entrepreneurial Wealth Report, this trend came to the fore. The survey of 973 entrepreneurs across nine markets found that as many as one in four ultra high net worth individuals had made no plans to pass on their wealth or businesses to their families. This was more than twice the rate of the global survey average. 

This was not because UHNW individuals are less likely to want to pass on their business or wealth. In fact, it’s quite the reverse: our survey found that UHNW entrepreneurs are more motivated to do so. 

The complexities of wealth
So why this apparent contradiction? We know from talking to clients that wealth – while bringing many benefits – often creates more complicated lifestyles with homes and businesses that cross a large number of jurisdictions and markets. This can make difficult conversations about succession even more complex. 

As our survey showed, around a half (52 per cent) of UHNW entrepreneurs have more than one business, compared with one in five (19 per cent) for the rest of the respondents. They are also more likely to live global lives, with geographically dispersed businesses and families. Around three-quarters (73 per cent) live in more than one country and nine out of 10 (89 per cent) own businesses that conduct trade across borders. 

When family members are living in different countries from each other, it is likely that they will need to navigate a myriad of legal and tax implications for their assets, accounts and structures. Making plans is even more difficult if you do not know which country your child will ultimately choose to reside. For example, the only child from a Hong Kong-based family business may initially study in the UK, move to New York for their first job, before setting up a new venture in the Middle East. It could take many years – if ever – before they return to their family base in Hong Kong.

We also know that it can be difficult for a UHNW patriarch or matriarch to let go of a business which they have built from scratch. The survey showed that nearly one third (32 per cent) of UHNW entrepreneurs said their top concern for passing on their wealth was their own inability to give up control – more than double the rest of those surveyed. 

In addition, UHNW individuals can be cautious about pushing their children into inheriting such a responsibility, knowing how much hard work is required to run and build a business, and aware of the burden of expectation placed on the next generation. In our survey, 41 per cent of UHNW entrepreneurs said they were concerned about the stress placed on their heirs. A similar number also wanted their family members to pursue their own personal routes or goals. 

Finding shared values
When advising UHNW clients, we know that it is vital to be sensitive to their needs while making sure they are given objective advice. 

A key risk is that UHNW individuals pass on their wealth at their death, but with plans that the rest of the family oppose. Such unexpected surprises are avoidable by at least ensuring that families are having conversations with each other. Through such discussions, family members can find shared values to incorporate into a succession plan. 

Where differences among the generations persist, there is a wide choice of solutions and techniques for finding resolutions. What will work for one family may not work with another, with each scenario deeply influenced by culture, generational stage, geography and more. 

Sometimes, it may be necessary to seek outside counsel, attorneys, mediators or advisors to provide an open and impartial forum. In other instances, a UHNW individual could benefit from a family office structure, which brings in third-party expertise to help professionally manage the family’s wealth, plan for the succession, and incorporate and educate the family over time. 

Starting the conversation early 
Whatever the solution, we remind clients that succession is ultimately a process and not a single event. They shouldn’t feel the need to plan the succession in one go. They can plan the transition over a period time, knowing that circumstances will need to be managed carefully throughout. 

And, of course, a conversation about succession planning needs to be just that – a conversation. This means listening to what the next generation have to say. In our experience, we often find the younger generation are highly engaged and passionate about their family business, but their ideals may differ or they may feel that they lack experience to take on running the business. 

At our Next Gen conference, which we held in Dubai in January, we helped provide educational support to younger family members, as well as a social network so they can get more hands-on experience in running a business.

This is why involving the next generations from an early age can pay off significantly in the long run. Talking openly about what both the senior and next generation wish to achieve with the wealth and how it is underpinned by common values can make a successful transition.