We need to start talking about succession planning
The Chinese saying, “Wealth never survives three generations” is an ancient wisdom that is still applicable in the modern world. According to the annual UBS/PwC Billionaires report, 70 per cent of billionaire wealth dropped below the billion-dollar mark once it went beyond the first-generation, and a further 20 per cent was gone by the end of the second-generation.
A recent study by RBC Wealth Management shared that we are about to witness the largest transfer of billionaire wealth worldwide – an estimated USD 2.4 trillion is due to change hands in the next two decades. What’s alarming about this, is that fewer than one in every three high net worth families have established a complete wealth transfer plan.
People procrastinate about succession planning for various reasons. Common reasons include concerns that passing on wealth may leave beneficiaries less motivated or cause a divide in the family. Furthermore, it could be a tricky topic to broach with familial relations, business associates and partners – particularly in Asia, where many believe that discussions about the death of a loved one or the handover of a business can bring bad luck.
If these echo your sentiments, fret not! One possible solution could be to engage a professional financial advisor to guide you through the process.
Without proper succession planning, wealth may disappear
A good succession plan should mirror your assets, covering all bases across estate planning, investment planning, wealth transfer and even charitable giving, and enable an orderly transition process that retains asset value whilst ensuring they get passed on to your chosen beneficiaries. Conversely, lack of planning could leave family wealth and financial assets exposed to probate costs, complex inheritance laws and regulations, leading to the disappearance of wealth. It could also cause emotional distress for your loved ones if disputes and power struggles occur within the family.