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Passing on wealth

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.

Succession planning is a complex process, made increasingly so with the rise of a demographic of mobile individuals with overseas investments and cross-border assets.

To further complicate things, such assets would likely be subjected to multi-jurisdictional legal, compliance and tax issues which could cause value erosion when transferring wealth across generations.

But how should you start? Here are a few important considerations to note as you kick start your succession planning journey:

  • Do you have up to date and professionally drafted wills in place, in all the countries where your assets are based?
  • Have you carefully assessed and chosen investment solutions that can help you avoid situations where probate delays payments to your beneficiaries? Examples of which include FPI’s international protection, savings and investment products which are designed to allow our customers’ assets to be passed seamlessly to chosen heirs.
  • Will your estate be subjected to country inheritance tax on your death and if so, what is your exposure to it?
  • Should you involve your children or other successors earlier on in the process to ensure sufficient preparation time? These may include financial education and practical experiences

Given the complexity involved, succession planning is best done under professional guidance from financial advisers. Financial advisers are trained to help you construct a succession plan that factors in and navigates these issues with ease. As a neutral and independent party, they are also well-placed to work with you and your family to facilitate understanding of the succession line and how assets can be distributed.

Plan early for greater peace of mind

With the right approach and proper guidance, succession planning – as well as conversations about them – need not be uncomfortable or complicated. It is important to factor in succession planning as you plan for your future, and to start thinking about it from an early age. By having clear arrangements in place to protect your wealth and loved ones, you will be free to enjoy life with less worry, secure in the knowledge that your financial planning has been taken care of.

Steve Weston - CEO FPI

Steve Weston – CEO FPI

Message from the CEO – October 2019

Planning for the future

At Friends Provident International (FPI), our business is all about planning for the future. Our customers might be planning for their family’s future, be that for school, university, getting onto the property ladder or for their own retirement.

Find out more

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