Managing family dynamics at top of UHNW’s financial agenda

Thursday, November 28, 2013
  • Half of respondents have misgivings about the younger generation managing the family wealth, according to Smith & Williamson’s latest research
  • Improved communication between younger and older family members is top priority
  • Greatest threat to wealth is financial mis-management
  • Only half of respondents have changed succession planning in last ten years
  • The ‘30s’ are seen as watershed age

New research from a survey of ultra-high net worth (UHNW) families, with a combined wealth of over £1billion, underlines concern about passing wealth to the next generation.

Half of the families taking part in a survey by Smith & Williamson, the investment management and accountancy group, have misgivings about the younger generation managing the family wealth.

“Managing family dynamics is a central theme to our research, however, despite concerns regarding the younger generation taking responsibility there is greater willingness to involve the next generation at an earlier age than previously. Participants typically commented that ‘30s’ is the watershed age,” said Charles Gowlland, investment management partner at Smith & Williamson.

He continued: “Where there are concerns about the younger generation’s ability to handle matters, the priority is to improve communication between the generations. Furthermore, one in four respondents commented that family members are poor at communicating on financial issues, which suggests that a substantial minority need to work harder at this.”

Asked about succession planning, only half of respondent families had changed their plans in the last ten years.

“It is perhaps surprising that more UHNW families in our survey have not amended their plans in the last ten years.  The standard triggers for reviewing a Will – which is just one  small part of succession planning - include marriage, divorce*, the birth of a child and death of a family member.  It is important that families review their succession plans in light of such events and I would suspect that some are not doing this which could give rise to major problems down the line,” commented Frank Akers-Douglas, tax partner, also at Smith & Williamson.

He added: “Finding effective ways to train younger family members to take control are also issues for many participants. Besides improving communication between generations, there is widespread feeling that young adults need to establish their own careers and independence before benefiting from significant family wealth.”  

“Despite any concerns regarding the younger generation’s ability to take the reins, we are seeing more openness within families than was the norm just 20 years ago. The use of the internet and social media can also be helpful but ultimately, there is no substitute for getting round a table.”

Managing threats to long-term wealth are naturally seen as a priority, although investment risk is viewed as a part of life. However, financial mis-management is considered the greatest issue. Tax and legal changes are the second most serious matters with volatility in financial markets and children ‘squandering’ wealth equal third.

Gowlland says: “Sustaining wealth requires focus, time and careful management – this applies whether you are part of an UHNW family or trying to maximise your retirement provision. Taking the long view, spreading risk through diversification and not taking snap decisions are wise strategies which everyone should keep in mind.”

39 families took part in the research, with a combined wealth of over £1billion.

*Office for National Statistics (February 2013): 42% of marriages end in divorce

Highlights and themes from the survey

How well equipped do you think the next generation is to take over managing the family wealth?

  • Half of our respondent group has misgivings about the younger generation taking over

If, in your view, the next generation is not well equipped to handle the family wealth, what steps are you taking to improve their understanding of what is required?

  • Priority is to improve dialogue between the generations

How effective are family members at communicating with each other about financial management issues?

  • 1 in 4 respondents feel communication is poor or very poor

How do you organise family meetings?

  • 76% have some form of family meeting, either formal or informal

If you have family meetings, how frequently do you hold them?

  • Of those who hold meetings, 79% have one or more a year

Have you changed your succession planning in the last 10 years?

  • Just over half of respondent families have changed their plans

What are the threats to your family’s long term wealth?

  • Financial mis-management ranked marginally ahead as the greatest threat to wealth.

To request a copy of the report, please follow the link here.

For further information, in the first instance, please contact Smith & Williamson’s Press office: Kate Harrison or Tamsyn McLennan 020 7131 4228 / 4264



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