WORLD OF PRIVATE CLIENTS - PRIVATE CLIENT SERVICES JANUARY 2021 - NET
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FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
PRIVATE CLIENT SERVICES
WORLD OF
PRIVATE CLIENTS
JANUARY 2021
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
CONTENTS
FOREWORD: THOUGHTFUL DECISION-MAKING
AMIDST CHANGE
WORLD OF OUR RESEARCH
PRIVATE CLIENTS 2020 AND COVID-19: DISRUPTION AND
DECISION-MAKING
1. TRANSPARENCY
JANUARY 2021 X The default setting is disclosure
X Privacy concerns persist and deepen.
2. RELOCATION
X Competing concerns
X Navigating public policy and political unrest
X Longer term trajectory, short term disruption.
3. FAMILY & GENERATIONAL WEALTH
X New values, legacy and risk
X Questions linger over ESG & impact
X Philanthropy transformed
X The impact on legacy
X The succession planning struggle.
4. ADVISER OF THE FUTURE
X Understanding, trust and a 360° perspective.
X Technological acceleration.
BDO’S OUTLOOK
WORLD OF PRIVATE CLIENTS | JANUARY 2021 2
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
FOREWORD: THOUGHTFUL DECISION MAKING AMIDST CHANGE
January is typically a time for making plans and To succeed in our business and personal lives, we X How the competing demands of transparency and
thinking about the year that lies ahead. With 2020 must understand and adapt to change, all the while privacy and reputation management are coming
now firmly behind us, it is time to look back on our wendy walton retaining clarity around our purpose, principles and to a head
research undertaken in 2020 which should help us head of global long-term objectives.
private client services | X How wealthy individuals are placing more weight
to carefully put plans in place for the future. bdo uk We feel that the need for thoughtful decision-making on socio-political stability and lifestyle factors in
and being mindful of how best to adapt has never relocation strategies
Private clients have always had to find a careful
been greater.
balance of risk and opportunity in the face of X How new generations are driving an increased
uncertainty and change. In 2020 this became UNDERSTANDING THE SHIFTING focus on environmental, social and governance
more true than ever. LANDSCAPE AROUND US (ESG) issues and philanthropy despite some
Against this backdrop, we carried out in-depth scepticism around rhetoric versus impact
Thank you to all of you who contributed to our research in order to best understand how wealthy
jeff kane X How wealth owners are frequently the barrier
research either by completing our survey or individuals and their advisers are meeting this myriad
chair of global private when it comes to succession planning
undertaking an interview. This report is for both client strategy group | of challenges and preparing for what the next 12
private clients and their advisers - we hope that it bdo usa X Why the HNWI community expect themselves
months may bring.
will assist in their planning over the coming years. and their advisers to become more agile, more
The research, underpinned by quantitative and multi-skilled and more technologically-savvy.
Wealthy individuals and their advisers face qualitative analysis in more than 25 jurisdictions, has
This is the first instalment of an ongoing plan to provide
a new, more complex global landscape. given us invaluable insights that we are delighted to
In many respects, 2020 represented a perfect storm intelligence that helps wealthy individuals and their
Longstanding generational changes, huge be able to share with you. These include:
of short and long-term disruption. The seismic advisers confidently plan and implement successful
economic upheaval, a global pandemic and a effects of COVID-19 continue to rock the global X How an initial wait-and-see attitude to COVID-19 and strategies. Our ongoing research will track how the
stronger emphasis on doing the right thing for economy. Meanwhile, our research shows that trends is giving way to detailed and actionable plans challenges and opportunities they face evolve over time.
society and the environment have collided to generational change is driving new attitudes towards X The extent to which increases in international We hope that you find this report insightful and
create an unprecedented global challenge. We the role of private wealth and its part in delivering taxation are expected useful as you prepare for the future. We also hope
are sure that almost every one of us has been beneficial, social and environmental outcomes.
X How wealth is seeking more diverse portfolios and that the next 12 to 18 months are more positive and
personally affected by the events of last year. bring us recovery, renewed growth and prosperity.
new investment opportunities
WORLD OF PRIVATE CLIENTS | JANUARY 2021 3
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
OUR RESEARCH | KEY FINDINGS AT A GLANCE
OUR RESEARCH
BDO’s World of Private Clients research The actions that wealth owners take now will define the
private client landscape for years to come and influence SURVEY RESPONDENT AND
programme was launched to provide an
understanding of sentiment among the global everything from regulation through to wider societal INTERVIEWEE OCCUPATION 49% private
client
private client community. In particular, we trends that develop in tandem with economic recovery.
4%
private client:
Through quantitative and qualitative inspection and next generation
sought to understand how private clients, next / family member
analysis of where we are today, and what brought us SURVEY RESPONDENT AND
generation wealth holders and the professional
8%
member or
here, we will be better equipped with the understanding INTERVIEWEE LOCATION
8%
other employee of
advisory community are seeking to navigate the and foresight to navigate the road ahead.
family business
plethora of short-, medium- and long-term risks
32%
professional adviser
and opportunities that define the global economy. As part of our research, we conducted an online to family office
/ private client
survey to gather the views of 350+ private clients and community
While initiatives aimed at better understanding professional advisers across 16 jurisdictions globally.
uk sweden
the trends driving the private wealth landscape ireland
have come before, never has such research been We also undertook more than 25 in-depth qualitative canada
netherlands
belarus
luxembourg
conducted at a time that is so drastically defined by interviews with wealth owners, the next generation and switzerland
austria
france
the radical upheaval and cultural and economic reset intermediaries from key private client hubs including monaco
liechtenstein
montenegro
usa spain greece azerbajan
that we see today. Hong Kong, Singapore, Switzerland, the UK and US. malta cyprus afghanistan
To help encourage the open sharing of thoughts and bahamas china
A huge amount of change is upon us, which is both insights, interviewees were informed that they would cayman islands
anguilla
bvi
impacting, and being impacted by, the wealthy. This be quoted anonymously in this report. panama
antigua & barbuda
grenada
philippines
level of change warrants a deeper exploration of both trinidad & tobago malaysia
singapore
its underlying drivers and its future implications.
australia
south africa
new zealand
WORLD OF PRIVATE CLIENTS | JANUARY 2021 4
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
OUR RESEARCH | KEY FINDINGS AT A GLANCE
OUR RESEARCH: KEY FINDINGS AT A GLANCE
OUR GLOBAL SURVEY OF MORE THAN 350 PRIVATE CLIENTS AND PROFESSIONAL ADVISERS YIELDED A NUMBER OF KEY TAKEAWAYS
57%
FOLLOWING THE IMPACT
OF COVID-19
OF SURVEY RESPONDENTS
71% BELIEVE WEALTHY
INDIVIDUALS ARE
moderately or very concerned
92% OF RESPONDENTS
BELIEVE CONCERN 80% IDENTIFIED OF RESPONDENTS
for personal or family reputation political stability as the
expect significant or thoughtful about the privacy and safety risks is critical when making decisions primary criteria in relocation decision-making
alterations to wealth strategies posed by tax transparency around tax structuring and compliance AHEAD OF LIFESTYLE AND TAX LANDSCAPE
9% EXPECT NO CHANGE and reporting requirements 59% SAYING IT EITHER “MODERATELY”
(72%) (65%)
WITH
LESS OR “VERY MUCH” IMPACTS
THAN
2% ARE ‘NOT AT ALL CONCERNED’
A
MERE SAYING IT THEIR DECISION-MAKING
63% OF RESPONDENTS RESPONDENTS
over the extent
69% THAT THE NEED TOOF RESPONDENTS SAID
SPLIT
SAID ECONOMIC WERE to which rhetoric
political and social instability AROUND THE IMPORTANCE OF diversify investments amidst economic
WILL VERY MUCH OR MODERATELY
ETHICAL INVESTING is typically uncertainty is the principal factor driving changing
(17%) (46%) matched by concrete investment with attitudes to legacy among wealthy families
50% 41% RESPECTIVELY
(not particularly) AHEAD OF NEW NEXT GEN ATTITUDES TO
(48%)
AND
SOCIAL RESPONSIBILITY AND PHILANTHROPY
prompt a trend towards individuals (moderately)
relocating over the next 12 months
WORLD OF PRIVATE CLIENTS | JANUARY 2021 5
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
2020 AND COVID-19
2020 AND COVID-19
DISRUPTION AND DECISION-MAKING
GRAPHIC 1:
2020 delivered a radical shock to the global One corporate services provider told us how they But what, specifically, was causing concern? Graphic 3,
TO WHAT EXTENT HAS COVID-19 AND THE
economy, described to us by one investment urge wealth owners to assess how high the risk of overleaf, highlights that the cooling investment climate
LOCKDOWN RECESSION FORCED ALTERATIONS
management professional as an “existential jolt” becoming “cannon fodder” is. “Ostentatious displays TO HNWI WEALTH PLANNING STRATEGIES OVER
is a worry for most (63.2%).
representing a “global heart of wealth will not be well-received.”, THE COMING 12 TO 18 MONTHS? Stock market commentators were quick to caution
attack”. The full effects of they added. RESPONDENTS CHOSE ONE ANSWER. against underestimating the impact of COVID-19.
COVID-19 and the global “Shifting attitudes to
Political and social unrest continues In March 2020, Standard Life Aberdeen Chief
lockdown recession are still to wealth are playing out at
to develop, not least in relation to Executive Keith Skeoch told CityWire that while we had
be understood by all of us, no global, national, local,
racial justice, gender equality and 44% reached “peak panic” in relation to the pandemic, peak
matter which jurisdiction we community and family
ethical capitalism, serving only to pessimism was still to come. Although the subsequent
are based in. It is nevertheless level. Private clients must
further heighten scrutiny of wealth news of a vaccine caused global markets to rally.
anticipated that the road to respond appropriately.”
economic recovery will include holders. Indeed, shifting attitudes to The prospect of increasing tax burdens is also toward
34%
tax policies built upon the wealth are playing out at a global, the top of the agenda (Graphic 3) and we are already
expectation that those who national, local, community and family seeing such concerns materialise, with proposals for
can pay more, should pay more. Also, recent research level. Private clients must respond appropriately. More the introduction, or raising, of wealth tax levies around
in the UK on wealth tax evidenced that public than ever, careful decision-making is paramount. the world. Canada and New Zealand are among those
attitudes show a clear desire for wealth to be taxed Wealth owners should identify the threats and actively considering tax policy changes while, in the US,
more relative to labour. opportunities, establish their priorities in response to the 2020 election was underpinned by conversations
emerging concerns, and make sensible alterations to 13% around the correct and acceptable level of taxation for the
There is an acknowledgement, as one wealth
longer term thinking. Our survey reveals that COVID-19 nation. However, there is also a level of misinformation,
management director told us, that “changes 8%
is causing private individuals to rethink planning rumours and speculation, so it is necessary to navigate
stemming from COVID-19 will be higher taxation
through all of this when planning for the future.
and that there will be a drive for the wealthy to strategies in some way (Graphic 1). The majority of
contribute more”. Non-compliance is being met respondents (57%) are planning either significant or very much / moderately / not particularly not at all
significant thoughtful / minor / no change
increasingly with punitive measures, not least in the thoughtful alterations, while less than 8% plan to do alterations alterations alterations
court of public opinion. ‘nothing at all’. where necessary
WORLD OF PRIVATE CLIENTS | JANUARY 2021 6
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
2020 AND COVID-19
2020 AND COVID-19
DISRUPTION AND DECISION-MAKING
GRAPHIC 2: GRAPHIC 3:
In response, and presumably in an attempt to mitigate
WHAT DO YOU EXPECT HNWI PRIORITIES TO BE OVER THE COMING 12 TO 18 MONTHS? WHICH OF THE FOLLOWING ASPECTS OF COVID-19
these concerns, our survey data shows that private
(RESPONDENTS WERE ASKED TO SELECT UP TO THREE ANSWERS ON CERTAIN SURVEY QUESTIONS. AND THE LOCKDOWN RECESSION ARE CAUSING
AS A RESULT, PERCENTAGES DO NOT SUM TO 100 ON ALL GRAPHICS IN THIS REPORT.)
client priorities for the coming 12-18 months are THE GREATEST CONCERN FOR INDIVIDUALS AND
dominated by seeking new growth and investment WEALTH PLANNERS? RESPONDENTS CHOSE
opportunities (cited in Graphic 2 as a top three priority A MAXIMUM OF THREE ANSWERS.
14% by 66.8% of respondents) and by de-risking portfolios
ensuring continued and mitigating against disruptions (53.2%). cooling economic
regulatory compliance and investment climate 63%
These findings reveal two competing strategies: on
de-risking
23% the one hand wealth owners are actively looking
53%
prospect of increasing
portfolios tax burdens 57%
/ mitigating educating the next generation for the positive growth opportunities that may
against on wealth management
disruptions emerge from uncertainty, while others are choosing asset protection/
a more defensive strategy, focused on de-risking and security of cash assets 48%
26% diversifying to protect existing assets. current (and longer
safeguardiing reputation and
Succession planning also scored highly, likely as
term) travel restrictions 44%
privacy, including against cyber
and physical threats
a combined result of incumbent wealth owners supply chain
being more aware of their own mortality, along with 22%
46%
disruption
the time that lockdown afforded people to address
succession planning prolonging uncertainty
administrative details around legacy and succession. around global real 21%
estate markets
14% Some of us have spent far more time with our close
67%
seeking reputational risk from
new growth legacy and / or philanthropic
families during 2020 than expected, and some of us were heightened public and 10%
/ investment media scrutiny of hnwis
opportunities
efforts (in general) separated by extensive distance and differing time zones.
other
3%
6% It is clear that there is no one road to follow, and
individual circumstance and choice rules, but we
legacy and/or philanthropic
efforts specific to covid-19 chose to examine the environment through four broad
and its aftermath
areas of focus: Transparency, Relocation, Generational
Wealth and The Adviser of the Future.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 7
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK THE DEFAULT SETTING IS DISCLOSURE | PRIVACY CONCERNS PERSIST AND DEEPEN JANUARY 2021 PRIVATE CLIENT SERVICES TRANSPARENCY
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
THE DEFAULT SETTING IS DISCLOSURE | PRIVACY CONCERNS PERSIST AND DEEPEN
TRANSPARENCY
THE DEFAULT SETTING IS DISCLOSURE
GRAPHIC 4:
The transparency agenda has been central their affairs within. Linked to this is the fact that tax One UK adviser compares the approach to traffic in
HOW CONCERNED ARE HNWIS AROUND
to private client planning for some time. authorities are coming under increasing political London: “you introduce all these regulations, but the
POTENTIAL PRIVACY AND SAFETY RISKS POSED
Our research reveals pressure to raise taxes and we may see an increase in result is that traffic is slower”. BY TAX TRANSPARENCY AND INTERNATIONAL
investigations across the globe, such
a clear understanding The tipping point may be closer than one might REPORTING REQUIREMENTS?
enquiries can cause distress and add
and acceptance that to the cost of investing or operating
think. Specifically, concerns over the EU Directive
“There is a clear
transparency requirements DAC6 on mandatory reporting of cross-border 38%
understanding that in that jurisdiction.
are not only here to arrangements persist, with one Swiss professional
transparency requirements
How, then, are private clients adviser observing that, while the need for tax
stay, but set only to are set only to strengthen,
managing their tax strategies transparency is well-understood, “there has to be
strengthen, broaden and broaden and deepen”
to guarantee compliance? Tax a line in the sand and DAC6 is a huge burden”.
deepen. The new reality 32%
regulation is particularly complex Although, DAC6 is not significantly mitigated, what
for private individuals is and further complexity may arise is left cannot be ignored.
that information sharing is as wealth owners grapple with national tax policy
27%
more sophisticated, more thorough and more reforms that are likely to be introduced post-
immediate than ever. ‘Real time’ has replaced pandemic. There is an overwhelming appetite for
‘on request’ and the default setting is disclosure. ensuring compliance to stave off unwelcome surprises
later down the line. As one legal adviser points out
Globalisation and technology have created an “nobody wants another Panama Papers”, and in some
increasingly borderless world for business and cases this has prompted a flight to conservatism.We
individuals. Despite a lag, authorities have gradually are fast approaching the transparency horizon, beyond
been catching up, creating frameworks for inter- which regulation may become onerous, excessive and
jurisdictional cooperation and collaboration. counterproductive. Wealth management professionals
International harmonisation ensures compliance is hope that regulation will speed up with time and
paramount, but this brings new complexities which technology, as there is a need to “remove the grit in 2%
wealth owners are expected to navigate and structure the system and get past endless box-checking”.
very much so moderately not particularly not at all
/ no different to
previously
WORLD OF PRIVATE CLIENTS | JANUARY 2021 9
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
THE DEFAULT SETTING IS DISCLOSURE | PRIVACY CONCERNS PERSIST AND DEEPEN
TRANSPARENCY
PRIVACY CONCERNS PERSIST AND DEEPEN
GRAPHIC 5:
Hailed as an unequivocal good by authorities and However, there is a downside to transparency – and Nonetheless, public scrutiny and the reputational
TO WHAT EXTENT HAS CONCERN FOR
regulators, the reality is that transparency is a privacy is the main price that is paid. The CRS has risks of being thrust into the media spotlight or court
PROTECTING PERSONAL & FAMILY REPUTATION
double-edged sword. Our research reveals the extent mechanisms to safeguard the secure transfer of data, of public opinion must be considered. BECOME A DEFINING FACTOR IN DECISIONS
to which private clients harbour concerns around but these procedures continue to be tested and must AROUND TAX STRUCTURING AND COMPLIANCE?
A majority of private clients take issue with the public
information falling into unscrupulous – or merely keep pace with technological advances to ensure
nature of certain transparency requirements, and the
untrained – hands. leaks do not occur. Another APAC-based fiduciary
vast spectrum of new stakeholders that creates. Public 38%
says the problem comes when information is publicly
Remaining compliant with tax and regulatory beneficial ownership registers have questionable
available, either by design or by virtue of leaks, which
authorities is both expected and accepted. “Clearly, benefit, says one intermediary who believes such 34%
“creates a sense of unease when data is floating
there is a need for authority access,” says one corporate mechanisms are “fundamentally wrong” and may
about in the open”.
lawyer in Cyprus. With the OECD-led Common constitute a “breach of human rights”.
Reporting Standard (CRS) overseeing information This gives rise to associated concerns around physical
While matters of law should be cut and dry, private
exchanges since 2017, individuals are accustomed safety, for example where information falls into the
clients must also decide what level of explanation
to the automatic exchange of information between hands of criminals. Our research shows that 70.8%
or justification they attach to their structures, in the
authorities in participating countries (those that are believe HNWIs are moderately or very concerned
face of public interest and access. This is reflected
on the CRS’ ‘reportable jurisdictions’ list). about the privacy and safety risks posed by tax
by 92.4% of respondents factoring in concern for 21%
transparency and reporting requirements (Graphic
Such measures contributed to a reduction of personal or family reputation when making decisions
4). A mere 2.4% are “not at all” concerned about
deposits to offshore jurisdictions and estimates from around tax structuring and compliance, with 59.2%
such risks.
the UK’s ‘No Safe Havens’ 2019 report suggest that saying it either “moderately” or “very much” impacts
automatic information exchange now covers 90% “When you consider personal safety, does the public their decision-making (Graphic 5). “There is no
of global GDP. But despite signs of the initiative’s really need to know?” asks one Hong Kong based objection to disclosing information, per se, but
effectiveness, campaigners in some jurisdictions trusts and family office services provider, who has there are objections depending on the audience,” 8%
want transparency to go further still. The Panama also worked in North America. This is echoed by a summarises one lawyer. Reputational concerns,
papers, followed by subsequent leaks, have also had European trusts and fiduciary structures specialist who therefore, are now a defining factor in wealthy
an influence. asserts that “shaming in the press is wholly wrong”. individuals decision-making.
very much so moderately not particularly not at all
/ no different to
previously
WORLD OF PRIVATE CLIENTS | JANUARY 2021 10FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK COMPETING CONCERNS | NAVIGATING PUBLIC POLICY AND POLITICAL UNREST | LONGER TERM TRAJECTORY, SHORT TERM DISRUPTION PRIVATE CLIENT SERVICES RELOCATION JANUARY 2021
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
COMPETING CONCERNS | NAVIGATING PUBLIC POLICY AND POLITICAL UNREST | LONGER TERM TRAJECTORY, SHORT TERM DISRUPTION
RELOCATION
COMPETING CONCERNS
The mix of decision-making drivers for GRAPHIC 6:
physical and capital relocation has always HOW IMPORTANT ARE THE FOLLOWING TO HNWIS IF AND WHEN SELECTING A NEW
been complex and contingent upon personal JURISDICTION TO RELOCATE TO? RESPONDENTS CHOSE A MAXIMUM OF THREE ANSWERS.
preference, cultural factors, risk appetite, and
lifestyle priorities. 100% 23% 9%
Acknowledging what is going on in the wider investment personal
50% opportunities reputational
world is relevant now more than ever, and in the factors
new wealth paradigm, our research identifies
25%
that stability remains the most influential of the
many factors driving behaviour.
80% 72% 65%
0% political lifestyle domestic
stability and tax
Local ties and national identity can dictate a lack culture landscape
of movement for some; lifestyle priorities may lie
behind a single relocation; while those that choose
to move for business opportunities or tax advantages
which are less predictable and can change year-on-
year, may be in a constant state of relocation.
20% 4%
education other
system
The consensus view is that taxation is always one “Stability trumps low rates,” explains one legal Beyond broad agreement on stability (identified in
consideration, with 64.8% of survey respondents adviser, while another asset manager warns that “if Graphic 6 by 79.6% of respondents as a key factor
identifying the domestic tax landscape as an you move purely for tax, you might well find yourself to consider if selecting a new jurisdiction), context is
influencing factor (Graphic 6). But rarely, if ever, is it moving back again before long”. king. Those with children will typically value strong
the main consideration. education, with a stable socio-political environment.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 12FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
COMPETING CONCERNS | NAVIGATING PUBLIC POLICY AND POLITICAL UNREST | LONGER TERM TRAJECTORY, SHORT TERM DISRUPTION
RELOCATION
COMPETING CONCERNS
Those with business interests will value stability
along with a reputation as a financial, technology or THE VIEW FROM SINGAPORE
investment centre with a strong labour market. KYLIE LUO | Head of Private Client Services, BDO Singapore
The events of 2020 have potentially thrown
new players into the mix of popular relocation
destinations, as global crisis has shone a light on In the midst of every crisis lies great opportunity and by demonstrating resilience in the face of the pandemic, Singapore has shown itself to
truly stable jurisdictions with strong leadership be an attractive jurisdiction for both individuals and corporates. Our teams here in Singapore have assisted more
figures and well-coordinated crisis responses. One than 300 families from all around the world with the set-up of family offices and tax compliant structures, with a major increase in 2020
Singapore-based wealth management expert notes, despite the circumstances.
for example, that “New Zealand or, Australia may
grow in attraction as places to invest and locate”. As the idea of wealth management is fast gaining traction in Asia, Singapore has also been developing rapidly as a pro-business, progressive and well-
regulated international financial hub for a number of years. With the Singapore fund tax incentives offered by the Monetary Authority of Singapore making
In many ways the travel restrictions imposed in 2020 structures such as family offices efficient from a tax and succession planning perspective, Singapore is an increasingly attractive location for families looking
have caused focus to shift back to family ties and to hold and manage their wealth.
local connections. Comfort, confidence, and security
have joined ‘stability’ as watchwords. In a recent parliamentary session, it was stated that there are at least 200 single family offices in Singapore, a number that has grown significantly in recent
years. Alongside a significant increase in the number of families from North Asia setting up family offices, we are also seeing more families from Europe and
Capital location may be less of an issue in the Americas, including billionaire Ray Dalio (Founder of Bridgewater Associates).
a globalised world, while for human relocation,
a Channel Islands-based relocation expert observes We expect this demand to continue to grow in the coming years, especially as 2020 has given families an opportune time to take a step back, rethink, plan and
“more exotic destinations may be less attractive put in place their succession arrangements. Further, families have been making the most of this down time to reposition their investment strategies as well as
as the focus is on quality across infrastructure, business strategies (where family businesses are concerned) to prepare for the next phase of growth.
healthcare, social, political and legal systems where Singapore also has the new Variable Capital Company (“VCC”) that was launched in January 2020, offering a more flexible vehicle for structuring investments,
people feel comfortable and confident”. which has been a huge success in 2020. We are expecting the VCC to extend to single family offices in the future, which would increase the demand in these
structures further, especially as it provides an attractive alternative to other overseas jurisdictions.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 13FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
COMPETING CONCERNS | NAVIGATING PUBLIC POLICY AND POLITICAL UNREST | LONGER TERM TRAJECTORY, SHORT TERM DISRUPTION
RELOCATION
NAVIGATING PUBLIC POLICY AND POLITICAL UNREST
From a wealth preservation perspective, how is tax Governments understandably need to recoup
policy changing wealth owner priorities when it comes revenues in the face of recession, but “nobody has
to protecting capital and assets? Our research reveals made a wealth tax work,” observes one private office
expectations – but also scepticism around the effective financial planning specialist.
functioning – of wealth taxes and shows how taxation
With tax hikes expected in many jurisdictions as
can serve as both a push and a pull factor.
they seek to recoup funds invested in COVID-related
Public policy is a behaviour-influencing tool. Sometimes support schemes, questions around relocation may
the influences are specific, direct and targeted; other once again rise to the fore. A Swiss adviser points
times the influence and impact may be unintended out that in Europe, “Portugal, and to a lesser extent
or unforeseen. Regardless of the policy motivation, Italy, have grown in popularity”. New tax systems
wealthy individuals are able to ‘vote with their feet’ and for HNWIs in both jurisdictions, in tandem with
relocate in response to tax and public policy reforms. the lifestyle choices offered in terms of climate,
This can be relocation away from a given jurisdiction cuisine and leisure activity, could prove attractive
because of unfavourable policy changes, or relocation as the global recession deepens. With lifestyle and
to a jurisdiction because of favourable incentives. culture identified by 72% as a dominant relocation
determinant, and tax by 64.8% (Graphic 6),
The imposition of various forms of wealth tax and high
jurisdictions that marry both will likely entice.
levels of income taxation have seen French wealth
owners seek residency elsewhere over the years despite
their homeland’s lifestyle attractions.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 14FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
COMPETING CONCERNS | NAVIGATING PUBLIC POLICY AND POLITICAL UNREST | LONGER TERM TRAJECTORY, SHORT TERM DISRUPTION
RELOCATION
LONGER-TERM TRAJECTORY, SHORT-TERM DISRUPTION
GRAPHIC 7:
Alongside tax policy-driven decisions, it is clear that
WILL ECONOMIC, POLITICAL AND SOCIAL
recent socio-political events have had the potential THE VIEW FROM NORTH AMERICA INSTABILITY IN KEY JURISDICTIONS PROMPT
to throw relocation priorities into the air, particularly JEFF KANE | Chair of Global Private Client Strategy Group, BDO USA A TREND TOWARDS INDIVIDUALS RELOCATION
given the premium placed on safety and stability by (OF ASSETS AND / OR RESIDENCE) OVER
private clients. As one investment manager points THE NEXT 12 MONTHS?
out, “2008 was about money and financial security” RESPONDENTS CHOSE ONE ANSWER.
whereas the COVID-19 pandemic “has been more The world was a very different place when we started this study. However, the
profound, prompting questions like ‘are my family situation we have been thrust into on a global level has sharpened the thoughts
and I safe?’”. As some semblance of normality of many respondents and perhaps even accelerated their plans.
46%
returns, the impact of health and social justice crises While at this time there are still many restrictions on travel between countries, that does not
is becoming clearer. necessarily impact the potential for future opportunity and growth.
While the ubiquitous nature of the coronavirus means Despite the unfortunate number of COVID-19 cases in the U.S., the country has historically been
that relocation destinations have not yet been too very resilient in the long term from a business perspective and we expect it to be able to remain on 32%
drastically influenced – “no country is immune to it,” this trajectory.
says a European lawyer – the different approaches of
leadership figures in both navigating the pandemic There is certainly potential for taxes to increase in order to pay for some of the stimulus enacted and
and subsequently bolstering the treasury may provide the changing political landscape will have its impact. However, our clients have continued to preserve
wealth owners food for thought. and are, against a backdrop of change and uncertainty, very engaged in planning the future of their
family wealth enterprise. 17%
In many ways, the core decision remains the same:
what do you want and need from your physical base,
versus those other things you are happy to travel Social unrest is a more divisive issue and this varies relocation driver, only 4.8% of respondents said that
for? Do you fly in and out – rather than relocate – for significantly from country-to-country. Our data shows economic, political and social instability is ‘not at all’
healthcare, golf courses and beaches, for example? that on top of political stability being the dominant prompting a trend towards relocation (Graphic 7). 5%
very much so moderately not particularly not at all
/ no different to
previously
WORLD OF PRIVATE CLIENTS | JANUARY 2021 15FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
COMPETING CONCERNS | NAVIGATING PUBLIC POLICY AND POLITICAL UNREST | LONGER TERM TRAJECTORY, SHORT TERM DISRUPTION
RELOCATION
LONGER-TERM TRAJECTORY, SHORT-TERM DISRUPTION
The result in some cases is a temporary flight of
investment while investors wait to see how events THE VIEW FROM SWITZERLAND “Investment migration has shifted to a
unfold, before potentially returning to markets they STEFAN PILLER | Partner & Head of Tax, BDO Zurich more holistic vision that includes
know well. The Asia-Pacific region provides examples
healthcare and safety.”
of this in action. “If you look at the flight of Chinese
money, international investment left but is steadily
returning; it has moved past ‘wait-and-see’,” says Switzerland demonstrates once again that even in difficult circumstances like
COVID-19, the country remains stable and the economy remains strong. The US State Department suffered “months of near-
one APAC lawyer, while an asset manager points out
paralysis and a long climb from a deep backlog”
that “Hong Kong may have lost some of its lustre, With a very competitive tax system and special arrangements (lump-sum taxation) according to the Los Angeles Times, to the extent
but the financial system remains strong”. for High Net Worth Individuals, Switzerland remains an appealing relocation option for private that it could prioritise only “life or death” requests.
Capital aside, physical relocation from Hong Kong individuals. The recently implemented Swiss corporate tax reform provides new tax planning
opportunities for businesses, especially for innovative firms, with our new patent box and A similar story unfolded in the UK, which has seen
to the UK, in particular, may increase under a new
R&D super deduction. a 172% increase in passport applications from last
visa option that will allow holders of British national
year, while Baroness Williams revealed in response
overseas (BNO) status and their immediate families
to a parliamentary written question in July that the
to apply for entry visas from January 2021.
applications backlog had reached more than 400,000.
The figures in Graphic 7 suggest that, as initial
Conversely, the Australian Passport Office saw a
responses turn into more concrete action plans,
67% reduction in passports issued compared with
further relocation activity should be expected. One
2018-2019. August 2020 saw 14,300 citizens depart
UK firm, specialising in residency and citizenship
Australia, while the number of departing travellers
planning, said it saw an almost 50% increase in the
in August 2019 was 828,000. In the face of travel
number of applications for new nationality during
The firm’s chairman was quoted as saying that Meanwhile, passport application backlogs have piled restrictions, many Australians are not seeking to
the six months to June 2020.
“investment migration has shifted from being about up in many countries during the pandemic, indicating renew their expired or expiring passports, indicating
living the life you want in terms of holidays and that individuals are at the very least assessing their that future relocation activity involving Australia is
business travel to a more holistic vision that includes options with a view to possible relocation. more likely to be inbound, rather than outbound.
healthcare and safety”.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 16FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK NEW VALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE PRIVATE CLIENT SERVICES FAMILY & GENERATIONAL WEALTH JANUARY 2021
FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
NEW VALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE
FAMILY & GENERATIONAL WEALTH
NEW VALUES, LEGACY AND RISK
With the economy under strain and social Culturally divergent approaches to wealth have The next generation of wealth owners may not know The media serves as a daily reminder of how quickly
justice in the spotlight, social attitudes to always been visible, to greater or lesser degrees, with what an internet-less world looks like. The results are this can go off-kilter if it is not carefully managed.
wealth are changing. The next generation is one philanthropy expert observing that, traditionally, varied and numerous but include a greater awareness
“You don’t want to be vilified by the press,” says one
there has been “an admiration of what is going on elsewhere in
also more socially conscious UK lawyer, while a fintech data
of wealth creation in the US, the world.
and values-driven, so wealth intelligence consultant identifies
where wealth is trumpeted more
creation must be handled “Millennials have an For the wealthy, this can create “A good reputation can private clients’ top two concerns
than in Europe, where things
both introspective thoughts as governance and reputational
more delicately than ever attitude to wealth are more discreet”. We must take years to build but can
that borders on the about their own role in society be lost overnight.” risk. “A good reputation can take
before, while environmental, add to this cultural nuance an
uncomfortable.” as well as feelings of guilt about years to build but can be lost
social and governance acknowledgement that new
the wealth gap. “Next generation overnight,” they note.
(ESG) considerations form generations today view, and react
to, wealth in different ways. guilt draws them to beneficiary-
a key pillar of private client led solutions,” says the social impact adviser. “They
investment strategies. One social impact adviser describes millennial take an entrepreneurial approach and see wealth as a
attitudes to wealth as “bordering on the tool, not an identity.”
The traditional bar-bell approach, with philanthropy uncomfortable” and there is increasingly a desire to
acting as a counterbalance for wealth creation engage with wealth in a different way. “Next gen This sentiment shift creates challenges for both
activities, has evolved. The goal is now to align wants to hold business and previous generations to current and future wealth owners, and impacts
wealth creation with the same values that drive the a standard of embedding values into actions,” they everything from investment portfolios and reputation,
family’s philanthropy. explain. Authenticity of approach is vital, and the through to legacy and succession planning.
next generation wants people to “walk the walk in “The wealthy are conscious of giving back and not
In many sectors we are seeing the onset of economic
their for-profit decision-making”.
recession leading to the exacerbation of trends that just taking – they understand the social importance
were pre-existing. Economic ill-health simply serves A huge, standardising force in this generational shift of that,” adds a wealth manager. There is a key
to throw these issues into sharper contrast. So, too, is the combined impact of globalisation, technology balance to be struck involving reputation and
with wealth. and social media. perception management.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 18FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
NEW VALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE
FAMILY & GENERATIONAL WEALTH
QUESTIONS LINGER OVER ESG AND IMPACT
GRAPHIC 8:
With wealth inequality now a routine part of public Such instances of potential inconsistency have Beyond diversification, investment performance is
TO WHAT EXTENT IS RHETORIC AROUND
discourse amid economic, health and social crises, prompted initiatives to define disclosure standards also an attracting force. “Many are willing to see a
THE IMPORTANCE OF ETHICAL INVESTING
the question of whether there is an onus on the (such as the Task Force on Climate Related Financial TYPICALLY MATCHED BY CONCRETE ACTION AND
sacrifice in financials for perceived social return,”
wealthy to ‘do good’ in the world is a common Disclosures). The surge in popularity of green finance INVESTMENT? RESPONDENTS CHOSE ONE ANSWER. says a social impact adviser. But as the market for
one. Philanthropy has been the primary vehicle for has also led to the International Organisation of impact and social investment grows, returns “are at
achieving this, but there is increasingly a view that Securities Commissions formulating a framework or near market levels”.
to harmonise rules and guidance on disclosing 50%
social impact should be more directly tied to wealth As education around this area improves, the
creation and preservation itself. sustainability risks. ESG as a focus area is here to stay.
movement towards a values-driven existence, where
Social impact comes in many forms, and the private However, our data shows that scepticism remains 40% social and financial return are linked to the same set
client community is well-placed to deliver maximum among private clients, with 56% agreeing that ESG- of values, will continue apace.
impact, given the resources at its disposal and its related action matches rhetoric, while 44% believe a
As risk and reward become clearer – and
dominance of investment markets. Rocket-boosters gap remains (Graphic 8).
performance is better tested over time – investors
have been placed behind the ESG movement, with The forward trajectory, though, is undeniable, as will not be able to ignore the opportunity. “It’s a
one wealth management professional noting that evidenced by providers continuing to launch and refine great investment option when you look at long-term
ESG offerings are now a staple part of the investment ESG funds. “It takes a great deal of effort and money to performance, and does some good at the same time;
landscape, rather than a “small tributary off the main launch new funds,” says one banking executive. “Firms that’s a pretty compelling proposition,” says one
river”. “It’s like going to a restaurant these days and don’t do it for a laugh or because it’s a passing trend.” investment management professional.
seeing vegan options appearing on menus where you
Investor appetite may initially have been driven by
wouldn’t expect to see them.”
next generation attitudes, but there is a growing
Climate change and the environment, where the realisation that this is not only a beneficial way
visible impact is clearer to see, have been joined by of investing for ‘good’, but also a sensible part of
a renewed interest in governance issues, for instance portfolio diversification. “There’s a place in any 4%
in the wake of multinational fast-fashion retailers portfolio for sustainable and responsible investing,” 6%
being found to fall short of ethical standards around says a corporate administration and family office
very much so moderately not particularly not at all
working practices despite having positive ESG ratings. solutions specialist. / no different to
previously
WORLD OF PRIVATE CLIENTS | JANUARY 2021 19FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
NEW VALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE
FAMILY & GENERATIONAL WEALTH
PHILANTHROPY TRANSFORMED?
GRAPHIC 9:
Alongside moves to better reconcile financial As with transparency, however, philanthropy may However, research from Candid and the Center for
HAS COVID-19 HEIGHTENED SOCIAL PRESSURE
performance and social benefit through ESG be a double-edged sword. With a spotlight on the Disaster Philanthropy shows around $12 billion
ON WEALTHY INDIVIDUALS TO ENGAGE MORE
investing, there remains a role for distinct wealth gap, people are both aware of, and angry worth of philanthropic giving in the first half of 2020,
IN ETHICAL AND PHILANTHROPIC INVESTMENT
philanthropic efforts. Whether through charitable ACTIVITIES THAT DELIVER SOCIAL BENEFIT about, wealth inequality. In some instances, public outstripping donations made for any other disaster
giving, establishing foundations, or setting up donor OUTCOMES? RESPONDENTS CHOSE ONE ANSWER. opinion takes over and there can be “a negative on record, so it is happening regardless of any
advised funds that integrate with existing wealth perception that the uber-wealthy are dictating perceived ‘pressure’. BDO UK’s recent publication,
management plans, wealth owners have a number of policy via philanthropy,” says one philanthropy PrivateView on Philanthropy, takes a closer look at
tools through which to pursue philanthropy. Again, consultant. This may leave philanthropists in a “no- philanthropy in times of uncertainty, particularly
inter-generational forces come into play. 40% 40% win situation” and is a reminder that while the focus this year.
is rightly on outcome and impact, not on optics, a
If sceptics previously regarded charitable giving as Reassuringly, and as has been seen with the
role may remain for reputation management.
a cathartic act, they now see a far more engaged adoption of certain technological solutions mid-
approach motivated by not only the theoretical Crises often breed surges in philanthropy and this pandemic, crisis-mode administration and reduced
notion of ‘doing good’, but by achieving tangible is evident on a worldwide scale with COVID-19. bureaucracy has kicked in. This reduction in red tape
impact. “It’s no longer a once-a-year cheque to one Philanthropy has already seen activity targeted means the lag time between pledge and impact is
particular organisation” says one financial planner at helping communities and health systems cope shortened. While some due diligence processes and
who has worked in multiple jurisdictions including with the immediate threat of coronavirus, while the governance frameworks will return, or be retrofitted,
Switzerland and the UK. “The next generation sector will also play a vital role in mitigating some of this streamlined approach should continue post-
is more hands-on, whether through fundraising, the longer-term economic fallout. pandemic. The appetite is there; process must not
sitting on boards or being actively involved in the serve as an off-putting factor.
Our research shows no clear consensus on COVID-19
businesses themselves.”
12% heightening social pressure on wealthy individuals
Next generation interest in philanthropy is to engage in philanthropy, with only 12.4% saying
unsurprising. It can be a good method for financial
8% the virus ‘very much’ heightened pressure to give
engagement and education, by putting the focus more (Graphic 9). A majority (80%) combined to
on people, rather than on money. Philanthropy can say social pressure was ‘moderately’ heightened
“bring humanity to wealth” notes one consultant. very much so moderately not particularly not at all
(39.6%) or ‘no different to previously’ (40%).
/ no different to
previously
WORLD OF PRIVATE CLIENTS | JANUARY 2021 20FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
NEW VALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE
FAMILY & GENERATIONAL WEALTH
THE IMPACT ON LEGACY
GRAPHIC 10:
The values-driven investment approach as an New values dictate the route forward that the next
WHAT FACTORS ARE DRIVING NEW AND CHANGING ATTITUDES TO LEGACY AMONG HNWI FAMILIES?
accompaniment to distinct philanthropic giving is generation is forging, and diversification away from
RESPONDENTS CHOSE A MAXIMUM OF TWO ANSWERS.
a prime example of how the character traits of the the inherited business or asset portfolio is far more
next generation tend to lead their approach when it
comes to wealth management.
common as a result. This is impacting the traditional
structure of many family offices. “The current private
100% 18%
client structure is siloed. Millennials hate hierarchy; heightening risks to
Our research shows this also has implications family reputation (from
they ask questions to challenge authority,” says one 50%
for legacy and succession planning discussions, increased media and
impact investment specialist, who believes this is public scrutiny)
with 48% saying that changing (next gen-driven)
attitudes to social responsibility and philanthropy
are driving new attitudes to legacy among wealthy
because “they have seen authorities let them down”.
Fundamentally, the markers of success have
25% need to
diversify
investment
48%
69%
0% portfolios
families (Graphic 10). changed. Impact sits alongside, and in some cases amidst
changing (next
generation)
above, profit in the pecking order. Next generation economic attitudes to social
Younger generations’ desire to positively impact the uncertainty responsibility and
often “see failure as an opportunity to learn, globally
world started the departure from status quo legacy philanthropy
whereas the traditional private client landscape does
27%
thinking focused on accumulating and preserving
not tolerate failure,” adds an impact investment
wealth, and current socio-economic conditions have
consultant. A ‘succeed at all costs’ mentality is no
accelerated this trend.
longer lauded and celebrated, instead being replaced increasing commercial
opportunity in impact
Our research shows that, even where next by a willingness to learn through falling short. investing
generation is not the driving force for change,
Incumbent wealth owners should understand
attitudes to legacy are still shifting. Graphic 10
the motivations of the next generation, and
indicates that more than two-thirds (69.2%) say
acknowledge that passing on wealth may need to be As one family office adviser observes, “even if next
this stems from the need to diversify investment
done completely and alongside the relinquishment of gen hits the buffers, they will have learnt something
portfolios amidst economic uncertainty.
strategy oversight, even if this means successors risk along the way”.
Another intergenerational trend is that individuality potentially undoing the work of the generation(s)
is more frequently triumphing over traditionalism. before them.
WORLD OF PRIVATE CLIENTS | JANUARY 2021 21FOREWORD OUR RESEARCH 2020 AND COVID-19 1. TRANSPARENCY 2. RELOCATION 3. FAMILY & GENERATIONAL WEALTH 4. ADVISER OF THE FUTURE BDO’S OUTLOOK
NEW VALUES LEGACY & RISK | QUESTIONS LINGER OVER ESG & IMPACT | PHILANTHROPY TRANSFORMED? | THE IMPACT ON LEGACY | THE SUCCESSION PLANNING STRUGGLE
FAMILY & GENERATIONAL WEALTH
THE SUCCESSION PLANNING STRUGGLE
A vital element of private client considerations, Highest ranked among the factors hindering succession
succession planning frequently stalls due to ED VAN DE VIJVER | Senior Manager, Family Business Services & Mediator planning was another issue of intergenerational
intergenerational differences or administration specialising in conflict mediation in Family Businesses | BDO Netherlands tension: the reluctance of the wealth owner to
anxiety. The reasons for this are complex, and often relinquish control. Any parent-child relationship
human and interpersonal in nature. can be a tough one to manage, and wealth can be
a complicating factor. “Regular people have kids;
Our research reinforces conventional wisdom by From a psychological perspective – and as our research shows – it can often wealthy people have heirs,” says one family office
showing that succession planning is a top three be difficult for family members to discuss themes that simultaneously impact specialist. “It’s worth remembering that distinction.”
priority for wealth owners for the coming 12 months, business and personal. Restraint and conflict-avoiding behaviour are common.
but in spite of this it can still fall down. Family Timing is key and concerns are not unfounded, with
dynamics play a crucial role, and disputes can arise Talking about sensitive issues that could lead to conflict risks upsetting the balance, and one consultant acknowledging that wealth has
from anywhere – but more often than not, from a unconsciously people steer away from it. However, this can have the opposite effect. Avoiding the the potential to “stymie hunger, kill a part of the
failure to communicate and manage expectations. issue means that communication suffers, and most conflicts are founded on the fact that people do soul and distract from education”. Wealth owner
People don’t plan to fail, but they fail to plan. not understand each other. desires to avoid impeding the personal development
Delaying decision-making is a tempting and easy Education systems rarely teach people to talk about feelings or emotions, and this can provide of the next generation must be balanced with an
default option, evidenced by 53.2% of respondents barriers to success among businesses. Those that are embedded in the family’s complexity may find it appreciation that there may never be a ‘perfect
identifying ‘lack of time and a tendency to put things difficult to extricate themselves from this tension in order to make sound decisions. moment’ to have difficult conversations around
off’ as a common cause for failing to plan sufficiently finance – shown by 47.2% listing ‘reluctance to
That’s where an adviser who has intimate knowledge of the family and business, but who ultimately discuss wealth with family members’ as a key failing,
(Graphic 11), but in some cases lack of planning itself sits outside the core system, can add real value. Bringing perspective, focus and instilling a systemic
creates disputes further down the track. Issues rarely with a further 23.2% pointing to ‘lack of knowledge
approach is a task that requires not only technical know-how but, crucially, ‘soft’ social skills.” on how to communicate around succession planning’
resolve themselves and small differences now can
become huge ones further down the line. (Graphic 11).
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