How to protect family wealth

Henry Hirzel of UBS discusses some of the effective ways for families to protect their wealth from one generation to the next, paying particular consideration to the family business.

  • While three-quarters of respondents to a UBS family wealth survey said protection is extremely important to them, most haven’t done enough about it
  • The key is trying to guide clients through the whole gamut of family wealth assets
  • Families need to be clear about whether they define themselves by their business, or whether they are effectively building the business to sell it
  • Beating the third-generation trap requires families to answer the more emotional questions first, and engage the next generation in the process

According to a recent study by UBS on issues relating to family wealth protection, it is apparent that there is a lack of transparency for clients around the globe in relation to family and succession matters, said Henry Hirzel in interview.

For example, while three-quarters of respondents to the survey said protection for the family is extremely important to them, they also said that either they haven’t done anything about it, or they haven’t done what they feel is enough to protect that wealth.

Protecting the wealth of a family

Usually when talking about family wealth, people think about their financial assets. But Hirzel said the key is trying to guide them through the whole gamut of family wealth assets – from where they built their wealth through to protecting it for future generations.

This also includes their social capital – how they appear in society – as well as the development of the human capital.

Given that the process is composed of many types of assets, therefore, it is complex to tackle, he said.

The role of a business within families

According to Hirzel, families need to be clear about whether they define themselves by their business, or whether the business is a way for them to generate financial assets which can be used for wider family purposes – effectively building the business to sell it. This is a very fundamental question, he explained.

He added that there are differences between what a business means to a family in Europe and North America compared with what it means to a family in Asia.

In the West, for example, people tend to build businesses to sell them, with very few of the next generation involved running the business. But in Asia, said Hirzel, people build the business to hand it over to the next generation.

Smooth succession planning

The statistics in relation to succession planning show the famous third-generation trap, so Hirzel said the challenge for families is to make sure they handover the business successfully to the next generation, as well as to enable the next generation to lead the business effectively by building it up and handing it over again to the next generation.

To be able to do this, before even putting in place a structure or constitution, he said business owners have to first answer some fundamental questions as a family: first is “who are we?” The second is “where do we want to be?” And third is “how do we decide this as a family?”.

Very often Hirzel said he gets asked to write a family vision or mission statement, or even a constitution. However, he said the value comes from answering the more emotional questions and, more importantly, engaging the next generation in the process.

When it comes to dealing with succession planning for families who are widely dispersed geographically, the challenge is to engage in in-depth discussion, he explained.

First, this means finding a way to get all family members at one table, which involves convincing them that it makes sense to meet as a family with a formal agenda to discuss the key issues they face. At the same time, it is important to combine formal discussions with a social event.


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