Dynasty: It makes rich drama,
but poor family-office management.

Think smart succession, instead.

Globally, a Great Wealth Transfer is unfolding.  In the coming decades, baby boomers are expected to transfer an estimated USD 68 trillion to the next generation[ref].  The trend highlights a pressing need among family offices to focus on the impact of succession on wealth preservation. Family offices find themselves in the business of creating dynasties.

At present, these processes are fraught with mismanagement and planning procrastination.  On one estimate, only about half of the families surveyed have a clear succession plan in place[ref]. Life’s unpredictability leaves families scrambling to react to health emergencies, death, and arbitrary succession planning.

Communicating the need

Personal excellence may build destiny; however, dynasties are built on familial excellence. Principals need to carefully consider how they choose to empower their successors, and incrementally cede control and wealth.

Begin by clearly articulating expectations and hopes for the family business and legacy. Block every family member’s calendar for regular and honest conversations to understand and manage each other’s changing expectations. Create a mutually agreed-upon plan that acts as a reference point to address any issues that arise from expectation mismatch.

The volume and complexity of financial assets involved leave U/HNIs vulnerable to the perils of a hastily thought-out succession plan. Taxation, non-traditional family structures—including half-siblings, adopted children, and unmarried partners—and complex asset holding structures complicate the smooth transition of wealth.

Navigating these intricacies requires tailored solutions. They need to be deliberated upon at regular intervals. Forethought in planning can help reduce tax burdens, prevent legal disputes, and frayed emotions.

Securing a smooth transition

Involve trusted advisors from your family office to provide timely advice and build a rapport with the family. Your family office is a repository of all your investments, charitable contributions, and assets and liabilities. Principals should also maintain an encrypted list of information like online banking details, passwords, PINs, and locations of important documents. Digitize all essential documents such as agreements, health records,  insurance papers, and even art collections.

Once bolstered with a secure document vault, the family office becomes a storehouse of all your transaction papers too. It thus becomes the one-stop place for all stakeholders: family, portfolio managers, accountants, lawyers, and executors, to gather the information they need to perform their duties effectively.

While family offices are widely known for their asset allocation capabilities, they must also excel at serving the long-term vision of multigenerational wealth preservation, creating dynastic families. Because only well-managed families endure, principals must take a purposeful approach to empowering successors and ceding wealth. Entitlement is out and excellence is in.

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