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Family offices aren’t sure if the heirs will be able to run a $19 billion business well when they take it over.
Rich families’ children and grandchildren are facing a number of problems before they get their big fortunes.
The next generation of the ultra-rich, who expect to get about $19 billion from their parents, say they are ready to take over.
The people in charge of managing the wealth of families aren’t so sure.
A study released on Tuesday by Campden Wealth and BNY Mellon Wealth Management surveyed 102 young heirs from families with an average net worth of $752 million. About 85% of the young heirs said they felt either very prepared or somewhat prepared for succession.
But this confidence doesn’t match up with what leaders at family offices think. These offices handle the investments, taxes, and legal matters of wealthy clans. In a survey done with the Royal Bank of Canada earlier this year, Campden Wealth found that only 39% of North American family office executives think the next generation is ready to take over.
Succession planning has been a hot topic in the world of family offices for years. Family offices are becoming more important in the financial markets as the ultra-rich look for ways to have more direct control over their own wealth. Studies have come to different conclusions about whether younger heirs will change the way they invest a lot or keep things mostly the same.
Rebecca Gooch, the senior director of research at Campden Wealth, said in the statement, “The next generation of wealthy people understand and accept the weight of this important responsibility for a lasting family legacy.” “They want to live up to their family’s expectations and make a positive difference in the world, but a successful transition is hard because of complicated family dynamics, not knowing what their role will be after they take over, and not having a written succession plan.”
About half of the people polled said that difficult family relationships are the hardest part of succession planning. The report said that only a third of the people who filled out the survey have formal, written succession plans. Others are still making them, relying on informal agreements or having no plan at all.
Most of the people who answered the survey were from Generation Y or Generation X. The survey found that just over half of them want to work for their family business after they get rich, while a third want to join their family’s business.
