Private View Blog: Families focused on succession planning like never before
As anxiety levels rise during the coronavirus crisis, bosses of wealthy families are increasingly confronted with the realisation of 18th Century US politician, scientist and Founding Father, Benjamin Franklin, who wrote that “in this world, nothing can be said to be certain, except death and taxes”.
With one eye on government announcements of sobering statistics and another on the wellbeing of younger generations while in lockdown, senior family members are focusing on estate planning and generational transfer of assets and responsibilities more than ever before.
“When we have interacted with clients in the last two to three weeks, most have wanted to make sure everything is in good order,” says Stéphanie Lair Crommen, head of wealth solutions at Geneva’s Pictet Wealth Management.
Although these concerns have included the fragile real economy’s impact on families’ operating businesses and the market volatility affecting investment portfolios, it is succession planning which has taken number one spot in the list of immediate concerns.
Most wealthy families advised by the Swiss bank have $100m in assets to supervise and have long-standing estate and succession plans in place. But typically, these need updating to account for changing family circumstances, influences and liabilities.
Out of date
“Many drew up their succession plans 10 years ago, so there is a chance the plan no longer reflects the changed shape of their family today and they need to revisit the arrangements,” says Ms Lair Crommen, recently poached by Pictet from French bank BNP Paribas, where she was previously responsible for wealth management operations in Singapore, Malaysia and Indonesia.
“They put these plans in place when they were 50 years old and the kids were at university. But now the next generation are married and they need to manage the influence of the in-laws.”
These succession planning strategies are normally hammered out at family summits, co-ordinated by the lead family officer, with key private bankers in attendance.
A series of planned extended clan gatherings on several continents, where Ms Lair Crommen and Pictet colleagues were expected to accompany several generations to help draw up family constitutions and statutes, have however been shelved due to travel restrictions.
In their place, the Swiss bank has set up webinars and video calls. “These have been a lot of fun and families have been very happy to have the opportunity to connect,” she adds.
Cabin fever
Among the stories she shares is one of members of a particularly wealthy Latin American family – who rarely see each other at the same time – traveling to Florida towards the end of March for a succession planning summit. A nationwide US lockdown began shortly after their arrival at the coastal property.
“Three generations came to the same house for the event and it’s been a very long time since they had been together. Now they can’t move outside the house for the foreseeable future.”
Ms Lair Crommen had a similar experience, making a late dash from Geneva to join her family in Paris, just before the French capital was shut down.
When these different generations gather to compare views on investment priorities, there are generally more shared beliefs than opinions which divide them, she says.
The main difference is generally about the perception of what their family’s money can do for the world around them. “Private markets and assets have always been critical for several generations,” says Ms Lair Crommen, noticing increasing expertise in all asset classes across the age-groups. “What is more specific about the millennials and newer generations is not only an interest in impact investing, but an aim to change the world,” leaving a huge market gap for private banks to combine structures with investment themes to create a raft of society-changing investible assets.
Family members in lockdown may also be reflecting on another of Mr Franklin’s perennially pertinent quotations: “The use of money is all the advantage there is in having it.”
Yuri Bender is editor-in-chief of Professional Wealth Management. Follow him on Twitter @YuriBender
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