Next generation lacks wealth planning involvement despite succession plans

Global family offices are aiming to build multi-generational legacies for their businesses, but many are yet to involve the next generation in wealth planning, according to DBS.

The Singapore-based bank’s report assessed family offices across Europe, Asia, and the Middle East, and found there were preparation gaps across their three priorities of wealth transfer, holistic risk management, and technology.

Although families generally recognised the need to act, the study showed that founders wanting to retain control remained a barrier to succession, with one in three (33 per cent) families citing this as the primary factor in delaying wealth transfers.

A further 15 per cent expected the wealth transfer to only happen once an event, such as the founder’s incapacity or a crisis, occurred.

Almost eight in 10 (79 per cent) families wanted to pass their wealth down at least two generations, while 29 per cent hoped their wealth would endure beyond three generations.

However, 43 per cent said the next generation was not involved in wealth planning at all, while just 1 per cent of the next generation were leading the design and implementation of the plan.

The majority (54 per cent) of founders held key assets in their personal name and 52 per cent used personal investment companies, with just 20 per cent using a professionally administered trust.

As the next generation is increasingly living and working across borders, 55 per cent were unsure which new ownership structures to put in place.

More than 85 per cent of family offices had no formal business continuity plan, rely on informal arrangements, or were unsure whether a plan existed.

Nearly two fifths (38 per cent) were yet to address cybersecurity and data privacy risk, and just 3 per cent had or planned to obtain cyber insurance.

DBS noted that some of the greatest risks come from within the family, with 27 per cent not having prepared for intergenerational leadership risk, 26 per cent had not addressed governance risk, and 23 per cent had not planned for family conflict.

Almost a quarter (23 per cent) had not addressed key person risk and just 9 per cent held key person insurance.

The most common reasons for not addressing risk were a lack of in-house risk management expertise (56 per cent) and limited internal resources (48 per cent).

Interest in AI was strong, with 60 per cent viewing learning how to adopt AI effectively as their primary objective, but day-to-day use lagged behind as 47 per cent were yet to use digital tools or AI in day-to-day operations.

Internal expertise gaps (49 per cent) and data security concerns (46 per cent) were identified as the biggest barriers to AI adoption.

“Our conversations with clients reveal how difficult it can be to move from intention to action, said DBS Bank group head of wealth planning, family office & insurance solutions, Lee Woon Shiu.

“That hesitation is understandable. Passing on a family legacy involves both the investment portfolio and the operating businesses that built the family’s wealth, often with deeply personal decisions about ownership, leadership and control.

“Yet those decisions are becoming more pressing as rapid technological change and market volatility test how families manage their businesses and wealth.

“Family offices need to look beyond immediate obligations and identify weaknesses in succession arrangements, risk oversight and technology before they become costly problems.

“The families best placed to protect and grow their wealth will not necessarily be those with the most assets, but those who address these issues early, while they still have time and ample choices.”

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