Do families secure the future of their business?

It’s in part due to increasingly intricate legislation but also that modern family dynamics and globalisation makes wealth more challenging to manage.

On one side, laws, regulations, transparency, taxes, structuring and substance all have to be considered. On the other side lie the more emotional aspects of wealth: family dynamics, succession, sentiments, fairness and philanthropy and increasingly things like impact and environment. The result is often that modern wealth is more challenging to manage than it ever has been before.

While this is true, recent events have provided a fresh lens through which to view wealth.

Many families have had the opportunity to take a step back and analyse what’s most important to them. The questions tend to be simple and close to the heart: Have we secured the future of the family business? Will wealth last into the next generation and beyond? What level of comfort do we have with the parties that assist us structuring our wealth?

Protecting wealth

A number of (U)HNW families were caught off guard by the Coronavirus. As humans, we tend to assume we have lots of time to plan things and the events of early 2020 made many people realise this isn’t necessarily true. A significant consideration for these families is getting a professional structure in place that protects wealth, if they hadn’t already done so.

Wider effects

There has also been a shift in dialogue between family members, which is having far-reaching effects. Younger generations are increasingly sharing their feelings about those entrusted to help the family structure their wealth – if they have doubts, they are increasingly likely to say so.

Rather than testing the family, the Coronavirus served as a test by which the family could assess how trustees and advisors handled these trying times. If a trustee has a very ‘old school’ approach, they were very passive or if they handled communications poorly during the Coronavirus, these have tended to be unignorable red flags.

Rather than accepting the status quo, families are discussing these concerns. The Coronavirus has also changed settlors’ mindsets. The situation has focused their priorities and understanding: to sustain wealth over prolonged period, and avoid conflict, the right advisers have to be in place. Increasingly, the fit of a trustee into the puzzle and how well the family feel the trustee fits is important.

Before the Coronavirus, I think we saw families being a bit more patient – there were more second chances. Since March, however, we’ve seen a shift in settlor, beneficiary and legal advisor mindset. We’ve been approached by families or their advisors who have been unhappy with how trustees performed this year. Rather than leaving the situation untended, families are looking at their options.