Successful Succession Planning

Global wealth continued to soar in 2020. Despite the pandemic, the number of ultra-rich individuals – those worth over £70m – increased by 60,000, making succession planning more important than ever.

The Boston Consulting Group, which compiled the figures, said the ultra-rich held £15.7bn in investable assets, or 15% of the world’s total investable wealth in 2020.

Much of this wealth was generated by single family offices which rose by 38% between 2017 and 2019, according to Campden Research.

And in 2019 there were 7,300 single family offices holding a total of $9.4 trillion assets between them.

Campden is in the process of updating its research, which is expected to show another huge rise in both the number of offices and the assets held by family offices.

Family offices – succession and governance

With such wealth comes great responsibility, and the priority will be to preserve the legacy of the business so it can be carried forward by future generations.

The pandemic has, thankfully, appeared to prompt more family offices to draw up a succession plan; in fact double the number that did in 2018, according to PwC’s 2020 Global Family Business Survey.

Worryingly, PwC, which surveyed 2801 family business leaders across 87 territories, also found that 29% believed their business was resistant to change.

But businesses with multi-generational ownership do need a strategy to prevent potentially destructive family dynamics from destabilising a company.

A formalised governance structure can help keep the business of the family and the running of the business separate. This governance can be overseen by an outside board of directors who can provide the rational objectivity needed to protect wealth.

Such succession planning can also also allow for the need to build in the wishes of a more dynamic technologically and philanthropically-minded younger generation. A generation who could also help the family office move forward with an environmental, social and governance (ESG) agenda.

But a governance structure is just one of many ways family offices can shore themselves up for the future. Succession planning can also include:

Regular reporting

Hiring professional support to keep a family aware of their business operations and act as a communicator between different offices.

Specialist talent

Consider taking on or in-sourcing specialised talent, in the US even family offices managing less than $1bn in assets are recruiting individuals with a private equity management background.

Managing risk

A family constitution – or working document that helps govern the family. This can act as a benchmark and a protocol for the future of the business. Risk may also include data breaches or cyberattacks.

Having a long-term investment strategy

This could include ESG or looking at managing future business shocks – such as COVID-19.

Reputational risk

Having a plan in place to manage negative publicity, especially where family brand or reputation is key to the business, such as dealing with social media and the various platforms that can make or break some businesses.

How ZEDRA can help

ZEDRA works with smaller family offices, offering sophisticated services that complement the expertise and know-how of the family office team. It’s a cost-efficient way for family offices to operate, and it means they can benefit from top talent and expertise, without having to make permanent hires.

As a professional Trustee, ZEDRA also handles the administration of Private Trust Companies and assists with their management if required.

For very wealthy families, we can help allow today’s successors to understand the long term responsibility that comes with handling family wealth.