Business owners need to step up Wealth transfer plans for next generation

Here’s my latest High Net Worth blog for the Financial Post, titled Only 40% of new business owners have transition in place, says new report.

The latest in a series of global surveys by RBC Wealth Management and Scorpio Partnership finds that while more than a third of business owners in the United States, Canada and the United Kingdom  have a full formal plan in place to pass their wealth on to their heirs, one in five have not even started to plan.

RBC surveyed 384 high-net-worth and ultra-high-net-worth individuals in the three countries, with average investible wealth of US$6.4 million. While 51% of business owners have a will in place, a startling 22% have not yet started any sort of wealth transfer preparations; which means “the majority of business owners are relatively unprepared to pass on their financial legacy,” the report says.

One of the experts I consulted was business transition and valuation expert Ian R. Campbell, who  recently wrote a Hub blog about Donald Trump’s business transition plans for his high-profile family members. It was also the basis for an earlier Financial Post column by me headlined Donald Trump is upping the ante in the Wealth Transfer game.

Campbell — also author of the book shown on the right: 50 Hurdles   —  found the RBC statistics to be “interesting. For me they support the proposition that business owners urgently need to address business transition. This in the face of multiple external factors outside their control that for many businesses negatively may impact their value and viability in coming years. Those factors include ongoing globalization, central bank policies, government debt, trade policies, regulation, and ongoing technological advances. “ For more on this see his online article, Not Strategizing for Business Transition Now? A Precursor to a Tale of Woe? 

Boomer business owners monetize their largest asset

For the FP blog, I also quoted popular estate planning speaker Tom Deans, who is the author of Willing Wisdom and Every Family’s Business (shown below). Deans says 6% of inherited wealth (some report as much as  90%) will move to a new advisor, “so the banks want to insert themselves into the family and become a virtual multi family office and keep family assets under management.”

Also, Deans says, as Boomer Business owners head to the exits and monetize their largest asset, the banks want to be a solutions provider “with the idea that they will manage the money from the liquidity event.  On the credit side, when business owners mangle their business succession plans, the banks are taking it in the shorts and have to carry more loan loss provisions.”

The new frontier of Inheritance Planning

The bottom line for Deans: with $205 million inherited every day in Canada, we are seeing the emergence of a new financial sub-discipline:  “Inheritance planning” is the very last step after retirement planning for Boomers.

“Boomers are now shifting their eyes not to how much their investments will return but rather how prepared families are to inherit.  “The Banks are all over this.  The battle for Next Gens is already heating up. And  so you can see from the study that preparing heirs is the new holy grail for financial advisors.”

Deans adds that Inherited wealth releases potential or accelerates demise: “It seldom equivocates.  The idea that we would transfer a small amount of wealth while we are alive, along with some context, education and conversation, is an exciting idea for more and more Canadians.”

The traditional idea has been that the more estate planning secrets the better but this is slowly turning as more and more elderly Canadians are coming to understand that their children will be playing a more important role in their long-term care.  “Whether we are talking about family business transitions, or transitioning the family cottage, advisors are facilitating more family meetings and bringing transparency to the last great taboo –  who in the family will get what, when and how?”


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