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Family dynamics top UHNW’s financial agenda

Financial mismanagement is greatest threat to wealth, survey reveals

25 November 2013

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Improving dialogue between generations is a priority for ultra high net worth families who are concerned about how their descendants will manage wealth, research has revealed.

Half of the families, with a combined wealth of over £1bn, who took part in a survey conducted by investment management and accountancy group Smith & Williamson said they had misgivings about passing on their fortune to the next generation.

One in four respondents felt communication between family members about financial management issues was poor or very poor. Although, 76 per cent said they organised family formal or informal meetings, and 79 per cent of those respondents had one or more a year.

Charles Gowlland, investment management partner at Smith & Williamson, said: "Managing family dynamics is a central theme to our research. However, despite concerns regarding the younger generation taking responsibility, there is greater willingness to involve the next generation at an earlier age than previously. Participants typically commented that '30s' is the watershed age."

Only half of respondent families had changed their succession planning in the last ten years.

Frank Akers-Douglas, tax partner at the firm, added: "It is perhaps surprising that more UHNW families in our survey have not amended their plans in the last ten years. The standard triggers for reviewing a will - which is just one small part of succession planning - include marriage, divorce, the birth of a child and death of a family member.

"It is important that families review their succession plans in light of such events and I would suspect that some are not doing this, which could give rise to major problems down the line.

"Finding effective ways to train younger family members to take control are also issues for many participants. Besides improving communication between generations, there is widespread feeling that young adults need to establish their own careers and independence before benefiting from significant family wealth.

"Despite any concerns regarding the younger generation's ability to take the reins, we are seeing more openness within families than was the norm just 20 years ago. The use of the internet and social media can also be helpful, but, ultimately, there is no substitute for getting round a table."

However, financial mismanagement was considered the greatest threat to long-term family wealth. Tax and legal changes were the second most serious matters with volatility in financial markets and children 'squandering' wealth equal third.

Gowlland said: "Sustaining wealth requires focus, time and careful management - this applies whether you are part of an UHNW family or trying to maximise your retirement provision. Taking the long view, spreading risk through diversification and not taking snap decisions are wise strategies, which everyone should keep in mind."

Thirty-nine families took part in the survey.

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Family Wills, Trusts & Probate