AMOL PRABHU: Bridging the generation gap in the transfer of wealth

Meeting the needs of different generations, especially within the same family, is complex when it comes to the transfer of wealth. Managing family wealth across generations requires tact, empathy and the ability to operate across global markets. 

There are a lot of factors at play when it comes to managing intergenerational wealth. You not only have the competing interests and risk appetites of different family members to deal with, but also that today’s families can be spread all over the world in geographies with different laws, tax and regulatory regimes.

Those and other factors mean that even in a tech-first world, where it’s easier than ever for individuals to move money around, it’s critically important to have a steady hand at the tiller with the whole family’s best interests at heart. 

Managing the great inheritance 

Managing intergenerational wealth is a process fraught with emotion. It requires deeply personal conversations that families may not have talked through or even thought about.

Those conversations are becoming increasingly important, too. Over the decade to 2030, the world’s wealthiest individuals are expected to transfer about $15-trillion worth of wealth to their families. For context, that’s a sum greater than China’s entire GDP. But it’s far from a simple matter of inheritance. 

For the older heads of those families the biggest concern is often about preserving wealth, as in many cases they were the ones who were at the forefront of creating it. They’re probably also aware that 70% of wealthy families lose their wealth within a single generation and that 90% lose it within two generations. 

Barclays’ “Smarter Succession” research report looks at how families deal with wealth transfer issues between the generations and how to build trust. Different generations are influenced by their own education, family, travel and life experiences in ways that shape their values and outlook on life — it can be a challenge to resolve intergenerational conflicts that arise. 

The next generation may have differing views on how family wealth should be used to create additional wealth, or may have less interest in being involved in the family business. Alternatively, they might have ideas about how wealth can be used to have a positive environmental impact that may differ to previous generations. 

That makes the role of the private banker all the more critical. Private bankers can help families ensure that they’re able to both understand and embrace divergence and best cater to everyone’s wants and needs.

Running the global gauntlet  

Managing those divergences is further complicated by the fact that many families, especially in the ultra-high net wealth space, are global in nature. The original wealth creators in a family may, for example, be happily retired in somewhere like Plettenberg Bay. Their children, meanwhile, may live and work in the UK while their grandchildren are in Dubai and Singapore. 

From a family dynamic perspective this might mean there aren’t just generational differences to deal with, but cultural ones, too. If the wealth creators in a family came from a deeply patriarchal background, for instance, they may struggle to understand female grandchildren wanting to take a more hands-on approach to the family business and wealth. 

Each family has a unique set of circumstances that has to be accounted for, which can lead to differences across generations as to goals, purpose and ambitions for the family. A good private banker will be able to navigate and manage those differences.

Being where families are, providing local, regional and global coverage that is individualised for each family member, as well as holistic support for the entire family, is important in this market. 

Chart(er)ing a successful future course 

Beyond having mediators in the shape of private bankers, there are also structures families can put in place to better ensure their wealth is managed according to their wants and needs. 

One example of such a structure is family charter. Sometimes referred to as a family constitution, it is a formal document that aims to set out a core vision for a family’s wealth; responsibilities for family members; and criteria to guide future business decisions. 

I am a big believer in gathering the family together to set out their principles in managing the family’s wealth and the values they wish to uphold in the form of a family charter.

The actual process of discussing these matters is as, if not more, important than formalising the charter itself. Done well, this charter can give structure and purpose to the family for generations to come.

• Prabhu is country CEO: SA and market head at Barclays.