Scott McCulloch is editor of Families in Business
The myth that the eldest son automatically inherits the bulk of a wealthy estate or family business could be exploded once and for all, if the findings of a new study on Britain's rich are to be believed. A report by Saffery Champness, the accountants, found that among landed estate owners the preservation of the estate is almost always a priority, despite the pressure for equality between children. Perpetuating the life of an estate and keeping control of a business have become the main goal rather than any deference to traditional concepts of primogeniture.
In interviews with 40 of Britain's wealthiest individuals, which were supported by a telephone poll of 1000 affluent people, some said eldest sons were considered less competent than their siblings, or in the cases of landed estates not wanting to lead a country lifestyle. This should come as no surprise. What is surprising is that communication – or the abject lack of it, as the report states – is still a key area of concern. Discussions of money in some 'traditional' families remain a taboo. Yet many of Britain's wealthy families face financial ruin and legacies of bitterness because they refuse to discuss their financial matters. It should not be.
If ever there were a case for decisive estate planning then this is it. This latest research correctly points out that formal structures should be in place early because, aside from worries about changes in Britain's fiscal regime, one of the more striking themes to emerge from the research is the "sheer complexity, sensitivity and difficulty" of the decision-making processes involved in handing on major assets such as a family business or landed estate where the future 'owner' is one of a group of potential beneficiaries. Taking on major assets demands the requisite skills to at least sustain, never mind grow, those assets.
Mike Beattie, chairman of Saffery Champness, says an estate or business can take on a life all of its own. He is right. Both require immense inputs of energy and professional management. Saffery Champness says its report reveals the extent to which many families have become aware of the different imperatives in owing as opposed to managing, which is why some have evolved institutional structures such as family boards. Michael Maslinski, who oversaw the study, believes the research underlines "significant changes" to the way inheritance is planned over the past 50 years and that there was now "more wealth than ever before to be passed on". The report adds, rather ominously, that the ways Britain's families will pass on their wealth will shape the economy.
So what of the findings? As with all research there is good news and there is bad news. The good news is that popular myths are explored with candour. Here are four:
- myth: successful entrepreneurs often want to create a family business dynasty;
- myth: family members will get a job in the family company;
- myth: inherited wealth creates freedom for the heir;
- myth: 'old money' is less commercially aware than 'new'.
And so it goes. There is bad news, too, says Mr Beattie. "The report confirms what we still unfortunately see from time to time, family businesses descending into anarchy when the shareholders are unable to reach a decision and would-be heirs allowed to believe that they would inherit, only to be left with bitterness and grief, because nobody explained to them why someone else was going to get everything."
Fortunately, this is increasingly rare because lessons have been learnt from the mistakes of others. Mr Beattie believes the super wealthy are now more freethinking about planning how their heirs will handle their wealth. This, perhaps, remains to be seen. The report does not pretend to have all the answers but Britain's more powerful families should find its content soothing, not least because some may finally take a decisive stab at the onerous but not impossible task of marrying up succession and wealth with a view to long-term familial harmony and growth.