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Control issues affecting wealth transfer to next-gens

More than $25 trillion (€19.32 trillion) is expected to pass from one ultra-high net worth generation to the next by 2050, but issues over giving up control and empowerment are affecting decisions about wealth transfer.

More than $25 trillion (€19.32 trillion) is expected to pass from one ultra-high net worth generation to the next by 2050, but issues over giving up control and empowerment are affecting decisions about wealth transfer.

That’s one of the findings of new research conducted by Morgan Stanley Private Wealth Management and Campden Wealth. Entitled Next-Generation Wealth: The New Face of Affluence, the study of more than 50 very wealthy families in North America suggests there are control issues affecting wealth transfer to next-gens.

“In some ways, families feel as if they are walking a tightrope and are seeking the right balance. Parents want to educate and prepare the younger generation for steering the family’s legacy and wealth. But they grapple with giving up control and weighing when and how much to divulge about the family wealth so that it’s not a disincentive,” said Mindy Rosenthal, author of the study and managing director of Campden Wealth North America.

Among those surveyed, 75% of respondents had a family business, while around the same percentage had a net worth of more than $100 million. The respondents spanned multiple generations – 45% of those surveyed were aged between 20 and 49 years, while 55% were aged 50 and above.

Although around 80% of younger respondents reckoned being a family steward was very important, it was the older generation that was more informed and involved in controlling the family wealth, found the study. There was also a difference in their plans on transferring wealth – while more than 60% of the older respondents planned to leave all their wealth to their children, fewer than 45% of the youngsters wanted to do so.

But the survey found some similarities among the different age groups. Although the respondents inherited a lot of wealth, around 30% of them, in both age brackets, had also significantly added to the family’s fortune.

When it came to using advisers to manage the family money, the survey said the older generation was “happier” with advisers than the younger lot. Sixty-two percent of next-gen family members were more likely to replace their wealth adviser within the next two years, while around a quarter of older respondents planned to do so.

“These findings have important implications for financial professionals who serve families of significant wealth. One is that they need to think like family advisers in the fullest sense, attuned to the attitudes and psychological disconnects that may exist between generations,” said Douglas Ketterer, head of Morgan Stanley Private Wealth Management in the US.
 

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