Russian entrepreneurs show little desire to pass their companies onto their children, as concern about the business environment in the country means most are focused on short-term goals, rather than long-term ones.
This was the main finding of the third Campden/UBS Russia’s Wealth Creators research, which spoke to a wide variety of entrepreneurs across the world’s largest country.
The report found that Russian entrepreneurs typically don’t have a “dynastic will” – that is, a desire to pass on the business to the next generation, despite the success of their businesses. This sentiment was expressed by one of the respondents, who said: “I don’t plan for the future. I know I probably should do a little bit more of it, but that is our culture. Our history has taught us that there is not much point in planning ahead.”
“It is a concern that many Russian entrepreneurs aren’t looking towards the long-term prospects for their businesses and looking to pass on their businesses to the next generation. This will have consequences for the development of a healthy competitive economy in Russia,” said David Bain, head of research at Campden Media.
Gregg Robins, managing director, head of wealth management for UBS in Russia, added: "The continuing lack of succession planning represents an important issue for the country as well as for the families themselves. At UBS we spend a lot of time counselling entrepreneurs around the world, and while their approaches can vary greatly, they widely view succession planning as a critical component of their wealth management plans. UBS is happy to support research on the challenges facing wealthy families in Russia, research that becomes more credible and meaningful as successive studies are completed."
In addition, the research found that investment sentiment is generally weak, with almost half of the entrepreneurs surveyed saying they have no plans to expand their business in Russia. Also, few were planning expansion outside of Russia, with only 15% of respondents looking to invest in other emerging market regions like Asia and the Middle East.
As far as funding growth plans are concerned, Russian entrepreneurs are embracing private equity as a funding option, with just under half of the respondents saying future growth will be funded by private equity.
The survey respondents prefer foreign banks, with just 13% of entrepreneurs sourcing funds from local banks compared to 47% who have tapped into foreign bank credit during the course of the last 12 months.
Banks, however, are seen as a gateway towards additional sources of expertise when it came to wealth management and wealth structuring, with 94% of respondents using banks for wealth structuring, rather than lawyers or accountants.
Overwhelmingly, Switzerland and the UK were the most preferred locations for offshore finance.