More than four-fifths of family businesses in Asia believe professional experience is important for achieving wealth management goals, according to a new study that recommends simulation software as a way of training the next generation.
A Roadmap for Generational Wealth in Asia: Mentorship, published by Credit Suisse and Campden Research, found that 85% of Asian family businesses place high levels of importance on professional experience when achieving wealth management goals, as it help reinforce lessons learned in formal education.
The survey, which received responses from 38 wealth holders with average net revenues of $900 million, added that high-tech market and planning simulators can help next gens gain practical experience in wealth management and visualise the long-term impact of decisions.
Financial software such as StockTrack allows individuals to manage a virtual portfolio of stocks, options, bonds, futures and mutual funds and can be tailored to match specific market conditions.
Campden Wealth's head of research Andrew Porter said technology can be a fantastic tool for educating the next generation about wealth management processes, but stressed it should not be a replacement for mentorship and study.
“Mentorship is a two-way street, and the next generation can teach family elders about new technologies and how they might be incorporated into the wealth management decision-making or operation structures in the future,” he said, adding: “Finding the right blend of these developmental measures should ensure that the next generation of Asian business-owning families are prepared for family wealth management succession.”
Porter warned of the dangers of relying too heavily on financial software and business simulations, suggesting that such programmes can be outright dangerous.
“Gaming and simulations, if not conducted properly, have limitations, if not outright risks. For instance, the largest risk is losing the game, which might tempt players to exhibit high-risk behaviour,” he said.
According to Porter, the risks can be mitigated by encouraging competition between players or teams, or by improving the rules or the realism of the simulation. In these scenarios, family elders can lead by example.
The study, which is the second Asia-focussed paper from Campden Research and Credit Suisse, also found that only 27% of participants consider their families to be prepared for generational wealth transfer, although those closer to succession are more confident in their preparedness.