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Commentators predict tax cuts, death tax axe and recession after Trump victory

By James Beech

US family business leaders are searching for silver linings from the presidential election of Donald Trump, just as their British counterparts are doing with Brexit.

Infrastructure upgrades, tax cuts, ditching the Obama administration's plans to expand and raise the death and transfer tax on family-owned small businesses, and a lack of impact on investments have been forecast. CampdenFB asked the global community of family business leaders, trusted advisers, and academics for their reactions to the billionaire second-generation family business patriarch being elected as the 45th president of the United States.

His triumph over Hillary Clinton initially sent stock markets plunging in the US and Europe but US stocks ended up closing higher on Wall St the day after the results were announced.

Family advisers were the quickest to respond to our call for comments. A major lesson one took from the bitterly fought campaign was the need to plan for succession. Others were concerned about a coarsening of American corporate culture from the top down, while others worried about the flat lining global growth.

Joe Freeman, head of family office services for US ultra-high net wealth managers Abbot Downing, said Trump's overall themes of infrastructure spending, lower corporate rates, and reduced regulation will be stimulative to the economy and beneficial to the wealthy, in particular.

Freeman said family offices with operating business will enjoy the greatest benefits, especially if they are US centric. Aggressive fiscal policy and restrictive trade policies could raise borrowing costs, push up inflation, and result in higher interest rates and a stronger dollar.

“Trump is on record saying he would reduce individual rates to three brackets of 12%, 25%, and 33% and reduce the corporate tax rate to 15% (from 35%!),” Freeman said.

“His plan is to keep the capital gains rate at 20%, but he will treat carried interest at ordinary income. With respect to gifting, Trump is on record saying he would repeal the death tax, but eliminate the step-up in basis for estates over $10 million. This $10 million carve out was specifically to protect family businesses and farms.”

Dr Marc Silverman, president of family wealth preserving Strategic Initiatives Inc, said Trump represented some of the worst American values: greed, me-first, bullying, downgrading of others, revenge, personal insults, refusal to take personal responsibility, and blame.

“Hardly the kind of leadership that many of us in the field preach and value,” Silverman said.

This could easily strengthen those in leadership positions, as in family business leaders, to 'lean in' their attitudes and actions more towards these kinds of values and behaviours. Second and third generations beware!”

An American private equity consultant, who spoke on condition of anonymity, said he was “profoundly disappointed and greatly concerned” by the new president. But he added that Trump was a businessman who understood the system and would do what was necessary to make it better.

“He will need to tackle the large inequality gap of his electoral base and I believe this will be a major priority of his initial plan,” the consultant said.

“I think that family-owned businesses should benefit as a result and given his tax policies, our investments should not be impacted.”

Asher Noor, chief investment and chief financial officer at the Saudi Arabian family office AlTouq Group, said the election result was a surprise for everyone – including the candidates.

Noor said the biggest lesson to be learned was that hard facts and solid logic still played second fiddle to the power of media, inner bias, and perceptions.

“The biggest parallel for me between these elections and family businesses is the importance of realising very early on, the importance of grooming leadership and focusing on succession planning,” he said.

“Otherwise one's legacy may have the shelf life of sliced bread!”

Patricia Angus, chief executive of family firm consultancy Angus Advisory Group LLC, said voters who had been affected by dislocations in the economy were drawn to a narrative that was not new in the US - populism and isolationism.

“Mr Trump's temperament and lack of experience cast a deep, dark shadow over how things will play out,” Angus said.

“The uncertainty caused by the election and the global response to it will favour family businesses that seize on volatility opportunistically; the potential for a recession caused by the elections leave everyone at risk for more challenging times ahead.”

Ludo Van der Heyden, Singapore-based professor of corporate governance at business school INSEAD, said it was too early to tell how Trump will impact US and global family business “but my expectations is like the UK (but probably not so bad).

“The one good thing is the public works programme in the US – that is what the US needs (both candidates agreed on that).

How will it affect his investments? “Not well, I am afraid, [there is a] recession on the way.”

Do these commentators reflect your views or do you have different predictions? Email: fb@campdenwealth.com

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