Next-generation members need to show an understanding of the value of money if they are to gain their parents’ trust and inherit their family’s fortune, according to Barclays Wealth’s Catherine Grum.
“Showing responsibility, maturity and an understanding of the value of money would go a long way to reassuring those parents struggling with trust and these are certainly the sort of descriptions we hear from parents who are comfortable that their heirs can look after their inheritance when the time comes,” said Grum, who is director of wealth advisory at the bank.
She was commenting after a study by Barclays Wealth found that 40% of the UK’s high net worth individuals do not trust the next generation to protect their inheritance. Globally 35% of wealthy individuals felt their children or stepchildren were not up to the task, although respondents in the Middle East (78%), Africa (77%) and Latin America (75%) showed higher levels of trust in the next generation.
“An individual's own family situation certainly had a significant bearing on how they responded to this question with less trust being shown by those who have had more than one marriage and especially where there are stepchildren as well as their own natural children,” Grum told CampdenFB.
Four in 10 respondents questioned for the Transfer of Trust: Wealth and Succession in a Changing World report said they had seen wealth lead to conflict. This was particularly the case in India, where 61% reported wealth causing problems – an issue also seen in Singapore (53%), Monaco (51%) and Hong Kong (51%).
However, those from Qatar, Switzerland, the United Arab Emirates, Ireland, the US, the UK and South Africa reported lower than average levels of wealth causing family problems.
Wealth does not necessarily lead to conflict, but the expectations generated by wealth can, reckons Grum.
“If expectations are properly managed then my view is that most conflict can be averted. This does not mean that you should always meet people's expectations whatever they are, but more that you need to properly manage them so that there are no nasty surprises,” she added.
Family business owners often face more complications when it comes to wealth planning, because they have to deal with decisions over who will take control of the company and who should inherit its value, she said, adding that many find it hard to separate the two elements.
“There are often emotional ties to the business, which means sometimes people only ask themselves who should get the business, and they forget that there are other options such as selling the business and passing on the value instead,” said Grum.