East to West: Lessons from the global generational wealth transfer
By Max Eppel, CEO at McFaddens & Co – The “Great Wealth Transfer” is well and truly upon us, and the variety of issues surrounding everything from succession planning to generational friction on how to invest for future growth, or wealth preservation has been thrust into the mainstream. It is certainly top of mind to many of our clients, and they are looking to us for unique solutions and advice.
In July, we announced a venture with CIIC to provide services to HNWI’s in China and Hong Kong, and I am reflecting here on some of the differences in wealth transfer approach from clients in Asia and their Western counterparts.
The Asia Pacific region is one of the fastest growing wealth centres in the world. According to Capgemini, the region has seen the highest percentage growth and the largest population of HNWI’s in the world for five of the past six years.
Wealthy families in the region are dealing with many of the same issues as their counterparts in the West in transferring wealth from one generation to the next and ensuring the needs are met across multiple stakeholders with different motivations.
As a global multi-family office firm we now have the luxury of looking at how our clients from different regions and cultures may be able to benefit one another.
What follows are some key learnings across cultures and motivations that we share with clients considering how to best transfer wealth from one generation to the next.
Have candid conversations about succession with family
One stark difference between Asian and Western cultures is the comfort with which families have conversations about planning for the passing on of elder family members. Discussing death is considered taboo in many Asian countries, which unfortunately means important conversations about wishes and motivations often do not happen before it is too late.
We advise our clients to begin these conversations early with their younger beneficiaries, discussing everything from the particulars of passing on a business to investment goals to personal passions. Depending on comfort levels, they may want to involve advisors in these conversations, which can help bridge gaps and differences of opinions between generations with practical guidance on how to address seemingly divergent concerns and preferences.
Be transparent and creative about philanthropic and sustainable investment interests
HNWI’s in the West have been much more progressive about putting their assets towards philanthropic and sustainable investment interests than their peers in Asia. However, we are starting to see a shift with the younger generations of our Asian clients, which mirrors what we have seen for several years with our Western clients.
Beneficiaries of family wealth are more frequently looking to give money away to charitable pursuits that match their passions or looking at impact investing to make a difference as well as a profit. For years, we have been advising Western clients on how to achieve these aims whilst still honouring the wishes of the older generations.
Whether through creative investment vehicles or understanding tax regimes, we have been successful in guiding clients through the transfer of wealth and differing opinions on how to deploy it. Through these lessons learned, we can better advise clients on meeting multiple goals that allow, for example, the older generations to preserve and pass on their wealth and legacy whilst the younger generations can make their own mark that aligns with their values as well.
Look East for progress on inclusiveness
Our Asian clients have been very progressive in terms of fostering an environment for high-achieving women to thrive. Indeed, more female entrepreneurs on the world’s list of billionaires are from Hong Kong and China than anywhere else globally.
One of the significant differences we see in Asia vs the West is how often women and younger generations are included and valued in traditionally older financial structures usually dominated by men. These groups are reshaping family businesses, relationships, and investments in Asia, and pushing innovation on how we think about dual financial and social legacy.
Whilst there is certainly more work to be done on a societal level in the West to bring more openness and resources to help women start business and generate their own wealth, wealthy families and individuals should not lean on tradition by only involving male beneficiaries. They could be compromising the potential of their business, assets, or legacies by ignoring their female beneficiaries’ ideas and values.
In an increasingly global world, we must look outside of our native regions for ideas and opportunities. It is an area in which multi-family offices have an obligation and a unique opportunity to advocate for their clients and apply best practices from elsewhere. With Asia and the West growing their wealth at a blistering pace, we must continue to look across borders and hemispheres for best practices on preserving and growing wealth and legacies.
Max Eppel is CEO of McFaddens and Co, an international multi-family office providing a suite of investment and wealth management services, with offices and experts located in the Middle East, Europe and APAC.