60% of Asia's HNW not planning for succession

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Yachts are moored at a marina next to luxury apartment at the man-made island resort of Sentosa Cove in Singapore
MARCH 11, 2020 - 10:13 AM

More than half of Asia's high net worth are not actively planning for succession, citing different priorities or "no perceived need" for it while of those that are looking at succession planning, many cite a lack of variety as the top challenge when choosing the right products and services. 

According to data presented in the new "Navigating wealth transfer: Challenges and opportunities of succession planning in Asia 2019" report by Butterfield (Singapore), just over 40 per cent of high net worth individual (HNWI) relationship managers surveyed said their clients have enacted a succession plan or are actively planning for succession. 

In terms fo barriers for succession planning, 33 per cent of relationship managers said their clients had different priorities, and a further 28 per cent said they had "no perceived need" for succession planning. 

This surprising revelation could suggest that end-clients had not fully considered the risk of the family business being split apart and sold after the death of the patriarch or matriarch as a result of complex family dynamics. It may also reflect a lack of understanding about what a succession plan aims to achieve and its long-term benefits, stated the paper's authors.

In terms of the top three features missing from the current suite of succession planning market solutions, respondents cited these three factors: variety of succession planning solutions/services, competitive pricing and succession planning products, training and outreach activities to relationship managers. 

Brian Balleine, Regional Head of Asia at Butterfield, said: “The findings reflect the deep complexity of succession planning in Asia. Even as we stand on the cusp of what is possibly the largest wealth transfer in history, many high-net-worth Asian families regularly face conflicting priorities and interests, with estate planning often deeply intertwined with company succession.”

Instead HNWI were more concerned with the evolving regulatory environment and associated risks. Other concerns cited in the white paper include geopolitical risk, such as trade tensions between the United States and China, as well as the Hong Kong protests, according to the more than 50 relationship managers and wealth managers in Hong Kong and Singapore who participated in the survey for the white paper. 

Additional interviews were conducted with various respondents from brokerages, private banks, family offices and law firms. The paper was independently conducted by Asian Private Banker in collaboration with Butterfield. 

Coupled with the recent coronavirus outbreak, these external risks are likely to remain major influencing factors on succession planning through 2020 said Mr Balleine. 

That being said, the white paper found that clients are beginning to engage in succession planning discussions. More than 80 per cent of the respondents said they have seen an increase in requests for succession planning over the last five years. 

More than half (57 per cent) of the relationship managers surveyed said at least half of their clients  use trusts as part of their succession plan. While financial assets (98 per cent) are the most common asset class held within trusts, according to those surveyed, clients also tend to include family / operating business (66 per cent), real estate (55 per cent), life insurance (34 per cent) and luxury assets (28 per cent) in their trust structures.