THE number of ultra-high-net-worth (UHNW) families around the world is expected to hit 784,000 in 2026, an increase of 125 per cent within a decade.
Global wealth is at its highest level ever, and Asia-Pacific accounts for 42 per cent or US$218 trillion of total global wealth.
Wealthy baby boomers are expected to pass on about S$25 trillion of collective wealth to future generations within the next decade via various means, including gifts, trusts and bequests.
For Asia’s UHNW families, this is a precursor to a paradigm shift for the Asian wealth management industry. It is paramount to understand and rethink how we prepare for the great intergenerational wealth transfer in this region.
Asian nuances and complexities in wealth transfer
Intergenerational wealth transfer is a highly sensitive topic in the Asian context, due to cultural and socio-economic factors that are unique to this part of the world.
A sizeable cohort of Asian UHNW individuals are first-generation business founders with multi-generational households, and they often have an extended overseas family network.
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Even if they strive to plan for wealth and business succession and continuity early, the complex intertwining of money and business, coupled with Asian values of family harmony and filial piety, makes intergenerational wealth transfer a subject that is complicated and extremely sensitive to broach.
Discussions on succession planning or inheritance are often associated with mortality, which is widely viewed as a taboo to the elderly in Asia.
Consequentially, the first generation may miss the optimal period when they are physically and mentally able to plan for succession.
Business owners who are parents and grandparents often struggle to balance between being fair and leveraging the family’s human capital, leading to procrastination or avoidance in setting up a robust and adaptable governance framework for decision-making and stewardship of the family’s wealth.
Having family members across multiple countries can further complicate the wealth management and decision-making processes, as legal frameworks and regulations surrounding inheritance and wealth transfer vary across different geographical locations.
It is therefore not surprising that less than half of Asia’s UHNW families have sound and meaningful wealth distribution plans in place.
Another area commonly neglected by Asian families is the engagement, education and preparation of heirs for succession.
The next generation has needs and concerns different from their parents. They tend to be more environmentally and socially conscious, which leads to rapid acceleration in sustainable investing.
Sixty per cent of UOB Private Bank’s first-generation clients do not have any environmental, social and corporate governance-centric investment, in a survey conducted by Global Sustainable Investment Alliance, however, 86 per cent of millennials indicated interest in sustainable investing and are twice as likely to invest in companies targeting social or environmental goals.
This younger generation is also digitally native, with 87 per cent of them viewing digital platforms as a crucial channel of engagement with their wealth managers.
Although decision-making authority resides with the first generation, it is essential to consider the next generation’s concerns and enhance their competency to prepare them for their future responsibilities – including protecting and growing the wealth they inherit.
UOB Private Bank’s Next Gen programme partners families to help them uncover underlying concerns of the next generation, instil financial literacy and the sense of stewardship early, and advise on the responsible management of assets.
The way forward
Seeking advice early from professionals in wealth, estate, investment and tax planning is crucial. It is also important to adopt a multi-generational approach by considering the needs, aspirations, and capabilities of not only the immediate heirs, but also the future generations.
This means building flexibility into legacy and succession plans in anticipation of future changes in wealth distribution considerations, while ensuring business continuity.
A family office can be an effective solution to navigate discussed challenges as it manages a family’s private wealth and diverse business ownerships centrally.
Singapore’s role as the Asian global family office hub has surged in recent years. The number of active family offices operating here had reached 1,100 as at 2022.
Demand for family offices has grown due to their ability to provide tailored solutions, with a board comprising carefully selected family members and professionals.
Family offices also ensure investment objectives and distribution of income and assets are considered and monitored professionally based on a pre-determined framework.
This removes potential conflicts and ambiguity among family members while providing all parties freedom to pursue their other personal interest and passions.
Wealth transfer planning is a long and continuous journey. Partnering a trusted wealth manager who understands the nuances of family dynamics and good governance is crucial.
The writer is head of wealth planning & family office advisory service at UOB
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