The Generation Game is about to change

By Graeme Fairlie, Business Development Executive at Fairway Group.

They say that the first generation makes it; the second generation spends it and the third generation blows it.

Historically, one in three businesses pass to the next generation with around 10% of family businesses pass to the grandchildren's generation. So while there are notable exceptions like the Rockefellers, succession planning has always been a tricky business.

The latest report shows that new multi-generational families are being created. In 2017 alone, 44 heirs inherited more than a billion dollars each totalling US$189 billion.

Over the next two decades, the report from UBS and PWC expects a wealth transition of US$3.4 trillion - almost 40% of current total billionaire wealth. But this doesn't apply just to the global mega-rich, it also has serious implications for more traditional, local businesses and families.

In order to create a successful, multi-generational succession, families can no longer be passive with their capital. Instead, new wealth planning need to include all generations in the initial stages, embarking on joint family projects or setting aside trusts or structures to encourage new business development rather than just inheriting a lump sum.

There has also been change to the family unit itself. Gender equality has come a long way and traditional, patriarchal lineage is no longer the norm. Women are already more likely to be entrepreneurs or lead a company than in any previous generation and so increasingly, women are likely to inherit businesses and need to be prepared for it.

We appear to be at a tipping point with wealth planning and the numbers are staggering. As of 2017, there were 701 billionaires over the age of 70, whose wealth will be passed on over the next 20 years.

Between 2012 and 2017, assets passed by deceased billionaires to beneficiaries grew by an average of 17% each year to reach US$117bn.

Changing values

A lot has been made of the so-called "millennial" generation but their financial goals are fundamentally different to their parents.

Philanthropy and altruism are higher priorities, as is the environment and thinking about sustainability. The increase in environmental, social and governance (ESG) investing over the last 20 years is a testament to this change in priorities.

At the same time, there is more access to technology and information which in turn is encouraging entrepreneurship. Especially in emerging markets, technology has allowed generations to skip the "landline" revolution and go straight to mobile e-commerce - perfect for start-up businesses who faced considerable barriers to entry in the past.

The new generations are not just preserving the family assets but adding to them, creating business families rather than family businesses. From those who inherit a family business, 62% start a venture themselves. By comparison, only 42% of those who inherit "plain" assets do so.


By making your loved ones part of any succession planning, you are already increasing the chances of the assets being passed to further generations, keeping valuable and cherished items in the family.

While the Billionaires report focusses on those at the very top of the tree, the lessons apply equally to families and businesses in the Channel Islands, the UK and the rest of the world. Digital entrepreneurship can begin anywhere and Jersey is leading the way with its infrastructure.

Perhaps now the saying should be the first generation makes it; the second generation spends it and the third and subsequent generations help to build on an established legacy with clear succession planning and family involvement.

Not quite as catchy but it looks increasingly like the shape of things to come.


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