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The unorganised state of Ultra High Net Worth wealth

By Caroline Kitidis & Jeremy Franks

Are the UHNW really less prepared for wealth transfer than everyone else?

On the face of it, this finding seems counter-intuitive. One would have perhaps thought that the more wealth you have, the more likely you are to have the appropriate plans in place to deal with it.  There are certainly no shortage of advisors courting the UHNW to help manage their wealth, yet according to our Global Entrepreneurial Wealth Report 2023*, the wealthier you are the less likely you are to have thought about your wealth or put plans in place.

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15%

Have not yet considered the long-term plans of their wealth

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24%

Haven’t made any plans on passing on their wealth

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13%

Do not intend to discuss the wealth transfer with their family

We see several key reasons for this:

  • Business comes first
    Entrepreneurs are often so focused on running their enterprises, they don’t prioritise their personal affairs. 
  • Wealth is more complicated
    Which increases with geographical diversification, leading to an endless list of multi-jurisdictional challenges.
  • Greater propensity for loss aversion
    Managing greater levels of wealth can be hard work and there is more at stake from a monetary perspective. The thought of handing that on to the next generation may be something that UHNW entrepreneurs are more likely to delay, or put off.
  • Limited bandwidth
    Busy agendas and conflicting priorities of the business owner and stakeholders within the family can mean key discussions are never scheduled.  

Once an entrepreneur, always an entrepreneur?

A high proportion of UHNW entrepreneurs own more than one business, our findings show that 52% have multiple businesses which compares to a global average for all wealthy entrepreneurs of 19%. Diversification is an important strategy in the long term to aid wealth accumulation, and multiple operations, often in different markets, can be a key part of this. 

Very often, an entrepreneur will use the skills and liquidity they acquired during their first business venture to build other successful businesses – whether that’s their own or through investing and mentoring others. Establishing an ‘iron reserve’ with a financial institution can be a good way to manage risk through building a safety net for your wealth, while you invest in, or start new, ventures which may have a higher level of uncertainty attached.

Proportion of current business owners who own more than one business

% of respondents

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Proportion of current business owners who own more than one business - Graphical Representation

After exiting a large proportion still intend to stay involved with business

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After exiting a large proportion still intend to stay involved with business - Graphical Representation

We find that businesses owned by UHNW entrepreneurs tend to be more scalable and therefore have a more diverse shareholding interests among families – which may mean sale isn’t straightforward. Because of this, it’s common for the next generation to be extensively trained on site over many years, and strong family governance structures are implemented, such as board or C-suite positions. 

The decision to sell rather than transfer may be based on a lack of interest from the next generation to take over – or a concern about their ability to manage the family businesses. Equally, many entrepreneurs are waiting for the right offer to land on the table. 

You may intend to pass your wealth entirely to the next generation, distribute to philanthropic causes or a combination of the above. But there are other potential options, particularly if you feel the next generation does not appreciate the responsibility that comes with significant wealth or does not currently have the skills or experience to be guardians of the ‘family silver’.

When considering your exit, you should put aside the complexity and decide what is right for the business and your family, and whether these two things are aligned. Making the ‘easier’ choice may be at the long-term detriment of the business – and therefore, the family.

How entrepreneurs intend to exit, leave or hand down their business
% of respondents

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How entrepreneurs intend to exit, leave or hand down their business - Graphical Representation
How entrepreneurs intend to exit, leave or hand down their business - Graphical Representation Legend
Woman at the conference

Handing down the business is the preferred option for UHNW entrepreneurs with 59% indicating a succession path and only 26% considering a sale. This makes the next generation a key stakeholder in the early preparations for succession and is something that needs to be considered well in advance. Despite this, we see that only 36% are having regular discussions with their families. Some do intend to start in the near future (20%) or in later years (30%), but 13% don’t intend discuss it at all, and will let their wealth transfer plans take care of everything upon their passing.

The rise of global families

We also see that the wealthier entrepreneurs are, the more geographically dispersed businesses and families become. For our UHNW cohort, 73% live across more than one country and 89% own businesses that are trading beyond their immediate border. This compares to a global average of 45% and 75% respectively

Number of countries that families live across
% of respondents

Number of countries that families live across - Graphical Representation

Conducting business domestically or across borders
% of respondents

Conducting business domestically or across borders - Graphical Representation

Structures in place to pass wealth to the next generation

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Structures in place to pass wealth to the next generation - Graphical Representation

Wanting what’s best for their children means that education is a huge focus, and often this means sending them overseas to study. And in the same way they diversify their investments, property investments tend to be spread across multiple markets and continents. 

It’s not just the wealth planning that is more complex, but the actual management of the wealth on a day-to-day basis is also harder. Advisors from one jurisdiction can often be heavily limited on their ability to advise on overseas assets. Multi-jurisdictional wealth structuring and long-term estate planning can also become a pandora’s box and a time-consuming process. Perhaps that is why 14% have no wealth planning solutions in place at all.

Drivers of personal connections to international markets (top 3)

Drivers of personal connections to international markets (top 3) - Graphical Representation

The next generation

Finally, we see that UHNW entrepreneurs are more worried about the stress caused by handing down wealth to the next generation. They know first-hand how complicated and consuming running a business can be and know this may be intensified for the next generation – especially with changing business landscapes and macro-economic factors, not mention the burden of expectation. 

Group of people laughing

They also cite their own ability to pass on control as a top concern. Handing over a business which has been built on decades of hard work can be incredibly challenging, and is a time with mixed emotions and questioning of decisions. There may be a sense of loss after the sale or transfer of a company, so having something to jump into can be a welcome distraction. The support of your family can be crucial at this time, so involving them at the planning stage means they’ll be more aware of what’s to come. 

Often too much time is spent preparing the wealth for the children and not preparing the children for the wealth. Having a long-term plan in place can ensure everything is set up for them to take control at the right time and with the right training and experience factored in. Far too often events take place which dictate the timing and don’t provide the best foundations for the transfer for either the next generation or the business

Concerns for the next generation

% of respondents

Concerns for the next generation - Graphical Representation legend
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Concerns for the next generation - Graphical Representation

Conclusion

While it's undeniable that significant wealth creates great opportunities, it is juxtaposed with complexity for those passing – and receiving – it. Because of this, it’s perhaps not surprising that nearly a quarter (24%) of our UHNW entrepreneurs have not made any plans around transferring their wealth. But there are many options available to help you manage this process in the immediate and longer term, ensuring the best outcome personally, and for the business and wealth you’ve built.

Wealth planning doesn’t have to be a daunting task and with the right guidance, you can start putting plans in place today that can help protect your wealth and family during your lifetime and beyond.

*We surveyed 973 entrepreneurs across 9 markets with investible assets of USD2-100m+ to understand their priorities, concerns and plans in three key areas: international opportunities, the path to business exit and beyond, and the transfer of wealth through generations. This includes 95 UHNW individuals with investible assets of USD20-100m+.

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