Flourishing Futures: Making Succession a Success

Over the coming years, a phenomenon dubbed the ‘Great Wealth Transfer’ is expected to see trillions of dollars passing from baby-boomers to the next generation, via the transfer of direct and absolute wealth ownership.

The indicators are that a certain amount of change and evolution around finance succession within the global financial services industry will be needed, particularly among advisers who work in wealth management and asset management.

To ensure advisers meet the evolving needs of the next generation of clients set to inherit this wealth, advisers must adopt a forward-thinking strategy now.

Jersey Finance, in partnership with Bedell Cristin, has produced this thought leadership piece for advisors of UHNW and HNW families and trustees on the financial planning actions they can proactively undertake in anticipation of the increasing influence of the next generation.

Note: the following information is only intended as a general overview of the subject matter. It does not constitute, and should not be treated as, legal advice.

Challenges Arising From the ‘Great Wealth Transfer’

The future of wealth ownership is changing. It is vital that trustees and other financial advisers, or fiduciary service providers who advise clients on finance succession planning, are ready to meet the needs and demands of the next generation.

These include the challenge of a late financial education, conflict from successors over inheritance, few future inheritors having a wealth transfer strategy, complex international family and property arrangements, access to more information and expectations that trustees will provide fast, accurate responses 24/7.

How to Make Financial Succession Planning a Success

Working with international private client specialists of top law firm, Bedell Cristin, we have identified 10 clear planning action points to guide trustees on how effective succession planning.  These include meeting face-to-face with the next generation, preparing a trust structure summary, aligning investments with the successor’s aims, clarifying who beneficiaries are and why, the impact of pre-nuptial agreements and focusing on values and future growth.

Jersey is one of the world’s leading international finance centres. Its forward-thinking approach, robust regulatory framework and political and economic stability have kept the jurisdiction at the forefront of global finance for more than 60 years.

Jersey is an attractive choice for the ongoing administration of existing trusts and establishment of new wealth-holding structures because it offers:

• Legislation which focusses on the importance of flexibility, allowing for the creation of structures tailored to individual family and estate requirements
• A regulatory regime acknowledged by independent assessments from some of the world’s leading bodies including the OECD, World Bank and IMF
• A well-respected and independent judicial system
• A depth and breadth of experience among its almost 14,000 professional advisers
  A central time zone, making the Island readily accessible around the globe
• Close proximity to the UK and the benefit of frequent daily flight connections between Jersey and the UK. Choosing the Island makes practical and logistical sense for those with family connections or business interests in London or elsewhere in the UK

The Founder Generation

Thirty plus years ago, the go-to wealth holding structure available and used by the founder generation was typically a ‘one-size-fits-all’ trust. The founder generation at the time of the trust’s creation likely had common attributes.

These will have included:

• All beneficiaries living in a ‘home’ jurisdiction
• A strong expectation beneficiaries would be educated or live in the “home” jurisdiction
• Moderate understanding of wealth-holding structures and no easy access to information, although entrepreneurial and well-versed in business activities
• A close relationship with most, if not all, members of the founder generation
• Beneficiaries with fairly traditional characteristics and qualifications i.e. children, grandchildren and great grandchildren of the founder generation, together with their spouses, would automatically qualify as beneficiaries
• A shared aim as to the purpose of the trust
• Active participation in the choice of trustees and therefore likely to have developed a close personal relationship with the trustees

The Next Generation

This present-day generation is also likely to have common attributes, but different to those of the founder generation, including:

• Beneficiaries and their families will have been educated or living in multiple jurisdictions beyond the ‘home’ jurisdiction
• A greater understanding of wealth-holding structures driven by a willingness to conduct their own research, access to online information and the media
• Expectation to easily access information via technology in a myriad of formats, 24 hours a day, seven days a week
• Difficulty in gaining or sustaining a relationship with other beneficiaries due to the growing size and international locations of the beneficial class; now including cousins, nephews or nieces and grandchildren
• More complex family arrangements
• Experience of either pre-nuptial agreements, divorce, multiple marriages, long-term but unmarried relationships, same sex relationships, and any children from these relationships
• More likely to have individual requirements and aspirations which may not necessarily be shared among all of the next generation
• A shift to a transactional-style relationship with trustees or employees, so less likely to have long-term loyalty towards the trustees or employees