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.

Trustees Must Meet Next Generations Needs

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.

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Why Jersey for succession?

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
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To find out more about making succession a success, read the full report.

Founder Generation vs Next Generation

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

The Future for Private Wealth Advisors 

To meet the evolving needs of the next generation, advisors must adopt a forward-thinking approach now.

Globalisation and the wealth creation witnessed in emerging markets are offering significant opportunities for forward-thinking jurisdictions as investors and families look to diversify into new markets and explore new sectors. Jersey is ready to not only handle challenges in this new-look environment, but also to seize the opportunities it presents.

With a track record spanning more than half a century, Jersey’s finance industry has always demonstrated a desire and ability to evolve with the times. Today, it is differentiating itself from other centres by embracing digital technologies, working with gatekeepers in key overseas markets, delivering insights through research, and evolving its range of products and services.

Harnessing the power of digital and creating an appealing environment for fintech business has been a real driver within Jersey’s finance industry for some years now, and dedicated activity in the fintech space is focussed on giving private wealth professionals greater cyber security, enhanced oversight, more choice and better access to wealth advice in a way that continues to meet the needs of the current generation of clients and the next generation.

There is real potential, for instance, for Jersey to lead the way in exploring the use of artificial intelligence to provide quick, tailored wealth planning advice and, in a global environment where governance and information exchange are increasingly important, in looking at new approaches to data management to ensure efficient data reporting.

Jersey stands out as a different breed of international finance centre that can provide stability, certainty and high standards of professional support for cross-border private wealth activity.

If private wealth practitioners are not already talking about the impact of the ’Great Wealth Transfer’, then they soon will be.

Trusts: A Positive Impact on Society and Within the Scope of Regulation ›

Discover more content about the benefits of trusts for individuals, families and wider society, which are equally wide-ranging. Many of the reasons for using trusts resolve needs in society, such as protection of the vulnerable, provision in retirement and family succession, while the more commercial uses can increase productivity and economic output and allow businesses to adapt and develop.

Jersey trusts are confidential, reputable and long-established financial planning vehicles, within the regulatory and tax net, and face scrutiny as part of wider international moves for greater transparency for such structures.

Download the full 'Flourishing Futures: Making Succession a Success' report