Thought PiecesJune 8 2020

The Wigmore Association: Discussing succession during self-isolation

4 mins read

Written by Wigmore Firms

The Wigmore Association member firms speak on how this period of self-isolation provides the perfect opportunity to broach the subject of succession planning

Given the outbreak of Covid-19, individuals and families globally subsequently have had to self-isolate. Now, more than ever, this time spent together creates the perfect opportunity for families to think and discuss succession planning.

Succession, much like the wealth being passed on, takes time to create. It requires long-term planning in order to be effectively implemented and should be taken into consideration at least five or ten years before the intended handover date (which itself is often unknown!). 

Planning allows time to create a framework for a smooth and effective transition, while engaging the next generation in developing a real understanding of the family goals and ensuring the wide variety of expectations are taken into account.

It’s challenging to achieve a smooth transition of control and ownership of wealth, values, knowledge and legacy to the next generation without stifling individual identities and aspirations of family members. Family succession requires well-disciplined family governance and planning, to take into account what matters most to each generation.

In order to get some practical ‘top tips’ on how to support creating a successful succession plan, we reached out to our global Wigmore member firms and asked the question, how can families begin this journey of proactive succession planning during this period of self-isolation, ensuring the next generation is prepared for succession?

Practical Tips:  How can Family Offices Help with the Succession Process?

Begin the conversation early

Gradually preparing for this huge transition will help set the next generation up for success, rather than stress. Simply put, it’s better to start talking about inheritance “too much, too soon”, and not leave it “too little, too late.”

Share short-term plans and also open up about long-term planning, goals, and anticipated roles within the family. All of these small conversations show trust and, should something happen to the family principal, would leave the next generation in a much better position of understanding.

Be clear about your family’s expectations, purpose and vision for the future. Wealth empowers all family members to make decisions and drive united outcomes both for today and for the future.

Create an environment for healthy communications

Consistent, collaborative and effective communication is fundamental to a family’s success in the short term and particularly in maintaining wealth momentum through generational transitions.

Tell your family’s story

Explain how your family’s wealth was created, and how it has evolved over time. By bringing them into the story and making them feel a part of the journey, they will develop a deeper understanding and appreciation for this wealth – so that when the time comes, they recognize the role they play in nurturing the family wealth.

Ask about their ambitions

This presents the perfect time to talk to your children about their ambitions and hopes for the future. The attitude of millennials to significant wealth is drastically different than that of their parents in many cases, so by discussing their personal goals you will develop a greater understanding of how best to transfer your wealth, in a way that works for all members of the family.

Lead by example

As much as this education process is important, values are “caught, not taught”. Wealthy families have a conscious choice to make in keeping their children grounded so that, when they come to inherit wealth, they are well placed to manage and invest it responsibly.

Formulate a leadership development plan

Develop a plan that defines the what, when, how and why stages and how something is to be done.  Train the raising generation outside of the family and engage a coach or mentor to support through the transition.

Look to outside advice

Wealth transfer can be an exciting, confusing, and an emotionally loaded journey to embark on, for all generations involved. Many families look to outside experts to “steady the ship” and help educate and prepare the next generation for the future. While an adviser can never replace the role of a parent, they play a valuable role in providing carefully considered insight on the practicalities of managing significant wealth and helping curate a plan to match their life goals.

Documentation

Seek help in documenting a family vision and setting out the family’s purpose of wealth. Our member firms help families to prepare a ‘Critical File’ in soft and hard copy of all the pertinent information of the family (Estate planning documentation, Company Constitutions, Trust Deeds, Inventory Lists, Land Titles, details of insurances, trusted advisors, log-ins, PIN numbers etc). Revisiting and revising critical family documents is crucial to ensure that wishes, signatories and other details are up to date.

For many family offices, the greatest question they currently face is generational change. Preparing for and managing the handover from one principal, especially the original wealth creator, to the succeeding generation can raise unique and potentially damaging challenges. The first-hand experience of our member firms across the globe can help you avoid the pitfalls and pursue the best practices to ensure a seamless succession.

Our member firms are here to help families facilitate these conversations and make sure all generations involved have the knowledge, tools, and vocabulary to ensure these conversations lead to successful transitions. Now is a good time for families to focus on opportunities and to make their succession plans come alive.

Across jurisdictions, we realise there are differing restrictions for the distribution of local assets and have published a separate article from Turim Multi-Family Office on “Succession Planning for Brazilian Clients”, which can be viewed here.