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June 28, 2018updated 11 Jul 2018 7:53am

Succession planning: Private banks’ strategies profiled

By Saloni Sardana

Succession planning is a key concern for the world’s growing UHNW population – defined as those people with $30m or more in net worth – and private banks are reacting by offering numerous programmes.

Private Banker International (PBI) benchmarks the UHNW succession planning strategies of major private banks and examines the investment attitudes needs of the UHNW community.

The fifth edition of the World Ultra Wealth Report published by Wealth X in June 2017 revealed global growth of the UHNW community of 3.5% to 226,450 individuals and a 1.5% increase of their total combined wealth to $27trn.

Despite heightened geopolitical instability, the Wealth X report said the global ultra wealthy population is forecast to rise to 299,000 people by 2021, representing an increase of 72,550.

Asia is a particularly important UHNW market given the region is projected to accumulate another 14,400 UHNWIs to reach a total of nearly 52,000, by 2022 – 49% of whom will be from China, according to Credit Suisse.

For the UHNW sector in Asia, a major challenge facing private banks is that much of the wealth is still held by the first generation, unlike the West where it has often passed down many generations.

UHNW Next Generation in Asia

 A spokesperson for Credit Suisse says:  “In Asia, much of the wealth and most of its significant family businesses were created in the second half of the 20th century and are therefore just beginning to experience the multi-generational issues that European or American industrial families had to contend with one or two generations ago.

“Over 80% of Asian family businesses are in first and second generation ownership, compared with around 50% in Europe and the US.”

The spokesperson adds: “Family-owned companies across global emerging markets are much younger than their peers in developed markets, at an average age of 37 years in Asia Pacific ex-Japan compared to 82 years in Europe.

“Hence, the private banking business model has to be highly correlated to where we are in the cycle of wealth creation in Asia.”

Michael Yong, private banking managing director at Standard Chartered Private Bank, says: “Intergenerational wealth transfer is the biggest challenge in serving the UHNW. 85% of the billionaires in Asia are actually first generation.”

Yong adds: “For the first time we are seeing a handover of this billionaire wealth. The impact of this on the industry is that 90% of the heirs would choose to change their wealth adviser.

Yong warns: “For these UHNW going through transition in terms of wealth transfer, wealth managers need to be able to engage the next generation.”

Dr. Silvio Struebi, banking specialist and partner at pricing strategy consultants Simon-Kucher, says: “Asia is also highly promising in terms of growth as the UHWNI population in China will be growing steadily in the next years. Banks in Asia invest in further growth regions like Thailand, India, Indonesia and Malaysia.”

Kevin Herbert, managing director at HSBC private bank, says:  “As these UHNW grow older, the average age is coming down overall given new wealth generation in Asia. They want to talk about succession planning and children and branches of the family and how they provide for the future.

“Sometimes it is a dynasty of the business and what their aspirations are for the company and what they have created to continue through to the generations.”

David Shick, head of private banking Greater China at Julius Baer bank, says: “In this region, they are going through succession planning issues. Most the wealth is first generation unlike Europeans who have gone through several generations of wealth transfers.

Shick adds: “They are relatively young at this stage now. They look towards private banks to give them advice on how they can maintain this family legacy by setting up family offices.”

Shick continues: “A key challenge is whether the second generation sees relationship managers as their own relationship managers. How do we make our millennial programmes as they go from first generation to second generation.”


Succession Planning

Here is a roundup of succession planning strategies of key players in the industry:

UBS Wealth Management

Josef Stadler, global head of UHNW at UBS Wealth Management, says: “We offer multiple platforms and initiatives for our clients to prepare for the next generation. These programmes are now in their 15th year help prepare the younger generation for responsible ownership and management of family wealth.

“They have also acted as platforms through which the participants may learn from their peers and establish ties with families from different countries and cultures.”

Stadler adds that UBS Wealth Management has an annual Next Generation Foundation- a six-day programme catered to the next generation successors between the ages of 20 and 27 that “helps participants gain knowledge, discover and enhance their impact as an entrepreneur team leader”.

Credit Suisse Private Bank

Credit Suisse Private Bank hosts a series of regular events and thought leadership forums, where investors connect investors with privately-held pioneering ventures such as their Private Innovation Circle, High Tech Forums.

These programmes are intended to bring together global opinion leaders and UHNW clients to discuss current, economic, financial and social landscape as well as relevant themes in the industry.

Since 2005, the Swiss bank provides financial education and peer-to-peer networking opportunities for young investors.

Credit Suisse co-founded and has been the main sponsor of the Young Investors Organisation- a global community of over 1300 future leaders from influential families in 55 countries.

A spokesperson for Credit Suisse comments: “Our close interaction with the YIO helps the bank understand the needs and challenges millennials face and to provide targeted solutions for their own personal growth, that of their family or the broader community.”

On the issue of family offices, the spokesperson says: “The Family Office Services Team works with our relationship managers and their UHNW clients across the region who recognise the importance of managing transitional or generational issues proactively, or who wish to develop their own Single Family Office but need help.

“They could have embryonic ideas about setting up a Single Family Office or they may have an existing set up which the family would like to improve because it no longer fulfils the needs of the family.”

Standard Chartered Private Bank

Yong says: “In a nutshell our strategy is to be the bank for entrepreneurs.”

He says succession planning is a core part of the bank’s strategy aimed at the UHNW.

Yong adds: “We offer family trusts. Quite a few banks are winding down trusts in the industry. We have made a strategic decision to keep that trust business. Because we feel it is really important especially for the UHNW to help them with that.”

Yong continues: “The second part is how we help nurture the next generation. We have this future global leader programme. This is to help our UHNW clients groom the next generation. These next generations can be in their twenties or even in their early thirties. “

The next annual one-week programme will be held in Hong Kong.

It focuses on five development areas: leadership, entrepreneurship, philanthropy, sustainability and communication skills for these next generations.

Lombard Odier  

Jurgen Vanhoenacker, executive director, sales and wealth structuring at Lombard Odier comments: “It’s interesting that succession planning remains the top concern for UHNWI and HNWI, as shown by a Wealth-X survey looking at the key needs of the wealthy over the past and next 10 years.

But Vanhoenacker warns: “However, according to this same survey (based on feedback from 400 of the world’s leading private bankers and wealth advisors who, between them, manage assets for about 45,000 ultra-high net worth (UHNW) individuals with a combined wealth of over US$500bn), globally only 53% of UHNWI clients have a robust succession plan in place. Our own experience totally confirms that.

Vanhoenacker continues: “Thus, we have made it part of our [business as usual] to provide ongoing training and educational sessions on succession planning for our business partners, that include private bankers, family officers and other key advisers to UHNWI and HNWI.”

HSBC Private Bank

Herbert says: “Succession is a very much a hot topic and an area of interest where we feel we can add a lot of value in terms of our business.

“Our trustee is 70+ years old now, it is one of the largest of any bank. When you get in this space, yes it is product and access to liquidity and loans for the strength of the bank’s balance sheet, but then succession comes into it very much. “

“The larger and more complex the family becomes, there are different opinions on how things should move forward in terms of the business or the wealth. We do a lot around trust structuring, we do a lot around family governance and business succession.”

“If you think of every corporate, they would a board meeting and governance in terms of how they run the company. We do the same in the family context. The family would have a governance to say, each branch would have a representative at the family board. If somebody passes away, then [we help construct] the succession plan for that branch.

Progeny Wealth Management

Neil Moles, managing director of Progeny Group, says: “We are focusing on the next generation, offering classes and one to one sessions with our UNHW clients’ children, helping them to approach and understand their wider financial responsibilities. Through this we can introduce them to the right people and ease them in by asking for their input and even giving them small areas of responsibility, ultimately preparing them for their future.”



According to Credit Suisse, “No part of the wealth pyramid has been transformed as much since 2000 as the millionaire and UHNWi segments”.

The spokesperson comments: “Assuming no change in global wealth inequality, the global economy is projected to add another 719 billionaires in the next five years, meaning that their number will rise to nearly 3,000.”

The spokesperson adds: “This difference in favour of Asia-Pacific will increase further and, by 2022, the region is projected to accumulate another 14,400 UHNWIs to reach a total of nearly 52,000, 49% of whom will be from China.”

Responding to the predictions of the 2017 Credit Suisse Global Wealth Report, Vanhoenacker says: “This increasing population will continue to have a similar set of needs requiring sustainable solutions, including wealth planning and succession planning.”

While the amount of wealth held by the UHNW community is massive, this is not easy to serve them.

Several of the wealth managers interviewed by PBI, say the biggest challenge in serving them is the fact that they are a very demanding set of audience.

Yong comments: “I think the key message in the outlook is this segment has huge upside opportunities but they are also very demanding as a group of clients. We need to provide them with very senior experience, advisors and bankers.

“This is also how we have tilted our hiring strategy which is focusing on hiring senior bankers.”

But Sando Forte, managing partner at Forte Financial LLP comments: UHNW’s can be more demanding but they can also be extremely fair, taking a view they will happily pay for something that has an actual or perceived value.  Personally I think it is clear the market is going to expand rather than get smaller.”

UHNW investment attitudes

Brett de Bank, co-founder of private investment platform Capitama identifies alternative investments as key challenge for wealth managers serving the UHNW community.

“In alternative and unlisted private equity & debt markets, the UHNWI community is underserved both in terms of the infrastructure providing access to such opportunities, but also how traditional wealth managers deliver potentially ancillary services as a part of their offering.”

Michael Parsons, CEO of Wren Investment Office, part of a global alliance of multi-family offices, comments: “From an investment standpoint we see more and more UHNW capital being allocated to private equity, with a greater focus on direct deals and co-investments.

“We are strong believers that private equity is a key component of a long-term investment strategy, but one has to be particularly selective in the current environment where valuations and leverage are being pushed to levels last seen prior to the global financial crisis.”

On a more gloomy note, market participants believe a spate of recent stringent regulations mean UHNWIs are more inclined to preserve their assets.

Simone Westerhuis, managing director at LGB Investments, comments: “There is still a negative sentiment towards offshore financial centres being perceived as reluctant to embrace transparency and absorb standards set by onshore governments.

“There is also growing pressure on financial firms from increased regulation such as MIFID II, GDPR and the forthcoming Senior Management Regime as well as the issues of cross-border tax compliance laid out by The Foreign Account Tax Compliance Act (FATCA).”

Westerhuis adds: “Against this backdrop, we would expect financial institutions to become more and more selective with regard to the individuals to whom they offer services and the structures of investments. From the perspective of the UHNW individuals, services may become more expensive and there may be fewer investments from which to choose.”

Forte says: “Succession planning for UHNW clients has become more relevant in recent years.  The changes in tax rules, GDPR regulation and Brexit mean more UHNW are looking closely at ways to preserve assets and then pass them down to the next generation.”

Overall, private bank are actively engaging in strategies to engage the next generation of UHNW clients and avoid a scenario where families and individuals go from “clogs to clogs in three generations”,

Wealth managers are focusing on engaging future successors through hosting a number of networking events, financial education classes and investment seminars. This makes sense as several private banks fear that the heirs of super wealthy may not recognise the value of a private banking relationship, especially as the industry is disrupted by challengers.

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