The succession planning process can seem like a difficult one, but Private Banker International (PBI) simplifies it for you.
Succession planning is a strategy aimed at passing on leadership roles and sometimes ownership of a company in the event a leader at a company dies, retires or moves on.
It also involves ensuring that wealth passes on smoothly from generation to generation.
Succession planning is often also called “replacement planning”.
Here is what the succession planning process should entail:
- Identify critical positions.
For any succession plan to work, a firm needs to know which positions are most critical and likely to be impacted should the leader of a firm leave.
- Identify different skill sets and competencies
In order to focus on expectations, one needs to identify what skills are required to fill vacancies in key areas and positions.
- Identify interested employees and evaluate whether they possess those skills
This part involves identifying candidates who are ready to develop these skills required for the leadership positions. This often entails ensuring that candidates have certain linguistic skills.
- Document and develop succession strategy plans
Often discussing career plans with employees and their interests is the best way of assessing candidates who are really to progress and whether the their skills can be developed in the time period.
- Evaluate effectiveness
This part involves evaluating and monitoring the succession plan to ensure that there is a plan for all key leadership positions. Ensuring that key positions are filled quickly and new starters perform well.
Why should the succession planning process matter?
Neil Moles, managing director at Progeny Group, commented: “UHNW individuals are expected to transfer around $4tn over the next decade. With a substantial proportion of this wealth being self-made, many will be dealing with complex succession planning matters for the first time without any established protocols in place.”
The Global Wealth Report by the Credit Suisse Research Institute (CSRI) shows that total global wealth reached $280trn by the end of 2017, 27% higher than a decade ago. In 2016 and 2017, 2.3m people became new dollar millionaires, bringing the total figure to 36m. The report predicts total global wealth will reach $341trn and 44 new dollar millionaires will be created by 2022.
The issue of succession planning is even more prominent in Asia compared to other parts of the world.
This is because Asia, particularly China, has the highest amount of billionaires compared to any other region.
Most of the wealth in Asia is still held by the first generation, which means succession planning is important to ensure that the successors of family businesses inherit, manage and grow the wealth effectively.
This is why wealth managers should all have a succession planning process in place to ensure smoothest transition of wealth.
Read PBI’s feature on Succession planning: Private banks’ strategies profiled to understand how private banks are doing to prepare