Many first-generation wealth creators in Asia have as their ultimate goal to establish the family name for the future. But passing wealth to the next generation can be fraught with risks, such as family disputes, changing legal requirements or the pitfalls of the financial markets. To ease the inter-generational transfer of assets and control, families can often benefit from bringing in external professional advisers. Swiss Life Global Solutions can help with our flexible and innovative wealth planning solutions that support wealthy families so they can live a self-determined life with confidence.
Talk of the Asian century is not just rhetoric - it's based on some remarkable facts. China's high net worth population (individuals with between €1m and €30m in liquid assets) has already reached 2 million, with a total wealth of around €9 trillion. This population is growing at twice the global average rate, and is expected to reach 2.7 million by 2022. Further up the wealth scale, the Asia-Pacific region is home to more than 800 dollar billionaires, or almost 38% of the global total, with two more appearing in China every week.
Much of this wealth is held by entrepreneurs, often first-generation business owners who have worked hard to launch and develop their companies. They may have become overnight millionaires or billionaires, for example, as a result of an IPO in Hong Kong, where $36bn was raised by stock market entrants last year. IPOs raised a total of $109 billion across Asia last year, up 27% from 2017.
Establishing the family name
The first generation of creators typically wants to secure their newfound wealth and ensure that it passes to their heirs. For many, the ultimate aim is to establish their family name in the same way that wealthy families in Europe and the US have done.
But passing wealth to the next generation is fraught with the risk of loss, either as a result of family politics, changing legislation or the many pitfalls of the economy or financial markets. Taking advice from a professional with experience and perspective gained over many market cycles may be one of the best investment decisions they can make.
The wealth management market in Asia is relatively new, unlike in the US and Europe, and many first-generation HNWIs in China are not yet accustomed to managing family wealth with a view to securing it for their successors.
A first step is to manage the transition of some or all authority for managing assets from the family's head to heirs. The founder may be reluctant to hand over control of the business, but ways can be found to involve younger generations according to their abilities and ambitions. They can be given a role in management, a shareholding, or an income from a trust in which ownership of the business is placed.
The coming generations will likely have gained exposure to international ideas about wealth management, through work, travel or study. They will have seen how many famous family dynasties in the West started from humble origins, but were able to build up their business over generations through far-sighted use of wealth planning solutions.
The heirs will be looking to replicate that success. But as governments impose stricter oversight of moving money and assets across borders, Asian families will have to think carefully about their personal priorities, and, in setting investment goals, take into account issues such as income distribution, exchange rates, personal assets, taxation and residence rules.
Few people have all the skills, time and desire to manage these issues. A key lesson for all families, in Asia as elsewhere, is that the growing complexity and rapid evolution of both financial markets and domestic and international legal requirements make advice from qualified professionals an essential element in securing family wealth for future generations.
Swiss Life Global Solutions offers flexible and innovative wealth planning solutions that support wealthy families so they can live a self-determined life with confidence. Our solutions are designed for secure and solid wealth transfer offering clients to grow their financial assets while simultaneously protecting their loved ones.