Business owners are not as prepared when dealing with wealth transfer as you might think, with 49% of them having no will yet, according to a recently launched report by RBC Wealth Management and Scorpio Partnership.
The Business owners and wealth transfer: Applying lessons learned in business to wealth transfer — which looks at the trends of wealth transfer among business owners — concluded that 51% of business owners have a will in place, while 22% haven’t started any formal preparations towards a will.
Go deeper with GlobalData
However, despite this, business owners are notably better prepared in their wealth transfer journeys than employed professionals or any other group surveyed for the research. Approximately 39% business owners have a fully wealth transfer plan in place in comparison to 26% of employed professionals. According to the research, the reasons for this are the self-directed spirit and preparedness of entrepreneurs.
Guy Huntrods, managing director and head of Investment Counselors for RBC Wealth Management in the British Isles, said at a breakfast briefing in London: “The level of preparedness of business owners is heavily correlated with the actual amount of their net worth. A business owner with investable assets greater than $10m is three times more likely to have a full wealth transfer plan in place than those with asset values of less than $1m.”
Business owners have difficulties differentiating their business from their personal wealth, according to the report.
John Younger, managing director of Business Owners & Entrepreneurs at RBC Wealth Management, adds: “One of the things we’ve seen with some families is that the patriarch or the matriarch of the family that is running the business has some really tough decisions to make in terms of passing on the business or passing on the wealth.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“In many cases they think to themselves, well I want to be completely fair with all of my family, but at the same time they have to recognise that maybe one son or daughter is particularly responsible with money and maybe one son or daughter has other ideas. They have to be careful and responsible in the way they deal with it.”
Other topics covered in the report include education and “giving while living”.
Business owners, most of whom are self-starters, tend to self-educate, according to the report. Approximately 68% of them conduct their own research to build their financial knowledge, and 45% indicate that they plan to give their children more guidance on inheriting wealth than they received.
In addition, 51% of business owners rely on family members to educate their children, while 29% rely on financial advisors and private bankers.
“The wealthier the business owner is, the more likely they are to rely less on family members and focus more in external advisors, which is good news for us,” says Huntrods.
With regards to the topics that business owners want to teach their children, wealth transfer comes first (36%), followed by investment strategy (35%) and budgeting (33%).
The report also reveals that 40% of business owners plan on “giving while living”, as they desire to help inheritors achieve their ambitions (21%) and mentor them on responsible wealth management (20%).
Research for Business owners and wealth transfer: Applying lessons learned in business to wealth transfer was undertaken from June to August 2016. The findings are based on data from 384 high net worth business owners living in Canada, UK and US with an average net worth of $6.4m.
