On September 19th 2019, a selection of the Private Client Global Elite arrived at the China Club, Hong Kong, to participate in their first discussion dinner held in Asia.

The evening, hosted by Marcus Dearle, Bryan Cave Leighton Paisner and kindly sponsored by Steve Sokic of IQ-EQ, focused on the upcoming topic of “Transition to NextGen.” With participation from jurisdictions including Hong Kong, Singapore, Japan, Italy, USA, Switzerland, UK and Bermuda, there were several NextGen themes that transcended these global borders:

  • The older generation want to protect their assets from the NextGen’s marriages, lack of business understanding or disinterest in continuing their inherited role;
  • There is a general “estate planning fatigue” within the older generation;
  • There is a general deficiency of information and communication between the older generation and NextGen, which limits a smooth transition of wealth;
  • The NextGen are moving away from traditional wealth planning methods and moving towards charitable investment, philanthropic ventures and a dislike for tax avoidance schemes and offshore trusts; and
  • Whilst the majority of the discussion focused on inherited wealth, members also discussed the shift in the NextGen’s handling of creation of wealth, particularly in start-up hubs. The trend seems to be a lack of interest of the NextGen in wealth planning for their family and a stronger affinity towards charitable investments.

Despite several themes transcending global borders for the transition of wealth to the NextGen, there were some interesting differences between certain jurisdictions.

In particular, UHNW families in Asia prefer to keep their businesses within their immediate family and get the NextGen involved earlier on, taking a longer term view of training successors.  In particular, the older generation focus on engaging the NextGen on how to accumulate wealth (as well as preserving inherited wealth) from early on.

In Japan, as inheritance tax is 55%, the third generation effectively inherit nothing. As such, the families’ enemy is the government and not the “NextGen.” The families are therefore much more closely aligned on how to preserve their wealth and coordinate their efforts together, not against one another.

Italy shares similarities with Asia in that Italian UHNW clients tend to keep their businesses within their immediate family and choose to distribute shares equally amongst their children. Unlike the UK therefore, there is not as much litigation on succession planning in Italy. However, this may increase with the future use of trusts creation in Italy.

Interestingly, whilst the members debated the general difficulty of their clients relinquishing control of their assets in favour of the NextGen, the lawyers realised that they too must “practice what they preach” and pass their own client work down to the NextGen of private client lawyers. In fact, input from the NextGen of private client lawyers may help stave off litigation between clientele families later down the line, as values they share with NextGen clients could be picked up earlier in the transitional process.

If you would like to join our next discussion dinner, please contact Amy Glover at [email protected] to enquire about membership to the Global Elite. Our 2020 calendar can be found below:

PCGE-2020