«Gouverner, c’est prévoir; et ne rien prévoir, c’est courir à sa perte.» Emile de Girardin, a French publisher and politician, summed up what wealth and succession planning is all about: act with foresight, otherwise you may be heading for a loss. Often easier said than done! For as much as a generational change offers opportunities, it also harbours dangers if one does not plan ahead in a structured manner.
Structuring assets and planning succession are often not easy undertakings, because the economic-rational view is compounded by an ideational-emotional one. This dimension is often more important than one might think. Every generational change is fraught with risk because intra-family circumstances and poor planning can pose a threat to family assets.
When is «the right time»?
Wealth and succession planning is a process that can take several years. The right time to begin the process depends on many factors. If the process is started too early, it can arouse desires in the successor generation and steer a personal development in the wrong direction. If started too late, the process can fail often because offspring has already gone its own way, established itself in other areas and a return to the fold is difficult or lengthy. The decisive factor, however, is the desire of the transferor to actively initiate the succession process. The actual process begins within oneself.
Material values are not primary
The roots of a succession are already laid in the cradle of children, through the role model function of parents. From an early age, we learn from our parents what life is all about, what it can hold, how things are to be valued and what we can achieve with our abilities. These perceptions shape our own views on family, wealth and entrepreneurship. Accordingly, it is important to focus not only on material resources in the process, but also on family values, traditions, attitudes and role perceptions. They have a subliminal influence on the family system and, if not addressed and taken into account, can jeopardize family wealth and happiness at a later stage.
Wealth means responsibility. Responsibility means looking ahead. What should the future of the family legacy be? What counts as core assets, what as residual assets? What is to be achieved, what is the purpose of the family’s wealth? How should the successor generation use the assets? Who should take over the reins of the family business? What other factors should be taken into account? These and many other questions need to be clarified and the family and the assets need to be viewed from an objective, neutral and future-oriented perspective.
For the person handing over, this is sometimes an uncertain and doubtful path. In order to develop a sustainable wealth and succession strategy, it is therefore worthwhile to call in outside support. Independent experts have the necessary expertise and knowledge in various areas. However, their most important function is to listen and to understand, to ask pertinent questions and to guide the process in a targeted manner and from a neutral position, with the ultimate goal of uniting the family, its assets and business enterprises into a functioning «perpetuum mobile».
Five «essentials» for success
Five factors shape the success of any wealth and succession planning: First, the analysis of the initial situation and possible challenges in order to summarize the real overall situation of the family, its assets and businesses in economic, financial and personal terms and to lay the groundwork for a realistic and sustainable wealth and succession strategy. Secondly, the definition of values in order to promote a common understanding of the family legacy. The associated open communication within the family makes it possible to form a guiding framework for the future development of the family, assets and business. Thirdly, the definition of purpose for assets and the company, which also creates the basis for discussion with regard to shareholding and management succession as well as governance. Fourth, the consensus of all those involved, which is necessary for the feasibility of an asset and succession strategy and fundamentally strengthens the family’s ability to act. Fifth, ensuring flexibility so that the assets and business can be adapted to future conditions.
The framework conditions in which wealth is embedded influence its continued existence. While one can often only react passively to external conditions, one can actively influence internal conditions. Therefore, it is advisable to actively start a wealth and succession
process with professional support and secure the future of
wealth and family.
Francis von Seilern-Aspang . Managing Director