HSBC Global Private Banking has released its Global Entrepreneurial Wealth Report this week, which explores the views of entrepreneurs and those who have exited their businesses about the transfer of wealth through generations.
Globally, more than a third of entrepreneurs are considering
exiting their business within the next five years, with more
Asian entrepreneurs, on average, planning to stop managing
their business, according to a new report by HSBC
Global Private Banking
Business transfer to family members, is top of mind for
entrepreneurs in Asia but many are underprepared, the HSBC
Global Entrepreneurial Wealth Report finds. On the other
hand, when Asian entrepreneurs exit by a share disposal,
they are less likely to sell their entire stake in their
business, providing the possibility of retaining their
influence in it.
The report gathered data from 973 current and former HNW
entrepreneurs across nine different markets: France, Hong Kong,
India, mainland China, Singapore, Switzerland, the UAE, the UK
and the US.
It shows that more than half of the Asian entrepreneurs want
their wealth used for charitable or philanthropic causes or
sustainable/impact investing. They would also prefer having their
wealth used to invest in future businesses – either their own or
others.
The report underscores the importance of advice around business
and wealth transfer – a fact highlighted earlier this week from
UBS and its annual study showing that those inheriting
wealth overtook
creators in terms of the sums involved. Such findings demonstrate
why banks have developed teams to advise business owners on
transfers, sometimes in the context of helping business owners to
create family offices and other structures.
Asian families, while ahead in planning their wealth, lag behind
in the discussion with their heirs, the survey reveals.
When it is time for them to exit, Asian respondents show a
greater preference for transfering their business to the next
generation of immediate family instead of selling the business.
Sixty-one per cent of entrepreneurs in mainland China and 53 per
cent in Hong Kong want to transfer their business to the next
generation of their immediate family or to another family member;
in France, the figure is much lower at just 36 per cent, HSBC
said.
However, the study shows that the majority of these entrepreneurs
in Asia, with about 70 per cent in Singapore, Hong Kong and
mainland China, have not yet started the wealth transfer
conversation with their families. The findings also show that 8
per cent of entrepreneurs globally have never intended to discuss
their wealth transfer plans.
“Our findings indicate that many entrepreneurs are aware of the
importance to prepare their wealth for succession but not as many
have started to prepare their heirs,” Henry Lam, regional
head of wealth planning and advisory, Asia Pacific at HSBC Global
Private Banking, said.
“Deciding how to deploy family wealth or who will drive the
family business in the future is a time that can lead to stress,
high emotions and uncertainty. In fact, almost one in two former
entrepreneurs we surveyed globally say they would have consulted
more with their family if given the chance to exit differently
and almost half of next-generation entrepreneurs recommend that
others seek more formal advice about wealth transfer based on
their own experience of coming into the family business,” he
added.
Exiting a business may not be easy
Across geographies, the key enabler for entrepreneurs planning to
pass on their business is when the next generation is ready to
take over. Of those planning to exit through a sale, the
majority focus on finding a suitable buyer, the survey
shows.
Entrepreneurs around the world are also equally family-oriented,
the firm added, with over 70 per cent wanting to preserve their
wealth for the next generation or distribute it to them. While
two out of five entrepreneurs in India, Singapore and Hong Kong
are more likely to invest in future businesses, echoing the
report’s findings that, post-exit, many plan to continue
business-related activities.
Using the proceeds for charitable causes or sustainable/ impact
investing is a notably popular choice for entrepreneurs in India
(70 per cent) and mainland China (58 per cent), while this is
much less likely in the UK or the US (37 per cent each), the
survey reveals.
Other key findings from the report show that entrepreneurs often
have a global outlook, with nearly half living in more than one
country or territory and three quarters trading with overseas
markets. They are not just in search of business opportunities
abroad: international investments and real estate are personal
drivers.
More than half of entrepreneurs in Hong Kong and mainland China
also look internationally for their children’s education.
