How HSBC’s team of advisers is preparing UHNWs for the future

The multi-faceted team at HSBC Private Banking is helping clients to weather the current crisis — and to prepare for whatever the future holds

The coronavirus crisis hasn’t just changed the way people live and work, says Charlie Hoffman, HSBC Private Banking’s UHNW managing director. It’s changed how they think.

‘It has given pause for thought,’ says Hoffman, speaking over a Zoom call. ‘I think clients are re-evaluating things. I asked one client what he’d learnt from all this and he said, “It’s really interesting, Charlie – I’ve learnt that I really like being at home, that I really love my wife, and that we’re really very happy. I’ve been wondering why I spend so much time travelling around.”’

This re-ordering of priorities manifests itself in different ways. Another of Hoffman’s clients has reassessed the time and money they spend on a particularly expensive hobby. Others, naturally enough, have begun to think more about their health and what will happen when they’re no longer around.

As far as wealth planning goes, that’s no bad thing, says Jeremy Franks, HSBC Private Banking’s head of wealth planning and advisory for EMEA.

‘Many successful businesspeople seem to believe they’re going to live for ever,’ says Franks. ‘As a result, they put off planning. Let’s face it, death is not normally a topic that people want to think about. But, actually, the coronavirus pandemic has made people much more willing to talk about death and its consequences.’

This leads to other conversations, Franks adds – not just about the financial wealth of one’s family, but considerations such as the legacy one leaves behind. ‘Many people thought that they wouldn’t need to consider their legacy for decades. The crisis has shown why the right time is now.’ Hoffman agrees: ‘The best way to begin wealth planning is often to start at the end, and then work backwards.’

A very real risk for successful entrepreneurs is that the wealth they’ve worked so hard to accrue will not be passed on to future generations. It’s widely acknowledged that the chance of ‘transmission failure’ from the first generation, ‘G1’, to the second, ‘G2’, is 70 per cent. That figure rises to a staggering 90 per cent between G1 and G3.

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Finding a purpose for family wealth during uncertainty

Understandably, people tend to think about their wealth and legacy in predominantly financial terms. But relationships between human beings often pose a bigger threat than dips in the markets. ‘If you do not uncover the emotional landmines waiting to go off, you are running a huge risk,’ Hoffman says.

Sweeping for these emotional landmines is something of a specialism for Russell Prior, HSBC Private Banking’s head of family succession and philanthropy EMEA. He works with business owners and wealthy families to smoothly and efficiently transition wealth between generations. ‘In many cases, that leads to conversations around family governance – whether that’s family business governance, or family wealth governance,’ he says. Prior and his team set about establishing a family’s objectives and then work out how to achieve them.

If that sounds like a rather simplistic description, then it probably is. ‘Sure, we know that the majority of wealth-transition failures arise through a lack of trust and communication between the generations, and a lack of preparation of the next generation,’ says Prior. But solving those problems is easier said than done. ‘Helping families to come together as a unit and think really hard about this process and the frameworks that underpin it is very important.

‘For example, if a husband and wife are running a business together, we might sit them down in a room and have a dialogue with them about the purpose of wealth. When we ask each of them, in isolation from the other, what their conception of that is, we often realise that the two people’s ideas only overlap by about 70 per cent, even though they feel as though they are totally in lockstep. So much of this stuff exists inside people’s heads, so it only comes out when they talk about it consciously, and with some structure.

When Prior and his team bring younger generations into the equation, the gap between individual family members’ values and senses of purpose can be even greater. ‘Often grown-up children are already in the business, helping to run it, so there’s not even a hint of animosity. However, I know as a parent, there are certain things that it’s difficult to speak with your children about unless there’s somebody independent in the room – an objective voice to aid the discussion. My team and I are that objective voice; we help families to increase the quality and depth of that communication and understanding.’

Many people take this opportunity to get things off their chest. ‘A lot of the kids are worried about whether they will be good enough to take the family business on,’ says Prior. ‘A lot of the parents worry about it too.’

Another of Hoffman’s clients recently told him that two of the three most emotional moments in his life had taken place while he was working with the team at HSBC: ‘You really are unearthing some very deeply sensitive topics – things that people haven’t wanted to address, or haven’t had the time or the framework to address.

‘There are things that it’s difficult to speak with your children about unless there’s somebody independent in the room’

‘There’s a sense of palpable relief when they feel that they can almost put the planning and the what-ifs aside because it’s done. Then people can get on with their lives.’

Of course, entrepreneurs with businesses to run have their hands full at the moment. Many are weighing up the benefits of diversifying their assets, especially when it comes to ownership of family businesses. ‘Do you really want to have your eggs in one basket?’ asks Prior. ‘We don’t know what’s around the corner. It’s easy to say that now, but we’ve been saying it to clients for years.’

Diversification takes many forms, notes Franks. It can even extend to the way he and his wealth planning team create separate trusts for different branches and generations of a family, in such a way as to prevent conflict from arising in the first place.

When it comes to the coronavirus crisis, it’s important to look for silver linings, Franks adds. Opportunities to transfer certain assets that have dropped in value may be among them, and his team work closely with other intermediaries to make this happen.

Another opportunity being taken by HSBC’s clients is the one to mitigate the impact of the pandemic through philanthropy. There is often an assumption that giving through Gift Aid is the most efficient way, says Franks. Clients who benefit from his team’s tax knowledge are often surprised when they learn this isn’t necessarily the case.

‘When philanthropists discover that their money can go further, they often end up giving more,’ says Prior. ‘We can help them to maximise their impact.’

Web: hsbcprivatebank.com

This piece first appears in issue 75 of Spear’s magazine, out now. Click here to buy the latest issue and subscribe

Edwin Smith

Spear’s editor-in-chief since 2020. Edwin was formerly deputy editor of Spear’s and head of the Spear’s Research Unit. He has written for the Telegraph, Guardian, Daily Mail, Esquire, Wired, ...See more