UHNW families prioritise values over inheritance

As the Great Wealth Transfer gathers pace over the next two decades, it seems the most valuable inheritance for many UHNW families might not be money at all

By Christian Maddock

While inheritance may seem clear cut from the outside, different families often have specific intentions for their offspring / Image: Shutterstock

The majority of UHNW families are more concerned with passing on core values to the next generation than inheritance, data from HSBC Private Bank has revealed.

Of the 1,000 wealthy individuals surveyed by the private bank, 71 per cent were more concerned with the progression of their personal legacy than their financial one. This data was provided as part of HSBC’s latest report on inheritance and legacy, entitled ‘Enduring values: Building a lasting legacy’.

This comes as the dawn of what HSBC calls the Great Wealth Transfer. Over $100 trillion is expected to pass from members of the Baby Boomer and Silent Generations to Millennials and Generation Z over the next two decades, according to the bank. With businesses, investments and property shifting to the younger generation in the coming years, HSBC has emphasised the need for philosophical as well as economic planning.

‘When it comes to creating a family legacy, a wealthy individual needs to be guided by two key principles,’ said HSBC Private Bank’s head of family governance and philanthropy, Russell Prior OBE. ‘First, they need a clear set of intentions for their wealth – a wealth philosophy. Second, it’s vital that there is clear communication of those plans.’

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Different UHNWs take differing approaches to the passing on of inheritance, HSBC’s report has shown.

Of those surveyed, 35 per cent of wealthy individuals want to enjoy their wealth with their family rather than pass it on to heirs after their death. Furthermore, 15 per cent of those surveyed were explicit in wanting to enjoy their wealth for themselves without passing it on to family members or heirs.

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Those who wished to pass on their wealth to the younger generation while still alive made up 28 per cent of those surveyed. Conversely, fewer wealthy individuals planned to pass their wealth down after death, accounting for 23 per cent of respondents.

There are regional differences regarding when to pass on wealth as well, the report has shown. Thirty-five per cent of US residents surveyed were likely to pass on their wealth after death, as were 33 per cent of those from the UK. On the other hand, 11 per cent of Indian respondents, 14 per cent from the UAE and 19 per cent from Singapore were confident they would pass their wealth on. Many of them expressed a desire to enjoy their wealth while they were alive.

While their intentions with wealth may differ, the majority of wealthy families agree that the younger generation needs to be prepared to inherit wealth. Seventy per cent of the UHNWs surveyed said they would delay transferring wealth to their heirs to help instil a sense of financial responsibility.

‘Wealth brings freedom and a lot of convenience, but at the same time, the senior generation knows there are also many responsibilities,’ said Ann Ling, head of HSBC Private Bank’s Asian wealth planning division.

The desire to connect their legacy with philanthropy was another unifying value among the 1,000 individuals surveyed. Of the over $100 trillion set to move down the generations as part of the Great Wealth Transfer, $18 trillion is expected to go to charitable causes.

‘Philanthropy can be a powerful way to create a legacy that can last long after the wealth creator has gone, and which can simultaneously unify the family,’ said Prior.