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Half of wealthy business owners have made a will, says new study

A startling 49% of business owners have not made a will, and 22% say they have not started any form of wealth transfer planning.
John Younger, RBC Wealth Management

A startling 49% of business owners have not made a will, and 22% say they have not started any form of wealth transfer planning, new research suggests.

The report, Business owners & wealth transfer: Applying the lessons learned in business to wealth transfer, surveyed 384 business owners in Canada, the United States, and the United Kingdom, each worth an average of $6.4 million.

While 39% of those surveyed by RBC Wealth Management had a full wealth transfer plan – a higher proportion than their employed counterparts – John Younger, RBC managing director for business owners and entrepreneurs, said the fact about half did not have a will was “extraordinary”.

“We note business owners tend to be better prepared than others, and it makes sense as they tend to be focused on their businesses and very organised,” Younger said.

“Having said that, they aren’t as prepared as you’d think. One of the fundamental things that we all should have, whether you’re wealthy or not, is a will.”

But wealthier business owners were much more likely to have a plan in place, said Guy Huntrods, RBC’s managing director and head of investment counsellors in the British Isles.

He said owners with investible assets exceeding $10 million were three times more likely to have a full wealth transfer plan (58%), than those with less than $1 million (19%).

“The level of preparedness of business owners is heavily correlated with their net worth… It is not that surprising because the more money you have, the more you will give this particular thought,” Huntrods said.

Campden Research’s Global Family Office Report, produced in association with UBS, found 43% of family offices expected a generational transition within the next 10 years, and 69% in the next 15 years. More than 240 global family office participants were asked for their main governance priority over the next 12-24 months and “implementing a succession plan” topped their list of responses.

Younger said he had also observed different attitudes to wealth conservation and transfer across generations. He was driving when, much to his surprise, he saw an older couple who he knew to be worth $65 million waiting for a bus to the airport.

“I thought it was extraordinary that this family who have built this incredible wealth lives like they need to pinch every penny,” he said.

“[But] culturally, it is because they grew up in wartime and it is embedded that that is how they live their lives. I know for a fact their kids say, ‘Mum and Dad why don’t you enjoy yourselves, you’ve been so successful’.”

Younger said a reluctance to plan came about because people wanted to “kick down the road” complications associated with succession. These discussions could be delicate, as they were intertwined with conversations about death.

“It’s not the easiest topic to deal with,” Younger said.

“It’s very sensitive from a cultural perspective, it often takes place when there’s been a death and there’s a bereavement process. [Therefore] we think planning is incredibly important.”

Younger said he was seeing a trend towards owners educating the next generation about wealth at an earlier age.

The RBC report said on average, business owners started educating their children about finance at age 25 compared to 27 for employed professionals. Younger business owners said they would start sooner, with 20% to begin educating their children before age 18.

While many, according to the RBC report, had an “unarticulated hope or assumption” that children would want to follow in their footsteps, they then found out their offspring had other ideas. Thus, having conversations around business and wealth transfer sooner rather than later was important.

Younger said many business owners grappled with how to be fair to all their children, particularly where blended families and the personal characteristics of various children came into play.

“Being completely fair can be difficult when children don’t have the same approach to wealth and business,” Younger said.

“A family may have a situation where one child is not that responsible, so there’s a trust for that particular child, while the other children may get a bit more freedom.”

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