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To hear the full episode of Wealth Insights, now part of the Beyond Markets podcast series, please follow the links to Apple Podcasts or Spotify. You can also read the transcript of our discussion with Gabriele below.

Whatever legacy you have to leave, failing to properly prepare to pass your assets to future generations can cause great disruption and difficulty. And given that roughly 70% of ultra-high-net-worth families do not currently have a plan in place, how do you begin to plan a smooth succession? And why is it important? We consider these topics and more in today’s episode. Gabriele, could we start with a quick explanation of what your role actually entails?

Sure. As wealth planners in Julius Baer, we provide holistic advice to our high-net-worth and ultra-high-net-worth clients on how to structure, preserve and one day transfer wealth according to their wishes. Then, depending on the country and the specific situation, our advice can be focused on family office services, financial planning, wealth structuring, succession, retirement or even philanthropic activities. My focus, and the focus of my team, is on European clients. But we are part of a global organisation and therefore we can always leverage our colleagues when the international aspect is relevant.

And given that the greatest transfer of wealth in history is actually due to take place between generations in the next 25 years or so, could you please explain why it’s important to have a succession or inheritance plan in place?

Of course. There are many reasons to have a proper succession plan in place, but I would say that at the end it’s peace of mind. You really want to be sure that your beloved ones are properly taken care of. And you also want to avoid conflicts. Avoiding conflicts, unfortunately, is a key element, especially when we have very large families.

Okay. And considering that there is a bigger volume of cash changing hands, does that kind of thing actually impact the approach that people may have to planning for the future?

The approach is important, obviously, but we firmly believe that each client is unique and also their situation. So I wouldn’t use one approach in any situation. ‘One size fits all’ really does not work in wealth planning, and for sure does not work when we talk about succession planning. I think that we can look also at the age of the people when we talk about succession – usually people think that it’s a topic for older people; that it is basically just how to dispose of your assets, how to transfer your assets to the next generation. In reality, succession planning is more than that – it is also the careful planning for emergencies, and that is obviously not strictly related to any age group. In reality, young families especially really need a succession plan. Let’s take an example: a family with minor children. In that situation, if the father, for example, is an entrepreneur or is an executive, he may have a very high income. So the family lifestyle is truly linked to the income that he is able to generate. But if something happens to him, then obviously the family will suffer.

And I mean for the example that you’ve just given, how would you recommend that those kind of situations are avoided? What would be your simple steps that you would advise in that case?

I think look carefully at the situation and think that while you may have a plan in mind, life happens and there are a lot of variables that you cannot control. An accident, for example, can happen and temporarily limit your ability to work and therefore your ability to produce an income for your family.

And aside from the more financial or administrational elements of succession, culture can be very important in how you plan. And we know it differs between country. For example, Grace wrote in the latest issue of Vision magazine that there was one Japanese temple-building firm started in 578 and it became the oldest family owned company in the world by changing traditional succession rules and thriving. So how important can the culture of where you live or operate be to the discussions around succession?

I would say it is incredibly important. What we see often, for example – in my case looking especially at European clients – often the wealth is held by the pater or the mater familia who, thanks to his or her ability, created the wealth, the fortune of the family. But obviously at one point this fortune needs to be transferred to them, to the next generation. And I think it is important that this is transferred in the right way, obviously according to the wishes of the clients, but also at the right time. I want to stress this point of timing. The time is critical. I think that especially when in the family there is a business, for example, it’s important to have a bit of a look at it; because within the family you can have the perfect person that can take the leadership role within the family for the business. But they need to be ready: so they can have the right character, the right characteristics, but it needs to happen at the right time. I believe that very often family businesses fail because the person that was designated to be the heir of the business took over the role too early. And sometimes this happens not because it was the plan, but just because something unexpected happened and this person had the courage to take on the role but were too early and unfortunately failed. I can probably tell you a story in this area. A few years ago I met a person at a conference, he was an entrepreneur, very successful – probably in his mid-seventies. He was an incredibly energetic, very active person. I would love to be like him at this age, still in the leadership position of his company, very friendly. We started talking and he explained to me how he created his company. He was obviously very proud of it. And he also told me that one day probably obviously he will decide to do something else, but he does not want to sell his company. So obviously as a wealth planner – what you can expect – I asked the question so you have a succession plan in place? And he told me, ‘I have a nephew, I’m very lucky. And this nephew is great. He’s just very smart, hardworking, the right character. He likes to talk about business. I think it is really the right person.’

So I was very interested and I started asking a few more questions. I said, ’Is he already involved in the business?’ And he told me, ’Not yet, he’s a student.’ So I pictured in my mind a person probably aged 25, perhaps doing a master’s to specialise in some areas of the business. And he told me no, he’s 16. Okay. I stopped a second and I look at him and because he was very friendly and there was a good chemistry. I smiled and I asked, ’But would he be ready today?’ Obviously he started laughing and told me, ’Of course not, it is too early.’ So why did I tell you this story? Because I think that is quite common. This person had a plan in his mind, probably a good plan. And I really wish that everything goes according to his plan and his nephew will take over the leadership role and will do extremely well. But as we know, life happens. And a person that is so young – we don’t know. In the next 5—10 years he can change his mind. So I think there is a lot of wisdom in the words ‘hope for the best, prepare for the worst.’

I think that’s very true. And for example, what might have been two avenues there? Would the advice have been for the entrepreneur to look for alternative successors? Or is it, in your mind, a better approach to start educating the 16-year-old about the company?

Straight away, I think you touched two important points. One is, for sure, the sooner you can start to educate a person, coach a person, the better – especially when we talk about businesses, because you want to test if this person really likes that world and is the right fit. So I think it’s perfect, your approach. But as I said, I don’t really have a formula to solve these kinds of problems. You really need to sit with a person, analyse the situation, and sometimes ask some difficult questions and work together on a possible solution, as you said. Especially if there is a young person. Perhaps you need to have a backup plan, perhaps with somebody else that you trust within the business that could potentially lead the company until this person is ready.

That makes sense. Now, if we look at some of the things that are making life more difficult for planning, when you are of high net worth or one of the wealthy families that we look after at the bank, they are more international today than they were previously. They now have more complexity in their lives. How does that affect the way that they approach estate planning? And is it something that will continue to change?

You’re putting your finger on a critical point. Families are more and more international now, but there is a point that I think that sometimes is overlooked. So it’s quite common now to find families with many family members living in different countries, with businesses in different countries, or perhaps they decide to move from one country to another. So, for instance, you can have a Belgian family that live today in Paris, in France; they have some business operations in other countries; their children study in London; they have a vacation home in Spain where they spend their summer holidays. And perhaps one day they want to retire in Italy, in Tuscany – okay, fantastic. I mean, it looks a very nice story, but there is a lot of complexity there. And when you have connections with multiple jurisdictions, one of the key points is to avoid conflicting laws. And this is especially important when we talk about succession planning. For example, many civil law countries have forced heirship rules, which means that at the end of the day, you are not fully free to dispose of your estate. The law says that a portion of your estate must go usually to the closest family members, the spouse and the children. Other countries, like, for example, England, have testamentary freedoms – you can freely choose, subject to certain provisions for family and dependence. So these differences are very important. And when multiple jurisdictions are involved, you need to be aware of it. And when you craft your succession plan, you need to be really careful to make sure that your wishes are met.

And aside from the example of England that you’ve mentioned there, Gabriele, we obviously have large presence in Latin America, in the Middle East, in Asia. These are culturally very diverse locations. Are there any specifics that you or your colleagues note on the way that you approach discussions in these regions?

Yes, of course. I mean, we see different trends across the globe and obviously the international aspect is not specific to European clients. When I talk to my colleagues covering the Asian markets, they tell me that now one of the emerging trends is that ultra-high-net-worth families decide to set up their own single family office to professionally manage their wealth in the Middle East. Asset structuring and liquidity planning are definitely in focus. When I talk to my colleagues covering Latin American countries, they always tell me security and protection is priority one. But at the end of the day, the common theme that we see is really this international aspect, and this is really not specific of a single region and obviously is especially important to high-net-worth families and ultra-high-net-worth families.

Returning to the idea that 70% of ultra-high-net-worth families may be without a succession plan, which John mentioned – in this situation, is it ever too late to start? And how would they go about starting to plan?

I have a simple answer: no, it’s never too late. You can start anytime. But in this area, the sooner the better. A suggestion could be the following: look at your situation and test if you are really aware of what can happen to your wealth, to your business, to your family, if something unexpected happens to you or to a member of your family. I think that this is usually a wake-up call, because sometimes people are not aware of how their assets will be distributed, for example, in which portions and so on. So it is very important to look at it, step back and say, ’Okay, am I happy with that?’ Because if the answer is no, well, you may need to have a look at your succession plan. The situation might not require immediate action, but if you look at it and you don’t like what you see, you probably need to be a bit courageous and ask some difficult questions of yourself. Because as I said before, it is not only a matter of distributing your estate, it’s also careful planning for emergencies. So think for a second if an accident happens, if temporarily you are incapacitated, for example, who has access to your wealth? If you have a leadership position in your company, who can manage the company in your absence? You need to ask these questions. And ideally you will also receive advice from somebody who has experience in this area, who is competent, and who can ask some questions that hadn’t occurred to you. Perhaps they will put you a bit in difficulty in the moment. But as I said, usually it’s a wake-up call. You see it and if you see something that you don’t like, it’s time to act. What we advise our clients to do is always start with a global wealth overview, which basically means look at your situation, look at your assets, wherever they are – financial assets, real estate assets, business, collections, everything. Look at the situation of your family, where they are, or if they want to move from one country to another one. Once you have a clear picture, involve competent advisors that can help and guide you. They can show you some options. Then you craft your plan. And then there is another step. It’s not essential, but we highly advise it. This step involves aligning the plan with stakeholders, family members or business partners. Why? Because as we said, you really want to avoid conflicts. Then the last step is reviewing the plan. If there is any change in the law, that can make your plan a bit obsolete; you should also think about any relevant changes in the structure of your family, of your wealth, or of your business.

And do you think the approach differs in any way depending on the age of those at the heads of these families or when there are multiple generations to consider?

Usually for younger families, for younger people, one of the main focuses is how to protect the family. And obviously, especially if they have minor children, if we look at situation where there are multiple jurisdictions, multiple generations involved, there probably the focus is on avoiding conflicts. If we look at families a bit older, with many generations involved, avoiding conflicts is key. Again, unfortunately, it’s a reality that people and family members tend to fight over inheritances. I mean, we have all read the stories also very famous people at war for inheritance. And this probably can be avoided with a very well prepared plan.

Now it’s definitely advisable to avoid conflict, but unfortunately it makes for good television. And for our listeners, Gabriele, we do like to offer some key wealth insights that they can take away from each episode. So what would you say, of all that we’ve spoken about today, are the most vital elements of succession planning that people should take note?

Of course, I would say first of all – and sorry if I repeat myself – when you look at succession plan, don’t think just about how to dispose of your estate, how to transfer your estate to the next generation or to whoever you want. It is more than that. It is also careful planning for emergencies. And for this reason, as we said, it is important for many age groups. Secondly, the other topic that we discussed today is the risk of conflicts within the law, and this is especially relevant when multiple jurisdictions are involved. Then follow the simple steps, starting with a global wealth overview. Get a clear picture of your situation, and if you are happy with the consequences in the absence of a conscious plan, you are okay for the moment. But if you are not, involve an expert in this area, and they can help you to create your own specific plan. Then align with stakeholders, family members, business partners to avoid conflicts.

And then review and review anytime that there is any important change in your specific situation – in your wealth, family, or business. One of the situations that is very important to consider is if you decide to move to another country. Because you may have created the perfect plan with the perfect solution in the first country, but when you move to another one, it may not work. For example, there are certain solutions that are incredibly well established in certain countries, but this does not mean that the advantages in that country are also applicable in the new one. So be careful about that. I know it’s a lot of work, but it depends. It can be complex, especially when you have two or three generations involved, multiple jurisdictions or business activities. Obviously in that case, preparing a good succession plan can take some time. But I also have good news. I mean, if you just do the first steps, you will also get a lot of value.

I want to leave a final tip: if you don’t want to do anything of that, just do this tiny step. Prepare an emergency folder. What is an emergency folder? It’s a folder where you basically collect information and documentation that is very relevant, very important in case of an emergency, as the name suggests. And it’s basically a folder with different parts. And we sometimes suggest our clients start doing that. 

We work together with them and obviously when you do that, you will probably realise that some information is missing, some pieces of the puzzle are not there – you’re expected to have power of attorney, last will, insurance policies, medical provisions, et cetera. So start just doing that. It’s very simple and can really help your family because at the end of the day you don’t want to add further stress to them in a difficult situation. Let’s be clear, this is not a succession plan, but it’s a small step that can stimulate some reflection on future planning. Also considering your specific situation in the area of succession planning and managing emergencies is helpful.