Intergenerational Transmission of Wealth: Threats and Opportunities

Intergenerational transmission of wealth presents significant opportunities for the next generation, as well as for wealth managers and private client advisors who support them.

Earlier this year, we launched our Trident Trust Singapore Knowledge Series with a roundtable event titled “Intergenerational Transmission of Wealth: Threats and Opportunities”, which brought together around 30 senior industry professionals from local and international banks, wealth advisory firms, investment houses and family offices. With a massive intergenerational shift in wealth anticipated in the near future, attendees explored how to unlock the potential of this transition.

Our Trident Trust Singapore team, Sean Coughlan and Hannah Bisson, along with co-hosts from Stephenson Harwood, Suzanne Johnston and Yi Lee, facilitated an engaging discussion.

The objective was to identify the major threats to wealth preservation across generations and to explore strategies for overcoming these challenges. By doing so, we aim to ensure that families are better prepared, their wealth is better protected, and that we, as their trusted advisors, are well-equipped to serve the next generation of wealth owners.

The off-the-record roundtable format encouraged debate and led to open and meaningful discussions among the attendees. Below is a summary of some of the key topics discussed and insights shared during the event. 

The Great Wealth Transfer

Great Wealth Transfer refers to the ongoing intergenerational wealth transfer in the United States, Europe and Asia, where the Baby Boomer generation is set to leave significant wealth to their heirs. By 2045, Baby Boomers and the Silent Generation are expected to bequeath assets worth a staggering USD 84.4 trillion. This monumental transfer in wealth means that Millennials are poised to become the wealthiest generation in history. 

Inspiration for discussions that followed was drawn from the 2024 Knight Frank Wealth Report  which declared that this wealth transfer is also taking place amid “seismic changes” in asset utilisation. Climate change was highlighted in the report as a key area where generational investment priorities differ, with an average of 79.5% of Millennials actively trying to reduce their carbon footprints, compared to only 63% of Baby Boomers.  

A speaker shared her view that Millennials are more focussed on ESG because they are considering their own children’s futures. Their Gen Z and Gen Alpha children are learning about the impact of climate change on their world and are encouraging their Millennial parents to reconsider daily life choices. This in turn translates into larger actions, such as charitable donations or new investment strategies.

Threats to Intergenerational Wealth Transmission

Discussions commenced with an open question:

“What is the greatest threat to wealth preservation from this generation to the next?”

The speakers commented that understanding the threats is crucial for effective wealth preservation. We must know what we are up against, in order to suitably prepare for, address and overcome these challenges.

Naturally, many different threats were identified:

The three biggest concerns raised were family disputes, poor communication and lack of planning.

Family disputes. The NextGen often wish to choose a separate career to their parents and forge their own path. They may have different views about life and about how to manage / distribute / allocate family wealth, which can lead to potential disconnects and conflicts.

Poor communication. Lack of communication and the unwillingness of the founder generation to have open discussions with the NextGen about topics related to wealth can also lead to family disputes, especially after the death of the matriarch or patriarch.

Lack of planning. Failure to plan, or to plan early enough, is a big risk. Delaying planning until a crisis occurs puts the family wealth at risk and can severely limit the options available to protect it at the last minute.

On the topic of threats, other notable insights from our attendees were as follows:

How important is succession planning?

• As global wealth grows, the need for proper succession planning becomes increasingly important.
• It is not enough to simply establish a plan and set it aside; ongoing communication and involvement of the next generation are essential to prevent conflicts and ensure alignment of expectations.
• Conflicts such as fights, divorces and disagreements are inevitable, and the presence of significant wealth only heightens these issues. This is why it is so important that families have structures in place to protect wealth when disputes arise.

Do you think your clients have sufficient plans in place today?

• Families have often complex needs and requirements, necessitating a combination of succession and wealth planning tools to achieve the right solution. Many wealth owners might not yet have sufficient planning in place to ensure a seamless transition of their wealth to the next generation.
• Families evolve and grow over time and with this their needs also change. For this reason, even after a succession plan is put in place, it should be regularly reviewed and updated to ensure it remains relevant and fit for purpose.
• While awareness is growing, many Silent Generation and Baby Boomer wealth owners are still reluctant to discuss wealth transition or to consider any handover of control.

What would you suggest if a wealth owner is unwilling to plan?

• Advisors should patiently encourage and educate.
• Case studies and real-life examples of what can go wrong if wealth owners fail to plan for the succession of their wealth can help to highlight the risks.
• Start with the basics. Do they have a Will? Can they identify suitable successors who could take over in the event they are no longer around?
• It is essential to approach this topic with a deep understanding of cultural sensitivities. Whilst respecting these cultural nuances, we must also fulfil our responsibility to highlight the risks and share the planning tools available to our clients.

How can we encourage more open communication between generations?

• Regular family review meetings involving trustees, advisors and family members can help manage expectations and address concerns before they escalate. 

How can wealth managers and advisors be better prepared ourselves?

• Forums and roundtables are vital for challenging us and raising awareness of the current trends so that we can stay prepared for the coming wave of wealth transition.
• Ongoing training and development are necessary to meet evolving demands of the private wealth industry. Historically, this industry has been slow to change, but the past few years have demonstrated how quickly we can adapt and progress when necessary.

What is the next generation looking for and are we ready?

• Core concerns for Millennial clients are:
  -    Cyber-attacks and threats
  -    Protecting their children in an uncertain world, with a focus on:
  ›    guardianship planning
  ›    avoiding rigid structures that may not accommodate their children’s future geographic, career or personal changes
  ›    the evolving job market, how humans interact and how business is done
  ›    online vulnerabilities associated to children’s online presence, particularly if they are wealthy
  ›    managing concerns about divorce and ensuring that trust structures are robust enough to protect the family wealth
• Political uncertainty and potential for border changes in the next 10 - 20 years
• Creating well-planned structures that address cross-jurisdictional complexities, especially as many NextGen (and their children) will have international education and experiences

Opportunities in Intergenerational Transmission of Wealth

Once we understand the threats and how to overcome them, we can then focus on the potential opportunities. The second half of the evening was therefore dedicated to understanding how intergenerational wealth transfer can actually benefit families.

Discussions began with a question: “What steps, strategies or structures are most helpful for families seeking to protect their wealth from one generation to the next?”

Feedback centered around three key areas: good communication, good governance and good planning:

On the topic of opportunities, other notable insights from our attendees were as follows:

What are the biggest opportunities for clients?

• The NextGen, being young and more in tune with current issues, can bring fresh perspectives that reinvigorate the family’s approach to wealth management.  
• Securing asset ownership within a trust can help to preserve a family legacy.  
• Putting in place a good succession which ensures a controlled and responsible transition can enable the older generation to more comfortably hand over some of their workload which will free up time for them fully enjoy their retirement.
• Involving the NextGen early can even strengthen family bonds, if roles and responsibilities are carved out based on each family members differing experience and interests, helping the family plan for their continued success and growth.

What are the biggest opportunities for their advisors?

• Professional advice is more important than ever as family dynamics get more complex with each successive generation and interests continue to grow and diverge.
• Millennials are focused on streamlining overly intricate inherited structures.  A significant part of our role involves conducting thorough health checks and simplifying such structures, so they remain fit for purpose, whilst remaining within the spirit and goals set by the founding generation.
• Given NextGen’s differing interests, the value of professional advice is even more crucial to ensuring that family legacies are preserved and aligned with current and future priorities.
• Encouraging the collaboration of the whole ecosystem of professional advisors will best help families who have bespoke needs.  

What differences have you noticed in the investing habits of the NextGen? What trends are you seeing with wealthy millennials

• Millennials tend to focus more on:
  -    Diversification of investments and assets across multiple jurisdictions
  -    Real estate remains a preferred choice, particularly in more geopolitically stable jurisdictions
  -    Jurisdictions with robust regulation like Singapore
  -    Millennials are highly conscious of the reputational impact of their actions, especially in the age of social media and they care about the legacy they will leave for their children. ESG and impact investing are therefore more of a focus for many Millennial investors.
• It can be more challenging to plan for the NextGen as they are more globally mobile. With the rise of remote working, people are less tied to any one location and so multiple jurisdictions often need to be considered.
• The NextGen is far more comfortable with, and reliant on, technology (and digital assets) and expects to be able to access information digitally, at all times. 

How to “future proof” a portfolio?

• Embedding family values into investment strategies, with a focus on portfolio asset allocation that considers both exclusion and inclusion sectors (for example climate change or sustainability)
• Maintaining flexibility is very important in today’s rapidly changing world
• Understanding family dynamics is important in crafting structures and portfolios that are specifically tailored to each family’s circumstances 

How can we successfully engage with both the current and next generation?

• Whilst the NextGen may want to forge their own path, they may not yet be our primary client. Our responsibility is to advise the current generation, whilst encouraging them to involve the NextGen.
• We are noticing a shift towards more families involving their Millennial children in discussions about wealth management and succession planning, however we should continue to prompt the older generation to engage the NextGen as early as possible.
• Offering NextGen workshops or training sessions not only adds value but also gives them the opportunity to connect with peers and advisors, building relationships for the future.
• Recognise that the NextGen often has a different outlook and different drivers. Introducing them into roles such as charitable giving can serve as an early step towards greater involvement, helping them gain experience and establish connections with advisors.
• Structures where assets are pooled in a trust allow for a well-defined succession plan, carving out roles for professional advisors and family members within protector and investment committees. This can enable the current generation to retain certain control during their lifetime as a power holder and also facilitate a smooth transition to the NextGen at the appropriate time, all while protecting the capital within the trust. 

How can family governance structures be used to better enhance wealth continuity and align values?

• A family constitution is generally not considered to be legally binding, and so would be most effective when used together with other succession planning tools, such as trusts and shareholder agreements.
• Family constitutions serve as a rule book for the family. They often cover the family’s governance structure, values and vision, as well as how family members are expected to contribute, make decisions and deal with conflict.
• For some families, this may be more informal - perhaps a set of key values or a mission statement.
• As families grow larger and more successive generations become involved, formalising these principles into a written family constitution / charter can really help codify the family culture and keep family members accountable.  In this way, all family members understand the family’s position on key matters, such as finances, family dispute resolution and involvement in any family businesses. 

Conclusion 

While fraught with possible challenges, intergenerational transmission of wealth also presents tremendous opportunities for wealthy families.
 
By encouraging our clients to plan proactively, communicate openly and implement robust governance and succession structures, we will help our clients be prepared for this upcoming transition and ensure their wealth endures for generations to come.