Family Business Succession Planning I Belfast I Familosophy
Supposedly as a result of the retirement of the baby boomer generation, we have been writing and talking about a trillion-dollar wealth transformation that will "take place within the next ten years." Is this, however, what has happened? This is demonstrated by the fact that we are still referring to it as a "happening."
We must inquire as to why so many people's predictions were proven to be erroneous. and, perhaps more crucially, what (if anything) should we be doing differently in response to this situation.
I've previously written about the "two speed" state of wealth, which is defined as dividing by value rather than by number. When looking at the big picture, aggregate data do not tell the complete story. It is estimated that there are millions of relatively'small' wealth transitions and a far smaller number of really significant wealth changes per year. They operate in a completely different way within each 'wealth band.'
One of the most significant effects, in my opinion, is the extension of life expectancy. It is not uncommon for people (particularly those in business) to continue to be productive for another 10-20 years or more after they reach the age of 65. By that time, the family enterprise may have been passed down through two (or more) generations of family members.
This can result in the rising generation serving as 'waiters' for far longer periods of time than they were previously. Is it realistic for anyone to expect to be granted control of the family business or to receive big riches when they are in their 60s? Consider the case of Prince Charles, who was born and groomed to be king, and who is now 73 years old and still waiting for his turn.
Due to the increase in life expectancy, it is necessary to reexamine what intergenerational wealth transition actually entails and how it should be implemented. More on this subject will be covered in later newsletters.
Consider the following: What is the average age of the 'rising generation' in your family? How far along is your family's wealth transition strategy, compared to where you thought it would be ten years ago?
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Scenario #1: The older generation wanting to work with the younger generation, bring them into the company, teach them how to run things, and then retire from the office, but not the income
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