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Barclays Wealth InsightsVolume 14: The Transfer of Trust

Wealth and Succession in a Changing World

In co-operation with Ledbury Research


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ForewordAbout Barclays Wealth

Barclays Wealth is a leading global wealth manager, and the UKs largest, with total client assets of 170bn, as at

www.barclayswealth.com

Follow us on www.twitter.com/barclayswealth and www.twitter.com/wealthinsights

Barclays Wealth does not endorse any website or third-party company referenced in this article. Such discussions

are for informational and discussion purposes only.

About this report

Barclays

Wealth Insight

to transfer that wealth in the future.

For information or permission to reprint, please contact Barclays Wealth at:

or email [email protected]

Wealth this is the core of our business. As the global economic landscape changes and so too does the shape and

The Transfer of Trust: Wealth and Succession in a Changing World, the fourteenth

Barclays Wealth Insights

Insights an interesting and inspiring read.

Thomas L. Kalaris

Barclays Wealth


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Peter Collett

Shaunaka Das

Marcus Dearle

Niall Glynn

Catherine Grum,

Emily Haisley

Sue Medder

Gareth Morrell

for Social Research

Dr Wendy Piatt

Shimon Takagi

Professor Orit Tykocinski

Richard Watson

Introduction

an afterlife. Whilst some of their architectural legacy has

Whilst we may still be concerned with the le gacy we

a successful life.

management process, and is also one of the most

consideration in succession planning, such as family and

best connect. Today, responsible succession planning also

whether their children will be good custodians of wealth,

to ensure their personal happiness and success.

To shed some light on this area globally, Barclays Wealth

to help interpret the results.

Our aims were to:

that can be associated with this.

necessary arrangements.

and trusts.

generation and how that generation should best


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Wealth and happiness:

relationship between income and one measure of

there is a stronger relationship between wealth and

happiness when it is earned, rather than inherited.

Wealth can beget family conflict: Some 40% of high

The importance the wealthy place on succession

planning does not increase with age:

importance of succession planning by high net worth

with age. Instead, it is most important in the earliest

and the latest age categories. Our analysis shows that

sale of a business. After retirement, high net worth

succession, as they enjoy a stage in l ife where they

are able to place more emphasis on their own needs.

Wills and disinheritance: Our research shows that 23%

of high net worth respondents around the world do not

The gender gap:

worth women say they place less importance on

order assume more importance.

Trust is a key element:

not trust their children and stepchildren to protect their

economies appear to trust their children less to protect

their children less.

Words of wisdom:

economic turbulence. This is consistently important

the scale and unrelenting economic problems we face.

technology, mathematics and science. Their top choice

do not trust their children and stepchildren

to protect their inheritance. There are trust

issues in all the major regions; generally

children less than in emerging countries.


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of their personal and business assets to their children.

The transfer of their material, income-generating

creations to their human, cost-incurring ones, can be

Succession,a crucial wealth

challenge

Yet it is something that increasing numbers of wealthy

economies. Indeed, inheritance is a more important

result all aspects of inheritance planning in these areas

are coming to the fore.


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which, in turn, a re often learnt from their own parents.

generation than those in emerging countries.

Values are also passed down by parents

the wealthy do not follow them as ardently in all things.

for them to follow in the footsteps of their parents in

terms of their careers or businesses.

important to follow in their parents footsteps. Shaunaka

Das

of ones family and ones obligations to them.

parents footsteps is a priority. In these regions, especially

of entrepreneurialism in these geographies, with

entrepreneurialism and willingness to follow in

parents footsteps.

Chart 1 Source of Wealth

* % selecting Main source of wealth (multiple options allowed)

Source: Ledbury Research

Inherited

% Selecting each option*

Entrepreneur

Earned

0 20 6040 80 100

18%

29%

15%

37%

59%

Developed

Emerging

51%

Singapore 51%

Ireland 53%

Monaco 64%

Spain 60%

Switzerland 63%

UK 57%

US 66%

Australia 62%

Hong Kong 41%

Japan 39%

Qatar 55%

South Africa 60%

UAE 68%

Chart 2 Personal Values

Total 59%

Saudi Arabia 78%

India 74%

* % who slightly agree or c ompletely agree with the statement My values are very similar to my parents values


% Agree*

0 20 6040 80 100

Ireland 9%

Monaco 35%

Spain 22%

Switzerland 8%

UK 8%

US 12%

Qatar 49%

UAE 14%

South Africa 17%

Australia 9%

Hong Kong 35%

Japan 18%

Singapore 21%

Chart 3 Following in Parents Footsteps

Total 20%

Saudi Arabia 56%

India 81%

* % who slightly agree or completely agree with the s tatement It is important to me to follow in the footsteps of my parents in terms of career/business


% Agree*

0 20 6040 80 100


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and emotionally. Research into happiness is a growing

Most people are sceptical of the idea that money leads to

happiness, but recent studies clearly show that money

and income.

between income and one measure of happiness:

wealth is important. Financial happiness is more closely

Emily Haisley,

on health, freedom, satisfaction, etc., there is the worry

accomplish this, he has strictly limited the amount of his

own fortune that his children will inherit. UK businessman

of simply transferring large-scale wealth to his children,

and instead has reportedly put in place a scheme that

The Times

Catherine Grum

Wealth specialising in succession planning, notes that

such concerns are common amongst clients, and that

there are many things which parents can do

to foster ambition within their children.

something under their own

through a third party such as a

Money really can lead to happiness

no matter which country you are in. So a 10% rise in the income of

as a 10% rise in the income of someone in the United States

Justin Wolfers, NPR Planet Money progr am, March 8, 2011


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share of the wealth. Amongst children, there may be

death of a parent. Where there are multiple spouses,

there may be those who feel entitled to more from

the estate, based on their contribution in creating it.

logical arguments and more emotional ones

but emerge after their deaths.

Sue Medder

notes that the multi-faceted family structure has certainly

from different marriages competing, not just against each

Total 40%

500,000 999,999 42%

250,000 499,999 38%

Under50,000 46%

2m-5m 38%

1m-2m 40%

5m-10m 42%

50,000 99,999 42%

100,000 149,999 40%

1m or more 33%

10m+ 46%

150,000 199,999

39%

200,000 249,999

33%

0


% Agree*

20 6040 80 100

Net Worth

Income

But it decreaseswith income

Conflict increaseswith net worth

Total 40%

Hong Kong 51%

US 36%

India 61%

Japan 47%

Singapore 53%

South Africa 43%

Spain 47%

Switzerland 28%

Monaco 51%

UAE 32%

Australia 44%

UK 37%

Ireland 33%

Saudi Arabia 38%

Qatar 12%


% Agree*

0 20 6040 80 100


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Peter Collett suggests that there may

be something more general about the nature of the

Sue Medder notes that

there is an entire baby-boomer generation who are

The transfer of family businesses from one generation

as seen by respondents in India who say it is important

to follow in their parents footsteps, but also report

Niall Glynn

amongst multiple families.

Amongst our respondents, we found that those who

Emily Haisley

accepted as fair that people should reap the rewards

that is inherited are more ambiguous and can trigger

Catherine Grum

business, the planning process starts months or years

surprise. Yet when passing wealth within families, this

too late, and when the patriarch or matriarch is no

longer around and no plans are in place, the dynamics

whether or not the wealthy thought that inheritance

Latin America, as well as the UK and Ireland. This high

response rate illustrates the belief amongst parents that

wealth is a double-edged sword that brings problems

India 50%

Chart 6 Burdens of Inheritance

Total 29%

Switzerland 15%

Hong Kong 38%

US 21%

Ireland 35%

UK 35%

Monaco 14%

UAE 18%

Qatar 20%

Singapore 36%

Spain 14%

Japan 32%

Saudi Arabia 22%

Australia 20%

South Africa 24%

* % who slightly agree or completely agree with the s tatement Inheritance places an unnecessary burden on the next generation


% Agree*

0 20 6040 80 100


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planning is deemed to be in this transfer process.

Still, the inheritance cycle continues

Is an inherited dollar any different than an earned

Academics Professor Orit Tykocinski from the

presence, although symbolically, of the person who

their other wealth.

by the personality and lifestyle of the deceased, and

money becomes highly associated with the person

to imagine that theyd inherited money from an aunt

The researchers speculate that these effects probably

to properly research this.

Emily

Haisley

such as how close they were to the person who left

building good relationships between generations

Money with personality

India 1%

Chart 7 Passing Assets on to the Next Generation

Total 4%

Switzerland 4%

Hong Kong 5%

US 3%

Ireland 2%

UK 6%

Monaco 2%

UAE 2%

Qatar 2%

Singapore 5%

Spain 5%

Japan 11%

Saudi Arabia 6%

Australia 2%

South Africa 0%

* % selecting the statement I dont believe any assets should be passed on to the next generation as the best match for how they feel about i nheritance planning


% Agree*

0 42 86 10 12


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dramatically, but it is interesting that more than 60% of

this idea has resonance right across the world.

successofsuccession


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need for thorough planning. This fact is now generally

appreciated amongst the worlds wealthy, with more

than half agreeing that succession planning is important.

A similar pattern is seen amongst those with higher

therefore are at more of a distance to planning matters

Religion also appears to play a role here. Those who

Shaunaka Das

and businesses within the family grouping is particularly

India and the ancient system of delegating duties a nd

* Mexico and Brazil

** South Africa

*** US


Total 61%

% Agree****

0 20 6040 80 100

NorthAmerica*** 54%

Europe 67%

LatinAmerica* 85%

Middle East 58%

Africa** 74%

Asia 55%

Chart 9 Importance of Succession Planning

* Mexico and Brazil

** South Africa

*** US


Total 57%

% Agree****

0 20 6040 80 100

NorthAmerica*** 51%

Europe 57%

LatinAmerica* 73%

Middle East 75%

Africa** 72%

Asia 55%


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contrasts. The importance of succession planning does

not increase on a straight-line basis with age, as some

between age and the importance of succession

planning. As chart 10 shows, it is most important in

the younger and the older respondents. We analysed

months include marriage, the purchase of property

things that will happen in the future are more important

are generally less concerned as they enjoy a stage in life

where they are able to place more emphasis on their

own needs.

succession planning for all ages of the wealthy

population is the purchase of property. Catherine Grum

Gareth Morrell, Research Director

importance of succession planning in the minds of

InsightsRisk and Rules: The Role

of Control in Financial Decision Making

Catherine Grum

With succession planning, these catalysts are often

step toward this goal; the succession-planning

Different ages, different priorities

succession planning is perhaps the one where you

importance to family dynamics and the future welfare

of the children.

From our research, it appears that women place

less importance on succession planning than men

lessening in younger generations. Younger women are

becoming much more engaged in succession planning.

Chart 10 Importance of Succession Planning for Different Ages


%A

gree*

Age

Under 35 35-44 45-54 55-65 Over 65

70%

50%

52%

54%

56%

58%

60%

62%

64%

66%

68%

Chart 11 Use of Wills*

Asia

Europe

57%

34%

88%

81%

Male

Female

NorthAmerica**

94%

93%

MiddleEast

50%

77%

* Africa and Latin America have been excluded due to low samples.

** US


% of respondents who currently have a will

0 20 6040 80 100


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importance that the wealthy place on passing on assets

wealthy people can best accomplish the transfer of assets

children and stepchildren when it comes to money

across the world, 34% of respondents are either

to protect their inheritance. Read in isolation this number

can earn their parents trust, and some parents will

The dos and donts,willsand wonts


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These concerns relating to recipients are part of a much

transfer their wealth. Amongst other things, a failure

fragmentation of assets and needless erosion of wealth.

respondents agreed that deciding on an inheritance plan

Catherine Grum

tell you more in one hour than you could learn on the

marriage tend to trust their children more, and

generally those with stepchildren trust less: 47% of

those with stepchildren do not trust their heirs to

protect their inheritance, compared with the global

* US

** Mexico and Brazil

*** South Africa

**** I trust my children/stepchildren to protect their inheritance


Total 34%

% who do not agree with the statement****

0 20 6040 80 100

NorthAmerica* 38%

Europe 37%

LatinAmerica**

25%

Middle East 22%

Africa*** 23%

Asia 31%

* South Africa

** US

*** Mexico and Brazil

**** % who slightly agree or completely agree with the statement Deciding on an inheritance plan for my children/stepchildren requires a great deal of professional advice


Total 63%

% Agree****

0 20 6040 80 100

NorthAmerica** 68%

Europe 65%

LatinAmerica*** 49%

Middle East 55%

Africa* 85%

Asia 61%


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There are a number of different ways of going about

spell out how part or all of a deceaseds estate must be

such as in France, Spain, Italy and Latin America.

and the family reaches consensus on how assets will

and sometimes all the property may go to the eldest

Japan. Shimon Takagi

They capture thoughts at only one moment in time and

in most countries they are public documents, meaning

accessible to anyone.

Wills are the classic option for the wealthy

Trusts are an increasingly popular option for the wealthy.

heirs manage wealth. The trustees can be empowered to

also become a standard part of estate planning. In other

trusts, particularly for assets outside the country.

can often form an important role in estate planning

deceased was asset-rich but cash-poor. One particular

the others life; if one were to die, then the other could

the deceaseds family and increasing their own

business holdings.

India 78%

Chart 14 Use of Wills

Total 77%

Switzerland 70%

Hong Kong 46%

US 94%

Ireland 89%

UK 93%

Monaco 71%

UAE 62%

Qatar 22%

Singapore 68%

Spain 66%

Japan 13%

Saudi Arabia 84%

Australia 98%

South Africa 96%


% of respondents who currently have a will

0 20 6040 80 100


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marriage/new partners and birth of a child.

The importance of these different factors changes

respondents whilst the purchase of property and

Gareth Morrell,

Research Director in the Society and Change Team at

importance of letting those who are affected by will

mortality, part of the reason for the low rate of will

happening is fairly similar across the world, with people

* US


*** South Africa


Main reason that prompted

Total EuropeNorth

America*

Latin

America**

Middle

EastAf ri ca ** * A si a

Increase in wealth 18% 18% 28% 17% 18% 27%

18% 23% 11% 7% 22%

Marriage/new partner 12% 14% 11% 28% 20% 4% 6%

Birth of a child 6% 10% 13% 8%

Chil d rea ched a certain age /left home 4% 4% 0% 3% 2% 6%

4% 0% 10% 13% 6%

Total 31% 43% 26%

Monaco 58% 31% 11%

Spain 55% 32% 13%

Saudi Arabia 73% 15% 12%

Japan 46% 46% 8%

US 15% 50% 35%

Ireland 42% 48% 10%

Switzerland 46% 34% 20%

UK 19% 50% 31%

UAE 40% 50% 10%

S ou th A fr ic a 8 % 45% 47%

Australia 14% 49% 37%

Hong Kong 48% 43% 9%

India 89% 7% 4%

4%Singapore 80% 16%

* Based on those who currently have a will in place and can recall the revisionsSource: Ledbury Research

0 20 6040 80 100

Never

12 times

3 or more times


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33

only for their children but for the world in general.

Our research shows that 20% of high net worth

a business legacy is gender.

important for the protection they afford, yet the number

factor in the use of prenuptials is their legal recognition.

whether or not spouses agree to prenuptials. Research

in the US by Heather Mahar, a Fellow at the John M.

Chart 18 Views on Prenuptial Agreements

a prenuptial agreementTotal Europe

North

America*

Latin

America**

Middle

EastAf ri ca* ** A si a

24% 21% 6% 34% 36%

Somewhat important 37% 40% 23% 18% 33%

Very important 30% 27% 71% 20% 81% 20%

10% 10% 0% 26% 0% 11%

* US


*** South Africa


Chart 19 Use of Prenuptial Agreements

* South Africa


*** US


Total 15%

% who have ever used a prenuptial agreement

0 20 6040 80 100

NorthAmerica*** 11%

Europe 15%

LatinAmerica** 27%

Middle East 15%

Africa* 62%

Asia 13%

I dont believe any assets should bepassed on to the next generation

4%

Dont know 6%

* % of respondents selecting each statement as best matching how they feel about inheritance planning when it comes to passing on assets to c hildren


% Saying each statement*

0 20 6040 80 100

Assets should be allocateddifferently by child

Assets should be equally dividedamongst all children

20%

70%


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to protect people, so that the terms of the agreement are much

Marcus Dearle, Managing Partner of the international law firm Withers LLPs Hong Kong office

In the last decade, marriage has become a much

substantial assets would normally only be awarded

usually amount to a property and reasonable needs

Marcus

Dearle

spouses can potentially be awarded, but it means that

trust assets were often not touched because the

These changes underline the importance of

consider legitimate restructuring of their assets in

well ring-fence certain assets outside the matrimonial

within a prenuptial agreement, which means the

agreement has a much better chance of being

people, so that the terms of the agreement are more

he adds.


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37

Wealth is, of course, just one of the useful things that

do to be successful. Understanding the challenges that

future generations face and how children can rise to them

Words ofwisdomfor the

generation

wealthy respondents around the world to tap their

picture of what the future holds for all of us.


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whether they wanted their children and stepchildren

about their childrens education and they trust them

more. We also found that those who wished for their

children to follow in their footsteps when choosing a

Questioned about the top three challenges facing the

economic problems we face. This top challenge is also

children/stepchildren to follow in their footsteps when

or following a similar path. A fairly modest 28% globally

theirs. This is the case for all sources of wealth, genders

and regions.

priority in Latin America, where the median age is j ust

is seen as the single most important challenge, and on

the other there is the US, where this is only a concern

that more Americans are concerned about the decrease

Chart 20 Expectations of Children****

* US


*** South Africa

**** % who slightly agree or completely agree with each of the following statements


Total EuropeNorth

America*

Latin

America**

Middle

EastA fr ic a* ** A si a

71% 71% 84% 67% 82%

follow in my footsteps when choosing

a career.

28% 40% 70% 42%

Chart 21 Challenges for the Future****

* US


*** South Africa

**** % selecting each challenge (respondents could select up to three)

Source: Ledbury ResearcSource: Ledbury Research

Total EuropeNorth

America*

Latin

America**

Middle

EastAf ri ca ** * A si a

70%

63%

Caring for ageing populations 68% 48% 21% 11% 21%

37% 41% 24% 32% 43% 42%

Rising education costs 22% 26% 18% 23% 24%

Increasing globalisation 18% 13% 32% 27% 21% 24%

18% 24% 21% 16% 28% 16%

17% 12% 17% 36% 26% 18%

power on global stage17% 13% 30% 16% 2% 13%


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41

should study, the wealthy are adamant that they should

Dr Wendy Piatt

the importance of science, technology, engineering and

Richard Watson, pointed to

two factors that suggest some caution to this strong

technical emphasis is necessary. First, he highlighted the

dangers of teaching people to do things that machines

simply the accumulation of facts and then the

application of those facts based on certain set rules or

we do need a broader education and we want to get

people to understand a bigger picture and a broader

Dr Wendy Piatt

The rise of China is one of the great macroeconomic

thought that Chinese was marginally more important than

language to learn.

language seems limited, particularly when one considers

in China than there are people in the United States

a threat to other languages in countries where it is used

been adopted to help the local economy interface with

threaten French in Francophone African countries.

Language: a sign of the times

Chart 22 Subjects of Importance****

* US


*** South Africa

**** The most important subjects for the next generation to study (respondents could select up to three)


Total EuropeNorth

America*

Latin

America**

Middle

EastA fr ic a* ** A si a

IT/Technology 68% 61% 80% 72%

Mathematics 71% 74%

Science 32% 42%

Languages 28% 40%

Social Sciences 20% 12% 12% 26% 17% 38%

18% 17% 27% 16% 17% 6%

Arts 7% 7% 7% 3% 2% 10%

6% 7% 2% 2% 8%

Chart 23 Foreign Languages Worth Learning


Chinese 69%

% Most important languages for the next generation to learn (all respondents)

0 20 6040 80 100

Spanish 36%

English 68%

French 18%

German 13%

Arabic 12%

Japanese 12%

Hindi 9%

Russian 9%


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43

Dr Wendy Piatt, Director General of the Russell Group

Chart 24 Foreign Languages Worth Learning*

* Top three most important languages for the next generation to learn (by country)


M os t I mp or ta nt S ec on d M os t I mp or ta nt T hi rd M os t I mp or ta nt

Where English Dominates

Ireland Chinese 72% Spanish 42% Russian 26%

UK Spanish 41% French 21%

US Chinese 66% Spanish 64% Arabic 21%

South Africa Chinese 64% French 34%

Australia Spanish 20%

Rest of the World

Monaco Chinese 61% Spanish 26%

Spain Chinese 71%

Spanish 38%

Qatar French 31%

Saudi Arabia French 44% Chinese 40%

Chinese 74% Spanish 22%

French 22%

India

Japan Chinese 82% French 13%

Singapore Japanese 21% French 17%


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This report has already discussed many of the UK-wide

UKregionaldifferences


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47

London and South East a wealth and

conflict hotspot

associated with wealth in the UK, with 41% of high net

When it comes to their usage of wills, the picture in

North East and Yorkshire setting the pace nationally

with nearly 44% of the wealthy saying that inheritance

come with family wealth.

are setting the pace for the rest of the country when

seeing the importance of succession planning, they

are in the top spot for this measure; they are also tied top

stepchildren to protect their inheritance.

Midlands dealing with serious trust issues

to protect their inheritance, about half were e ither

with wealth. Indeed, the Midlands are on par with

to prenuptials

slice of the UK wealthy population.

They put a little more emphasis on succession planning

not necessarily translate this into the appropriate actions.

Interestingly, whilst they may be slow with completing

their wills, their usage of prenuptials is amongst the

highest in the country. Around 8% of wealthy

amongst 24% of the regions wealthy that prenuptials

South West fair warning to the next generation

to worry about when it comes to securing inheritances

from todays wealthy. In this region, we found that

Amongst those who are planning to pass on wealth

amongst their children.

inheritances for granted. If they do, they may be

unpleasantly surprised.

Scotland serious about succession planning

Across all the regions, we found that it was the

Scots who were the most concerned with planning for

wealthy in Scotland said that succession planning was

We see fairly good follow-through on these good


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Chart 25-30 UK regional differences*

Wealth Leading to Family Conflict

% who slightly agree or completely agree with

UK Total 37%

London 41%

South West 34%

Midlands 41%

40%

38%

Scotland 38%

Passing Assets on to the Next Generation

match for how they feel about inheritance planning

UK Total 6%

London 3%

South West 10%

Midlands 8%

6%

8%

Scotland 2%

% who do not agree wi th the statement

UK Total 41%

London

43%

South West 37%

Midlands

33%

42%

Scotland 41%

Burdens of Inheritance


UK Total 35%

London 26%

36%

South West 31%

Midlands 41%

44%

38%

Scotland 40%

Importance of Succession Planning


UK Total 57%

London

South West

Midlands

64%

60%

Scotland 64%

Use of Wills

% of respondents who currently

UK Total 93%

London

South West

Midlands

100%

Scotland


* % respondents selecting each statement as best matching how they feel about inheritance planning when it comes to passing on assets to children


UK To ta l L on do nSouth

East

South

WestMidlands

North

East and

Yorkshire

North

WestScotland

Assets should beall children

78% 78% 84% 74% 72% 76% 86%

Assets should be allocateddifferently by child

13% 13% 8% 17% 18% 12% 14% 12%

should be passed on to the

6% 3% 10% 8% 6% 8% 2%

4% 6% 3% 3% 0% 10% 2% 0%


27/28

Contact us

email [email protected]

www.barclayswealth.com

Conclusion

for it. Yet wealth comes with responsibility and, in many

wealth can be a double-edged s word. The good news

added to a growing body of research that shows that

wealth, or at least income, can bring happiness.

associated with succession planning. The fast-changing

beliefs shift between generations. In many regions the

family unit is now multi-faceted and disparate. It is

therefore not unreasonable to see elements of distrust

as an undercurrent in some high net worth families.

The research has also shown that wealth transfer is a

and eminently sensible: sensible to facilitate both

the tests of time.

Legal note

of this information, neither Ledbury Research nor Barclays

Wealth can accept any responsibility or liability for reliance

by any person on this report or any of the information,

opinions or conclusions set out in the report.

This document is intended s olely for informational

purposes, and is not intended to be a solicitation or


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