Proper wealth transfer plans lacking in Asia: Poll

In Singapore, only 19 per cent of the 80 wealthy individuals surveyed have a proper wealth transfer plan in place.
In Singapore, only 19 per cent of the 80 wealthy individuals surveyed have a proper wealth transfer plan in place.ST PHOTO: KUA CHEE SIONG

Families more concerned about transfer of values, with conditions linked to inheritance

Few wealthy families in Asia have a proper wealth transfer plan in place, raising concerns that the next generation might not be able to manage their inheritances well.

According to the findings of a new survey, only 31 per cent of high-net-worth families polled across Asia have established a complete plan to pass on their wealth.

In Singapore, only 19 per cent of the 80 wealthy individuals surveyed have done so - the lowest among the six markets polled.

In all, RBC Wealth Management quizzed 425 respondents in Singapore, Hong Kong, China, Indonesia, Taiwan and Malaysia.

Ms Tho Gea Hong, RBC's head of wealth management for South-east Asia, said: "Discussing and preparing for the transfer of wealth can be a complex, time-consuming and emotional issue for families.

"Many of Singapore's high-net-worth individuals have complex wealth planning needs due to diverse asset bases. Without a full and comprehensive wealth transfer plan in place, they may be leaving their heirs adrift."

The study also found that more than half of respondents in Singapore have not started any type of formal wealth transfer planning - only 34 per cent of respondents here have prepared a will.

The survey also found that Asian families are more concerned about the transfer of values than wealthy families elsewhere, with 64 per cent of the respondents across the region saying their inherited wealth came with conditions.

In contrast, just 26 per cent of respondents in Britain and North America said conditions were attached to wealth.

RBC Asia managing director Mike Reed said it is uncommon for Asian families to discuss wealth transfers among themselves, too.

He said: "I think part of this is because parents want to avoid creating entitled heirs; they don't want their children to lose the incentive, drive and ambition to work."

Indeed, 26 per cent of respondents in Asia said their primary concern regarding wealth transfer is the fear that their beneficiaries will lose motivation after getting their inheritance, compared with just 5 per cent of respondents in Western markets.

RBC said the passing of wealth from one generation to the next can be an emotional and time-consuming process, made even more complicated when assets cross borders.

These challenges are particularly relevant in Asia, where wealth creation has boomed in recent years, thanks to rapid economic growth.

As such, many families are not only tackling the complex task of transferring a global portfolio of assets, they are doing so without prior knowledge of how such inheritances should be structured, RBC said.

However, RBC added that the lack of preparation for wealth transfers could itself affect benefactors' confidence in the next generation - 70 per cent of those who did not have a plan said they lacked confidence in their children's ability to grow and preserve the wealth.

Ms Tho said: "From our findings, we see that having family conversations about wealth can boost the next generation's understanding of wealth. Yet, some families find inheritance discussions sensitive or uncomfortable. Thus, we guide families by having these conversations, which can help beneficiaries understand how their family's wealth will be transferred, and how they should use that wealth.

"I've also seen some families 'gift' their beneficiaries some money, for them to start managing on their own - almost like a 'practice' account."

A version of this article appeared in the print edition of The Straits Times on November 22, 2017, with the headline 'Proper wealth transfer plans lacking in Asia: Poll'. Print Edition | Subscribe