How HSBC Global Private Banking is helping generations of wealthy families meet their succession planning goals

“Amid a series of ‘black swan’ events, we have engaged with many families intent on future-proofing their financial assets and family legacies,” says Henry Lam, regional head of wealth planning and advisory, Asia-Pacific, HSBC Global Private Banking, citing broad estimates of trillions of dollars set to move from one generation to the next by 2030. “There’s been a mindset change. The pandemic, for example, highlighted how businesses can be blown off course by unforeseen events, which has led to a demand for family office structures that separate a family’s wealth from the family business, so as to limit the potential impact of one on the other.”

Preserving wealth

According to the HSBC report, 73 per cent of HNW and UHNW entrepreneurs cited the preservation of wealth or its distribution to the next generation as a prime imperative.

It also found that 52 per cent of respondents intend to pass their business on to the next generation or to other family members, with the figure rising to 58 per cent for those who have accumulated more than US$10 million.

Effective succession planning requires detailed preparation and expert management to maximise opportunities and minimise risks. There must be an agreed framework which considers the different interests and priorities of older and younger family members, along with a reasoned assessment of likely changes in the investment environment.

There may also be competing preferences among family members over long-standing traditions versus alternative, innovative approaches to running a business or managing family wealth.

“At HSBC, we place great importance on the software, which is the human touch from the family, and pair this with the great trust we have earned from our decades of wealth planning experience,” Lam says.

Taking a holistic approach

Those discussions require some fundamental questions: about whether a family wants to keep business interests together and run them as a unit; if business offshoots have transformed into something that can continue as a family business; or if emotional ties are sometimes clouding judgment, for example.

“We emphasise the human element,” Lam says. “We take a holistic advisory approach encompassing succession planning, family governance, family office advisory and philanthropy advisory, as well as traditional insurance, complemented by our robust institutional trustee services.”

Being inadequately prepared can lead to unwanted consequences. Avoidable issues arising from prolonged disputes about the rightful division of assets can spill over into ongoing debates that will inevitably harm growth and profitability.

Human and social capital

“Ultimately, our discussions transcend mere financial wealth; they encompass the essential human and social capital,” Lam says. “I recently spoke with a third-generation business owner who credited her success to family networks from her parents through businesses across various locations over many decades. Within the framework of succession planning, acknowledging and understanding these connections is imperative, ensuring successors are well informed and prepared for the responsibilities they will inherit.”

HSBC Global Private Banking’s role is to act as a partner and an adviser. In some instances, that will mean helping family businesses expand faster or explore new ventures. In others, the focus may be on finding ways for a family business to establish a family office, create a global footprint, diversify its investment portfolio or guide succeeding generations so they are ready and able to take on new responsibilities when the time comes.

Fostering collaboration

Whatever the case, the starting point is to encourage frank and open discussion about practicalities and expectations before instigating any major changes.

“It is very easy to forget that members of families are at different life stages, have different experiences and most likely have a different risk appetite for investments. It is our job to help our clients to find a way to move forward and create dialogue,” Lam says.

The aim is to foster a sense of collaboration, with an emphasis on the benefits of continuity. Given HSBC’s universal bank model and global network, it is able to advise on matters with multiple touchpoints, including business and private banking, throughout the life cycle and across multiple jurisdictions.

“Often the biggest challenge is to ensure the plans and structures created in the leading generation remain relevant and are aligned to families as they evolve,” Lam says. “Once we deal with multigenerational families, we must pay attention to the succeeding generations. It is important that their personalities and abilities are taken into account, their views are heard and an active dialogue happens with all the key stakeholders.”

It is also vital to be aware of potential underlying pressures and anxieties. For example, a designated successor may have ambitions to branch out in a brand-new direction, or gain experience in an alternative industry or profession before joining the family business. Or those moving up into positions of influence may have interests or priorities other than reinvesting in the firm.

“Wealth transfer and succession planning is a significant project, and much depends on timing,” Lam says. “The family members must be ready to talk about it and move forward together. Our role is to put things in perspective, and find a position to build from.”

Guiding principles

HSBC Global Private Banking is equipped to offer research insights that guide and recommend, giving clients the support they need to expand their business, meet evolving goals and pass on wealth to successive generations. The guiding principle is that every client is different. With that in mind, professional advisers must be adept at reading family-specific situations and have the breadth of knowledge to interpret and facilitate the appropriate response.

“As assets and wealth accumulate over time, this creates a need for us to provide more wealth management and intergenerational advisory services,” Lam says.

One outcome of the advisory process may be to establish a family office. Typically, this brings greater clarity to the distinction between private and business-driven investments and allows for decision-making mechanisms to involve the next generation.

“A lot of our clients are looking at opportunities to expand in Asia,” Lam says. “They may already have business interests in Europe or the Middle East, but now they want to establish another complementary base, using Hong Kong as a stepping stone.”

With deep, local expertise in Asia and international reach, HSBC Global Private Banking can help its wealthy clients move to the next stage in wealth creation, managing the shift of assets between generations, or professionalise the approach to investment strategies and structures.

“The next generation is very curious. They want to know what to do and how to do it,” Lam says. In response, the bank provides platforms for next-generation sharing, inviting experts such as academics and entrepreneurs to discuss areas such as family business and wealth and succession planning. Recently, it hosted next-generation programmes in Dubai and Singapore, drawing on its global network to bring together young peers and industry experts. “They get to learn and share, and they bring it back to their family to start a conversation.

“Succession planning is an ongoing journey rather than a destination. At HSBC Global Private Banking, we are privileged to guide the generations of clients through this evolving process. Our role is to chart a course that addresses immediate objectives but also anticipates future aspirations, thereby forging a legacy that stands the test of time and continues to thrive across generations.”

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