Being a business owner is considered an “American Dream” by many, but when it comes to succession planning, a recent survey reveals that not everyone feels the same about passing the baton to their children.
The survey was conducted by Versta Research on behalf of Wells Fargo and analyzed the attitudes of 1,008 “wealth creators,” defined as American adults aged 50 and older who have at least $1 million in investable assets and earned (not inherited) most of those assets. Thirty-nine percent of business owners say the business has been an important source of meaning and purpose in their lives, but half (52%) do not want their children to inherit and succeed them in managing the company. And among parents, nearly all (93%) want their children to forge their own paths rather than follow in their footsteps.
“It may sound very much like the plot of a television drama, but many investors do not trust their children’s ability to take their place. Others believe that handing over the keys to the castle will be a disincentive for them to achieve their own financial success,” says Michael Liersch, head of Advice & Planning at Wells Fargo.
But, as Liersch points out, some wealth creators feel they are doing their children a favor. “Many parents simply recognize that their children’s strengths and interests are not aligned with the family business. Having these perceptions can be crucial for effective succession planning.”
This does not mean that parents do not want their children to succeed. The vast majority (67%) want their children to meet the family’s standards of wealth and success, and many go so far as to help them financially with education, car purchases, medical expenses, and even travel and vacations.
Nine out of ten business owners attribute their own financial success specifically to hard work and determination. Two-thirds (67%) cite the advantages of a good education, and more than a third (37%) recognize the importance of living in the land of opportunity, while a quarter (23%) acknowledge the role of luck.
Helping to pass on this success through family generations tends to be more complicated for some. While 73% believe they have managed to pass on their financial values, 45% worry that their children do not know how to build their own wealth, and a third (35%) report that it has been difficult to convey their work ethic to their children.
So, how can one plan for the future in a way that helps protect the business while promoting family harmony? Relying on a wealth management and investment firm that has expertise in succession planning, estate planning strategies, and family dynamics can help families chart a clear path forward.
“The most important thing is that everyone is aligned and there are no surprises,” Liersch added. “Without thoughtful conversation and a formal plan, assumptions can be made, and disruptions in family dynamics are highly likely.”
Source: StatePoint