The next generation will inherit more than $30T

The stage is set for the most massive wealth transfer in history—$31 trillion—from those born before the mid-1960s to their heirs, reports New York-based research company Altrata. Almost 4.5 million people, each worth more than $5 million, hold collective assets of almost $90 trillion.

“We expect over a quarter of these individuals will seek to pass on their fortunes in the next decade to 2033, which will involve the transfer of a staggering level of wealth,” says Altrata. “This is a colossal sum, greater than the gross domestic product of the US, the world’s largest economy, and more than 10 times the market capitalization of Microsoft, the world’s most valuable company.”

Out of the 1.2 million in the older generations who will pass on their assets, around half will be from North America, followed by Europe, and then Asia.

This ratio is surprising, given that Asia boasts richer families than Europe.

“Just a fifth of the wealth transfers will be in Asia, due in large part to the donors’ younger average age,” says Altrata.

In the Philippines, for instance, most of the family businesses in the Forbes and Fortune lists are managed by the second generation, mostly boomers and Gen Xers, who are still very much at the helm of their enterprises.

This wealth transfer will occur in an increasingly volatile world, warns Altrata, with “more frequent geopolitical conflict, rising political populism, heightened trade restrictions, widespread anti-elite and anti-immigrant sentiment, more extreme climates events and growing fiscal pressures from ageing populations.”

Heirs need to take these into account when they maintain their core businesses, diversify into other fields, or prioritize philanthropic activity for certain urgent causes.

An integral part of safeguarding wealth is smooth succession, which must be carefully implemented. Even China, with its rocketing economy, needs to ensure that its businesses will last.

“Chinese companies will undergo a massive succession process in the next 10 years,” says Joe Ngai, chair of McKinsey’ Greater China region in South China Morning Post.

“Chinese entrepreneurs tend to be bold, top-down leaders who create highly centralized, command-and-control structures where they set the direction and hold the key relationships, while the reset of the company runs as fast as it can to achieve ultra-ambitious targets. While this approach proved successful during the era of rapid growth, it will be much less effective in the next decade.

“Business leaders will have to build more enduring institutions by installing more professional managers in the top ranks who are empowered to make key decisions.

Thorny questions such as how family members participate in the succession process will also be critical. How Chinese firms manage this process will determine whether they endure or simply fade away once the larger-than-life founder is no longer active.”

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Market Watch

Professionalization is not just for Chinese family businesses, but for all who want to last through the generations. And speaking of relatively affluent families, what makes them happy?

Rather than focusing on the usual tropes in Scandinavia, let us look closer to home.

In the 2023 Jockey Club-Smart Family-Link survey of 4,529 residents in Hong Kong, 58 percent report happiness scores from 7 to 10 (out of 10). Respondents had a college education and a monthly income of at least 60,000 Hong Kong dollars.

“Surprisingly, buying gifts and giving money to family members does not constitute an increase in the score,” professor Kelvin Wang Man-Ping of the University of Hong Kong tells South China Morning Post. “Instead, enough time needs to be allocated towards fostering quality communication time with family members.”

“It actually doesn’t take that much time or money to achieve a good familial relationship,” says Wang. “Simply having fun with [family]. Praising them and accompanying them is enough.”

Queena N. Lee-Chua is with the board of directors of Ateneo’s Family Business Center. Get her book “All in the Family Business” at Lazada or Shopee, or the ebook at Amazon, Google Play, Apple iBooks. Contact the author at blessbook.chua@gmail.com.