SINGAPORE – As Asia’s first-generation entrepreneurs grow older and prepare to hand over their businesses to the next generation, many are not yet ready for the transition.
Key questions around who will lead the business next, how ownership should be distributed, when the founding generation should step back and on whose terms are not addressed openly enough in succession planning, said the latest Julius Baer Family Barometer report.
These questions become even more commercially consequential when a business sale is on the table. They can shape valuations, negotiations, and a family’s readiness to act when an opportunity arises, it said.
Just 3.5% of wealth professionals advising Asia-based clients said most business-owning families they advise are fully ready for a sale or transfer. Globally, the figure is just as low, at 2.3%.
Differing valuation expectations are the most frequently cited source of family misalignment that could derail a family’s exit. This is followed by disagreement over the business’s future, emotional attachment, legacy concerns, and timing, the report said.
The Barometer surveyed more than 700 advisers to ultra-wealthy families worldwide, capturing their assessments of their clients rather than the families’ own views.
The professionals included relationship managers, tax and legal specialists, family-office professionals, wealth planners, investment advisers and consultants.
Asia has the lowest level of active involvement by the next generation in carrying out plans for what happens to a family business or wealth after it is sold.
Only 8.4% of respondents report the next generation as having an equal say. In most cases, the next generation is consulted but has no formal vote, is involved in limited discussions or is not consulted at all.
More than 75% of advisers to wealthy families in the region said the wealthy prefer to set up a single family office to manage their wealth after an exit. Others may consider creating a family investment vehicle or entity, as well as a new business.
A single family office helps families manage increasingly complex finances by overseeing investments, consolidating financial reports and handling administrative matters in one place.
Families often retain strategic decision-making while relying on external specialists for investments management and non-investment functions.
“Unless you are a large-scale family office with substantial resources, it is difficult to build dedicated teams across every asset class, as well as manage non-investment functions such as legal affairs, operations, and estate planning. Most families will need external expertise in some areas.” said Christos Anagnostopoulos, head of family office solutions and advisory for Asia at Julius Baer.
Some Asian founders who are not ready to retire following a sale would separate their wealth into different pools: one professionally managed for long-term preservation and another reserved for new ventures and direct investments.
That allows them to remain entrepreneurial while ensuring the majority of the wealth is managed in a disciplined way.
“The result is a distinctly Asian model of post-exit wealth management. Families are professionalising the way wealth is owned and managed without losing the entrepreneurial mindset that created it in the first place,” said Anagnostopoulos.
The report found that families in Asia and the Middle East place greater emphasis on long-term growth, while capital preservation ranks highest in Europe and Latin America.
Succession planning is the leading family priority for the wealthy across Asia as well as the rest of the world.
Jimmy Lee, member of the global wealth management committee and region head for Asia at Julius Baer, said the most prepared families are those that make succession a shared strategic priority well before a transaction becomes relevant.
“Involving the next generation early and agreeing on the family’s long-term goals can help reserve both the wealth and the entrepreneurial spirit that built it,” Lee said.
Early dialogue helps establish whether younger generations want and are prepared to take over.
After succession planning, other priorities include building a family legacy, and individual and family growth opportunities.
Geopolitical diversification, inflation protection and real estate investing are the top three investment-related topics in Asia, reflecting families’ desire to build portfolios resilient to political and economic uncertainty.
Taxation remains the leading societal concern globally and in Asia, ranking ahead of intergenerational wealth transfer and political stability.
The process of passing on a business or its sales proceeds can expose differences in expectations among family members, the report suggested.
Founders may want to preserve the family wealth they have built, while younger generations may have different ambitions for their careers, investment strategies or involvement in the family enterprise.
“Governance, ownership structures and investment frameworks help families manage this next phase together,” the report said.
The scale of this challenge is also reflected in the global findings, where 80% of respondents identify a lack of family alignment as a barrier to a sale or transfer.
The figure suggests that even when a business is financially positioned for a transaction, disagreements over its future can complicate the process.
