Are unprepared heirs a threat to family wealth?

• 69% of young heirs aged 18-40 are happy about stepping into leadership roles within the family business
• Maybe not so surprising for younger heirs but 30% are worried they lack practical experience in leading an organisation, with a quarter (25%) fearing the financial burden of this future position
• Nedbank Private Wealth advocates the use of philanthropy to create trust and upskill heirs, but 57% of millennials with wealth over £25m say their family has no philanthropic arm

New research released by Nedbank Private Wealth highlights the crucial role of effective communication and trust in family dynamics, concerning wealth transfer and succession planning.

The findings reveal that while 69% of young heirs surveyed aged 18-40 are happy about stepping into leadership roles within the family business, significant challenges lie ahead.

For Gen Z and Millennial respondents, 30% worry they lack practical experience in leading an organisation, with a quarter (25%) fearing the financial burden of this future position, further undermined by potential for lack of autonomy (22%) in having to operate in the shadow of their parent. Others cite fear of failure (26%), stress (25%) and seeing the reality of the toll the business had on their parent (33%) when thinking about the reality of succession and the barriers to overcome.

And whilst an enthusiastic 98% of Gen Z¹ heirs feel prepared² to manage family wealth, data suggests that by the third generation, only 10% of family wealth remains intact³ . But it’s not the perceived wealth risks that stand out as the primary culprits of financial destruction across families, it is communication or the lack thereof, and not being listened to that worries heirs most.
Nedbank Private Wealth focuses on addressing the core challenges impeding intergenerational wealth transfer and emphasises the pivotal role philanthropy can play in fostering family unity, preparedness, and prosperity. 57% of millennials with wealth over £25m say their family has no philanthropic focus.

Rebecca Cretney, Senior Investment Specialist at Nedbank Private Wealth, comments:
“There are several practical ways to enhance communication, foster trust, and better prepare heirs; we must nurture the enthusiasm of younger generations by providing gradual hands-on experience to bridge the readiness gap, and the anxieties of older heirs must also be addressed.

“Philanthropy is a powerful way to do both. By establishing a philanthropic strategy, you can enhance financial literacy for younger generations, as they gain valuable experience in managing charitable assets. It also provides board or trustee experience, reinforces family values and a sense of responsibility, and strengthens family bonds through shared passion projects.

“Additionally, it promotes personal growth, develops leadership skills, and deepens understanding of societal issues. Ultimately, a philanthropic approach transforms wealth management into a multiplier of wealth, ensuring legacy continuity rather than diminishing it.”

Despite the significant belief in the potential of philanthropy (78%)⁴ among younger generations, there remains a need for greater awareness and education. Establishing a philanthropic strategy not only unifies families on business values but also serves as a unifying factor in addressing wider societal concerns, yet 57% of millennials with wealth over £25m say their family has no philanthropic arm.

Simon Gibbons, Executive Head of Wealth Management at Nedbank Private Wealth, said:
“Philanthropy can serve as a powerful bridge between generations, creating a lasting impact not just on family wealth but also on the communities they care about. By integrating philanthropic initiatives into succession planning, we can equip heirs with the tools and confidence they need to navigate their future roles, ultimately strengthening their connection to family legacies and fostering meaningful relationships.

“We urge business owners in particular to tap into the enthusiasm of young heirs, providing them with hands-on business experience through philanthropic endeavours, or otherwise. This not only trains them and grows their skills but also creates a legacy that all family members can be proud of. By educating families about the opportunities and benefits of philanthropy, we can foster innovative thinking and strengthen family bonds, ensuring a win-win situation in increasing wealth while supporting causes that matter.”

Nedbank Private Wealth advocates for a holistic approach that transcends the stereotypical risks plaguing wealth transfer. By fostering open communication, nurturing trust, and preparing heirs for the responsibilities ahead, families can overcome the historical trend of wealth erosion and pave the way for enduring prosperity.

Philanthropy is an impactful way to do so, giving heirs the opportunity to test, learn and build trust with parents, whilst growing wealth now and the future.

¹ ‘Gen Z’ refers to those aged 18-24
² ‘Yes, I have the tools’, ‘Yes, I have financial acumen’, ‘Yes, I have training’, and ‘Yes, I have practical experience’ responses combined
³ HSBC Global Entrepreneurial Wealth Report 2023, UBS Billionaire Ambitions Report 2023
⁴ HSBC Global Entrepreneurial Wealth Report 2023, UBS Billionaire Ambitions Report 2023