When it comes to planning the future, there’s no time like the present

Families are understanding that the pandemic will last longer than expected, and that predicting the future has become even more complex in the ‘new normal’. In our conversations with clients, a number of concerns have cropped up repeatedly: Families are considering new and more family members in their planning. They’re reviewing their capital and liquidity requirements, both for the present and for the future. And they’re reassessing the talents and skills necessary to assure the family’s legacy.

These concerns aren’t only the preserve of billionaires. They’re scalable to families and businesses of any size. What’s to be learned from the way ultra-high-net-worth individuals are planning for an increasingly uncertain future to maintain and grow their prosperity?

Some frequently asked questions – and possible answers

One question that we’ve been hearing a lot is how to protect family wealth and maintain sustainable wealth appreciation. In the current changing and more volatile environment, families all over the world are looking to protect their wealth and make sure that their capital continues to grow in the long term. Managing risks and ensuring accountability are key components of this. Families are also finding they can’t do it all alone, so the family office is playing a pivotal role. This, of course, requires a family office strategy adapted to individual needs, capabilities and circumstances.

The new normal is accompanied by a new set of risks: investment risks, family succession risks, tax and legal risks, fraud and technology risks, and geographic and geopolitical risks. These risks have to be reviewed. Families (and their family offices) should map them out and consider the best operating model to mitigate and manage them. Given that every family has its own unique risks, any framework designed to assure wealth protection and sustainable capital appreciation has to be tailored specifically to the family’s values and needs. PwC advises families and family offices on an individual risk management framework that covers risk assurance with a focus on private wealth.

Another question revolves around the key elements to consider in long-term planning. What’s the long-term plan for the family’s wealth? It seems such a simple question to answer. But in reality, what we find is that there are unspoken questions families need to ask themselves: What’s the purpose of our wealth? What are our family’s vision and values? What are the long-term plans we need to consider? Disputes crop up repeatedly, so families should set down how they intend to mitigate and reconcile disagreements between members. Alignment and communication are fundamental to the success of the long-term plan.

Ultimately, when planning for the long term, families should consider whether they have all the necessary capabilities internally or whether they’ll need to outsource some of the competencies required to deal with the new normal – and then make sure they select the right expertise.
And finally, we often ask if the impact of succession on the business has been considered. The impact basically depends on its essential nature of the business – in other words, whether it’s a family business or an investment business. Depending on the answer to this question, families will have to take a closer look at what skills will be needed in the new normal. Families need to ensure complete alignment with the next generation and/or the outsiders who will be coming in under their succession plans. Succession ultimately entails two elements: ownership and business steering. Getting these things right is a learning process that involves challenging the status quo.