Billionaire problems: what will your kids do with it all when you die?
Billionaire problems: what will your kids do with it all when you die?
More jaw-dropping social media posts for the Rich Kids of China?
Along with the bombastic growth of billionaires around the world comes the herculean task of passing down such wealth to the next generation.
This task has been made even more daunting in Asia, a veritable generator of high-net-worth individuals (HNWI), according to the recently released “Billionaires Insights” report by UBS and PricewaterhouseCoopers. The report predicted that billionaires in the continent will end up “cashing out” or even opt for a private equity holding company model if their heirs appear “untested” or unreliable for managing the family wealth. Such inheritors will be groomed for “ownership rather than management,” which will be delegated to external hires.
“This is a logical method to preserve wealth in a region where it is sometimes difficult for heirs to take over family businesses,” the report stated.
One billionaire is reportedly created every three days in Asia, led by China, where 80 individuals alone reached billionaire status last year or 54 percent of the global total. Additionally, more than 85 percent of billionaires in most of Asia’s young economies are first-generation, meaning they will eventually perform their first-ever wealth transfer.
More: USD3.9 trillion in global wealth to be passed down in next 10 years
Simply handing the reins of the business to one’s scions can be tricky in China and other parts of Asia, where corporate empires are heavily dependent on personal connections. “Such is their complexity that they are difficult for a young person to manage,” the report stated.
Exacerbating the issue is the fact that many HNWI parents in China do not have much of a choice in heirs due to the one-child policy.
There could also be a disparity in values between billionaire parents and their children. Some heirs prefer to chart a career course of their own or live out a life of charitable giving as opposed to income generation.
Many of China’s growing fuerdai or second-generation HNWIs have caused ripples on social media in recent years for posts that flaunt several highly outlandish purchases.
History’s biggest-ever transfer of wealth will transpire in the next 20 years, with almost 500 individuals passing down USD2.1 trillion in riches, the report stated.
Read next: 5 things we learnt from the World Ultra Wealth Report
Source: Property Report