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  • Transamerica Life Bermuda Releases New Study Uncovering Challenges for High Net Worth Individuals’ Succession Planning

Transamerica Life Bermuda Releases New Study Uncovering Challenges for High Net Worth Individuals’ Succession Planning

December 18, 2019

Heightened awareness amongst respondents on the critical importance of succession planning but less than half have a plan in place

Transamerica Life (Bermuda) Ltd. (TLB), a leading High Net Worth (HNW) life insurer, today announced the launch of its latest HNW research study, "Succession Planning 2019: Converting Challenges into Actions". Sponsored by TLB and partnering with Asian Private Banker (APB), the study offers insights into Asian High Net Worth individuals' (HNWIs) and Ultra High Net Worth individuals' (UHNWIs) current approach regarding succession planning, focusing in particular on the factors that are preventing them from taking action on planning for their wealth transfer to the next generation.

This is the fourth year of collaboration between TLB and APB looking into opportunities and gaps in retirement and succession planning activities for this segment. The study examines the role that life insurance products can play in helping to meet the complex needs of these individuals and their successors in the succession planning process. The study is part of TLB's Mastering High Net Worth programme and the company's continuous efforts to deepen its understanding and gain additional key insights into the priorities and needs of HNW customers.

Asia and the rest of the world is seeing the largest wealth transfer in history, with an estimated value of nearly US$16 trillion of UHNW wealth expected to transfer through generations in the next 30 years1. Though there is growing awareness and concern regarding the need for succession planning, Asian HNWIs still lag behind their western counterparts in their preparedness level with 57% admitting they have done nothing with regards to estate planning and wealth transfer, as compared to 32% in the West.

Key findings from the study include three main challenges/risks that contributed to the lack of preparation among HNWIs - procrastination, lack of communication, and complexity of the process:

  • Procrastination: less than half (40%) of Relationship Manager clients have planned or are currently planning their succession plan. In addition, 25% of end clients surveyed indicated that they didn't plan to begin their succession planning for another 10 years or more.
  • Lack of communication: With the lack of intergenerational engagement within the family and the resistance to discuss cultural taboo subjects, only 15% of Relationship Managers (RMs) indicated that next-generation or their representatives participate in more than 60% of all related discussions, and two out of three end-clients surveyed have never discussed succession planning with their family.
  • Complexity of the process: The perceived complexity of succession planning for HNWIs and RMs was a big impediment to taking action. Citing the challenges put forth by today's evolving regulatory framework across multiple jurisdictions, 63% of HNWIs felt that the implementation of their succession plan was "very difficult", and 29% of RMs deemed the process as "too complicated".

While HNWIs primarily focus on overcoming internal challenges in their succession planning, they increasingly seek alternatives that could ensure an unscathed wealth transfer to their successors in such a complicated market environment. As complexities arise from the tightening regulations and increased transparency requirements in the region such as the Common Reporting Standards (CRS), HNWIs' interest in using life insurance as a critical wealth transfer tool has increased due to the benefits it can offer in helping to mitigate external risks such as regulatory complexity, tax-related compliance requirements, and geopolitical or market exposure as well as reducing jurisdictional and compliance issues that are associated with transferring family assets that are spread globally.

The ongoing greatest wealth transfer in East Asia will continue to provide a solid foundation for the succession planning market. Within this discrepancy between the need for versus the actual development of a succession plan, there is a real growth opportunity for financial advisers, wealth managers and life insurance providers to step up and close this gap.

"As the HNW market in Asia continues to burgeon, many wealthy individuals are facing the prospects of preparing to transfer their wealth to the next generation. Through our partnership with APB, this study has helped to highlight the heightened urgency and desire that HNWIs have for effective succession management. With our singular focus on servicing the HNW sector, TLB is well placed to tap into the growth potential that exists for life insurance within the succession planning space," said Marc Lieberman, President and CEO of TLB. "Our depth of expertise and continued drive for gaining valuable HNW consumer insights will help us to provide increasingly innovative insurance solutions as we work hand-in-hand with our distribution partners to safeguard our HNW customers' wealth legacies and preserve their hard-earned assets for generations to come."

"Asian Private Banker is proud to present our fourth report with our sponsor TLB, covering the key conundrum of wealth transfer. To the families and industry professionals who spent their time to provide such valuable insight and data we say: 'Thank you!'. To the industry, we say: 'Listen!'. Now is the moment to act. Now is the time to make decisions that affect the future of many. Read, digest and discover," said Andrew Shale, CEO of Asian Private Banker.

About the study

The "Succession Planning 2019: Converting Challenges into Actions" report was sponsored by TLB and conducted by APB. The study was conducted between March and September 2019 and included the responses from more than 230 HNWIs and RMs, with a special focus on Hong Kong and Singapore.

The report defines HNWIs and UHNWIs with at least US$1 million and US$30 million in investable assets respectively, excluding primary residence, collectibles, consumables and consumer durables.

Please click here to view the full research report.

Note:
1"Family Wealth Transfers Report" http://www.wealthx.com/wpcontent/uploads/2015/01/WealthX_NFP_FamilyWealthTransfersReport-2014.pdf