New research from international family office Stonehage Fleming has revealed that the Covid-19 pandemic is leading to a significant shift in the key priorities of many wealthy families. This finding and others is contained in Stonehage Fleming’s report, ‘Four Pillars of Capital: a time for reflection.’
The research surveyed 183 multigenerational members of different families and their advisers on key themes that determine the sustainability of long-term family wealth. These themes are the purpose of wealth, the identification and management of risk, succession and the next generation, investment attitudes and philanthropy.
As a result of the Covid-19 pandemic, just under a third of the respondents said they are actively contributing more to the community and wider society, with 57% having supported causes or projects related to helping combat the pandemic or supporting those most affected by it.
“However, they prefer to remain discreet about their philanthropy despite the increased focus on how families and businesses are contributing to their communities and society during the crisis,” said Johan van Zyl, Chairman of Stonehage Fleming South Africa.
Also as a result of the pandemic, 25% of respondents said there have been changes in the roles and responsibilities in their family, with 72% of these saying that members of the next generation are playing more prominent roles and more responsibilities are being shared. In fact, 69% said that the next generation had proved important in helping their family navigate the crisis, particularly as stay at home orders by governments had increased families’ use of technology.
“This increased appreciation of younger family members and their contribution to their respective family’s intellectual, social and cultural capital during the pandemic has caused the re-evaluation of priorities for many families. This includes a renewed focus on defining a purpose for their wealth,” van Zyl said. “Even before the pandemic there was a growing trend for wealthy families to discuss and agree the purpose of their wealth. Millennial members of wealthy families are particularly interested in feeling a sense of purpose and meaning in their lives and, as such, are helping to drive this trend.”
The survey found that 52% of respondents already have an agreed purpose for their wealth while, due to the Covid-19 pandemic, 44% who don’t have an agreed purpose of wealth have started thinking about this more.
Family disputes or break ups remain the greatest risk to long-term family wealth, with lack of future family leadership and direction being the second greatest risk, and failure to engage the next generation the third greatest risk.
“Not surprisingly, the crisis has given wealthy families a renewed focus on risk, with many of those that lacked a formal or structured process of identifying and mitigating risk saying they are now more likely to establish one,” van Zyl said.
On the investment front, it was no surprise, said van Zyl, that 34% of respondents were planning to reduce their investment risk and 25% were trying to increase liquidity. The crisis has made 43% of respondents increase their exposure to cash, 28% increase their exposure to gold and 23% increase their exposure to direct investments. Fifty five percent of respondents said they apply ESG or sustainable principles to their investment approach.
“As with all families, Covid-19 has contributed to a re-evaluation of priorities by wealthy families, and a renewed focus on purpose and risk. These actions will help build resilience and guide families through future unexpected challenges,” van Zyl concluded.
PERSONAL FINANCE