MINNEAPOLIS – May 17, 2017 – Over the coming years, an estimated $3.2 trillion will transfer to the next generation in the U.S. Of all demographic groups, business owners are the most prepared and are readying both themselves and the next generation for wealth transfer, according to new global research by RBC Wealth Management conducted in collaboration with Scorpio Partnership.

The study found that 39 percent of business owners have a comprehensive wealth transfer plan in place compared to 26 percent of employed professionals.  Business owners with $10 million-plus in investible assets are three times more likely to have a full wealth transfer plan in place than those with $1 million or less.

“In the case of business owners and wealth transfer, complexity drives necessity of planning,” said Van Pate, Wealth Strategies Consultant at RBC Wealth Management – U.S.  “A business owner’s assets are often illiquid and inextricably linked to family interests, creating a host of wealth planning challenges that employed professionals do not face.”

Business owners tend to adopt the same strategies in wealth transfer that have brought them success in business. Their hands-on, entrepreneurial approach puts them ahead of the game in terms of starting the process, but in some cases it leads to insufficient preparation.

According to the study, 51 percent have drafted a will. While a will is the first step in creating a comprehensive wealth transfer plan, it is not enough to adequately distribute assets, preserve wealth, and create a long-term legacy that reflects a business owner’s values and wishes, according to Pate.  Another 22 percent of business owners say they have not started any sort of wealth transfer preparations.

Research also showed that business owners are very concerned with providing their children with well-rounded knowledge of business and finance, with almost half of those surveyed (45 percent) intending to better prepare their children for inheritance by giving them more guidance than they themselves received.  In fact, business owners begin the wealth education process with their children at age 25 – two years earlier than the majority of respondents. 

Younger business owners are accelerating this trend, with 20 percent of those surveyed intending to begin the wealth education process with their children even sooner – at age 18.

The study also found that business owners are more likely that other groups to transfer some of their assets during their lifetime, with 40 percent indicating they intend to make lifetime transfers to heirs, compared to 32 percent of employed professionals, who have a higher tendency to transfer all assets upon death. 

“A giving while living strategy has numerous benefits,” said Pate.  “It creates an opportunity for business owners to share their financial knowledge and guide the next generation in their learning of wealth and finances.  It also enables benefactors to witness the positive impacts of their wealth and the legacy they envision leaving.”

The research – undertaken from June to August 2016 – surveyed 384 high net worth business owners, worth $6.4 million on average, across the United States, Canada, and the United Kingdom.

Other key findings from the report include:

  • 37 percent of business owners expect guidance from other family members at the time of inheritance, yet only 28 percent of business owners who have inherited say they received such guidance.
  • Similarly, 27 percent of would-be inheritors who are business owners expect guidance from their benefactor’s lawyers or accountants, yet only 14 percent of previous inheritors report receiving such help.
  • While 32 percent of would-be (business owner) inheritors anticipate support from their financial advisor, only 14 percent of those who have inherited say they received it.

In January 2017, RBC Wealth Management released the 2017 Wealth Transfer Report, Lasting Legacy, which focused on wealth transfer trends in the U.S., Canada and the UK. In addition to this Business Owners and Wealth Transfer report, RBC recently released a Women & Wealth Transfer paper, and in the coming months will publish two additional papers which will delve further into the challenges and opportunities families and millennials face when it comes to inheritance. The full details of the report, and a survey which allows Americans to compare their answers to the findings, is available on www.RBCWealthManagement.com.

About RBC Wealth Management – U.S.

In the United States, RBC Wealth Management operates as a division of RBC Capital Markets, LLC. Founded in 1909, RBC Capital Markets, LLC. is a member of the New York Stock Exchange, the Financial Industry Regulatory Authority, the Securities Investor Protection Corporation, and other major securities exchanges.  RBC Wealth Management has $289 billion in total client assets with 1,800 financial advisors operating in 200 locations in 41 states.

Contacts:

Nicole Garrison, 612-371-2999, nicole.garrison@rbc.com, or
Jonell Lundquist, 612-371-2239, Jonell.lundquist@rbc.com