How to close the succession planning gap

How to close the succession planning gap

Overwhelmingly, Asian families and entrepreneurs seek to pass their wealth to the next generation — yet very few achieve this. What barriers do they face, and how can they overcome these?

By Louisa Loo, Head of Wealth Planning Asia, Lombard Odier Group

Of the many traits that unite family businesses and high-net-worth individuals (HNWIs) worldwide, the desire to pass on their wealth to the next generation is arguably the most prevalent. In our recent Lombard Odier Asia-Pacific (APAC) HNWI study, almost two-thirds said preserving family wealth across generations is the most important goal when thinking about passing on or receiving family wealth .

It is therefore surprising that so few HNWIs manage to achieve this. In our experience, most wealth creators fail to pass their assets to their immediate offspring, while the proportion of the following generation that receive this wealth is far, far less. There is much truth to the Chinese proverb, “wealth rarely lasts beyond three generations”.

What causes this impasse; and what measures can HNWIs take to ensure wealth is successfully passed to future generations?

Intergenerational misalignments

While the dynamics of wealthy families are highly varied, common patterns nonetheless exist. Our study, conducted in collaboration with our Strategic Alliances, identified inadequate succession planning as the prime cause of intergenerational wealth erosion in APAC. Only about one quarter of families have a full succession plan in place, with the majority having no or limited plans.

The report highlighted several roadblocks that are currently impeding the succession process. First, while many HNWIs want readiness, they often lack the structures, familial conversations and governance frameworks to realise this. Despite over half of respondents saying maintaining family unity and shared values are important goals, over a quarter of those aged 60 or above have not discussed having a clear common purpose for their family wealth. Moreover, only 14% of respondents in this age group say ensuring a smooth transition of leadership and ownership is a primary concern for their families.

Additionally, we also observe that while families understand the need to modernise, resistance to change remains a significant challenge. Up to 60% of Singapore and Hong Kong-based families for instance, said balancing tradition and modernity was a major concern. Yet as many as half of senior family members in these markets said they were opposed to change.

Given the scale of these misalignments, how can families move forward?

Forging a new path

A modern, robust succession plan comprises many interconnected elements. And when approached positively, they can resolve multiple misalignments, and sources of tension and misunderstanding. At the heart of this process is open and frank dialogue between all generations, where all parties must be willing to engage in difficult conversations to address their differences constructively.

A good starting point is to align on the family vision and mission. For families that have already outlined principles, it may be worth revisiting them to ensure younger generations feel represented and invested in the family's future direction.

Family governance also plays a critical role. Key components include articulating roles and responsibilities. Yet much of the time, such documents are often too broad and lack specifics. Outlining who is responsible for what helps ensure accountability, reduces duplication of effort and also lessens the likelihood for disagreements among family members.

Another consideration is the role of non-family members: it is increasing unlikely that all leadership positions can or should be filled exclusively by family members. Bringing in external expertise can help secure the best talent for specialised roles while supporting the long-term success of the business.

Having a clear long-term plan and a realistic timetable is equally as essential. By documenting these, both the older and younger generations gain visibility into the future direction of the business, leadership succession plans, and the skills that need to be developed over time. A critical component within this document is contingency planning. Not just for day-to-day operations, but also for when longer term plans become derailed.

Ultimately, these different components strengthen the succession process and greatly increase the likelihood of success. Typically, such meaningful dialogue and effective governance also lead to families capitalising on new opportunities, while remaining true to the founding generation’s legacy and purpose.

The role of external advisers

A noteworthy finding from this year’s study is how HNWIs who work with advisers tend to fare better than those who do not. Interestingly, 88% of respondents who received professional guidance said they had some degree of alignment, versus 58% of respondents who received no guidance. Adviser roles range from investment professionals to accountants and tax professionals, lawyers, technology professionals, and wealth planning experts. Tax planning is an increasingly important area, particularly for wealthy families with international assets and beneficiaries. Some 31% of HNWIs reported having heirs living overseas, and 61% of this group said they do not fully understand foreign tax laws and regulations.

When evaluating external advisers, HNWIs should assess a broad range of criteria, including professional qualifications, relevant experience, service models, strategic capabilities and alignment with the family's long-term objectives.

Increasingly, talent and technology are reshaping wealth management across APAC. Advanced digital tools, from artificial intelligence to data analytics, can simplify complex planning processes and enhance asset allocation decisions. However, algorithms alone cannot replace human expertise. Experienced advisers provide the essential emotional intelligence, ethical judgment, and trusted relationships necessary to help families navigate complexity and uncertainty with confidence.

These are areas Lombard Odier excels at. The firm’s unique proposition of 230 years of Swiss heritage and stability, combined with Asian investment and wealth planning expertise, resonates strongly with APAC HNWIs. As a private bank founded by entrepreneurs for entrepreneurs, Lombard Odier is particularly well positioned to support Asian founders, many of whom value partnering with advisers who understand their ambitions, challenges and long-term vision. Our continued investment in the best talent and technology also ensures we are ready to meet the fast-evolving needs of the region’s HNWIs today and tomorrow.

Creating thriving, long-lasting legacies

While the desire to pass on their wealth to the next generation is nearly universal among HNWIs, we’ve seen how misaligned expectations, resistance to change, and inadequate planning often impede successful outcomes. Many don’t have a formal plan altogether, while others rely on arrangements that are no longer fit for purpose.

Nonetheless, there is hope. Bridging generational divides requires open and honest dialogue, supported by clear governance, shared objectives and long-term planning. With the support of experienced, trusted partners like Lombard Odier — families can build robust succession frameworks that help ensure their wealth and legacies continue to thrive during their lifetime, and are successfully passed on to future generations to come.