GENERATIONAL HANDOVER: THE NEW CHALLENGE OF FINANCIAL CONSULTANCY

Bluerating | June 2021

The average age of financial advisors who assist the wealthiest client segment is 58, while their clients’ average age is 68. Over 40% of them are business owners or shareholders.  

Over the next 20 years, at least 800 billion euros in movable, real estate and/or corporate assets are going to be passed from boomers (born between 1946 and 1964) to millennials (born between 1980 and 2000).

Today, small and medium-sized businesses employ 82% of workers and constitute 92% of active businesses. They are often managed by one key figure which dictates the fate of the company. Therefore, facing in good time the gradual entry of new managers or other members of the family is vital for the company.

Recently, the pandemic has intensified the need to face succession issues.

However, the issue of generational handover is still a taboo for 1 Italian out of 3: only 17% of them have addressed and successfully solved the issue of succession. The comparison with other country is merciless: the European average amounts to 34%, 42% in the USA and 50% in the UK.

The generational handover is a taboo for entrepreneurs as well: only 55% of them have tackled the issue so far, despite the fact that today the average age of Italian entrepreneurs is 68 and, of course, it increases year after year – -2,5% of entrepreneurs under 40 and + 1,2% of entrepreneurs over 70.

The generational handover is often quite a traumatic process, because it does not concern only the economic/financial dimension of the company, but it also affects its family and relational dynamics. This is why only 30% of family businesses survive after the founder’s death and only 13% of them reach the third generation.

When addressing this issue, a good financial advisor should start from some key assumptions.

The aims of Italian entrepreneurs are preserving their assets for their heirs (79% of medium-sized businesses and 65% of small businesses) and acquiring new resources for their companies (64%).

Raising awareness on succession issues is a task for an expert financial professional, able to inform (77%) and to act as a pivot in the group of professionals – first and foremost the accountant – who gravitate around the private client and entrepreneur.

It is important to envisage the generational handover not as an event, but as a gradual process which has to be prepared in good time. Moreover, the generational handover is composed of a series of stages; and the first stage is planning.

Thereby, the generational handover will turn into an opportunity for growth for both the financial professional and his/her client. In the opposite case, the generational handover will remain a time of crisis and discontinuity with the risk for the financial professional of losing contact with the family and the heirs.

Moreover, in order for the generational handover to be successful, it is useful to include a professional contribution foreign to the family. This may guarantee an impartial and objective approach to the analysis of the company potential, to the optimization of corporate assets and to the identification of management and financial solutions.

In particular, the participation of a financial advisor can facilitate intergenerational communication and generate strategies which harmonize the interests of all the members.

For the best financial advisors, this is an opportunity that must not be missed.

Nicola Ronchetti

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