Wealth planning and business assets
Business assets and family companies are now a key focus when planning to transfer the wealth of private clients
Estate transfer has always been an important topic that the BNP Paribas Wealth Planning Solutions teams have addressed with private clients.
Now, more than ever before, we also discuss the business assets and family companies belonging to BNP Paribas Wealth Management clients. There are three main reasons for this.
First of all, a situational factor: the COVID-19 crisis forced private clients to take a fresh look at issues related to their global wealth transfer. Everyone knows of someone who has become ill or indeed died as a result of the recent health crisis, bringing matters of incapacity and even complex working conditions to the fore and leading us to ask questions that we had not necessarily wanted to think about in the past.
Secondly, a demographic factor: population ageing means that there are now a significant number of companies needing to be transferred in the coming years. Baby boomers are now at an age where they need to hand over the reins and step away from the businesses they created, managed or indeed themselves inherited. A recent report estimates the amount of global wealth to be transferred by 2030 at USD 18.3 trillion. This concerns 680,000 individuals with USD 5 million or more in net worth, two-thirds of whom are over 70. (Source: Wealth X/Euromoney Report - December 2021)
Lastly, a structural factor: family businesses are a vital part of Europe’s economic fabric. This is particularly true of countries such as Germany, where family-owned companies represent 90% of businesses. (Source: Stiftung für Familienunternehmen 2019).
The transfer of business assets and family companies to the next generation over the coming years therefore constitutes a major challenge for our economies and for the wealth management industry.
Generally, certain “illiquid” assets are fully factored into wealth transfer considerations, although the types of solution may vary from country to country. This is the case of real estate assets – which structured through a split-property donation – or art collections, which are often transferred into specific foundation-type structures. The purpose of these solutions is to enable the assets to be held over the long term, while at the same time addressing any potential tax friction.
The situation is different for family businesses, which have an added level of complexity.
Business assets and family companies are not, in principle, deposited with private banks. However, it would be unimaginable for wealth planning teams not to support private clients with matters relating to this type of assets, as the latter often make up a considerable portion of their income and wealth and are a huge source of emotional attachment.
Of course, in the simplest cases where the decision is made to sell or carry out an IPO, the operation may result in the assets being entered in the bank’s books. Deliberations about wealth transfer won’t end there for clients, however, as the future of the assets must be considered, but their more liquid nature will make them easier to break down. On the other hand, when families plan to retain control of companies, the wealth solutions required will be more complex and will call for a range of technical tools (family constitutions, shareholders’ agreements, pre-emption clauses, etc.).
As every business has its own distinctive characteristics and each family is different, there is no one-size-fits-all solution. The purpose of the various techniques and solutions put in place will not be to settle the issue of how the family company is governed once and for all. Rather, they are used to anticipate as much as possible any problems and to identify the means of addressing those issues while avoiding any conflict situations likely to destroy value.
BNP Paribas Wealth Management and its Wealth Planning Solutions teams are therefore fully committed to supporting private clients with all of their assets, including specific assets such as business assets and family-owned companies. As part of BNP Paribas Wealth Management's activities with External Wealth Managers, the Wealth Planning Solutions teams can support both EWM clients and the EWMs themselves, in particular when it comes to structuring and transferring estates.
Head of Wealth Planning Solutions International Markets
Sylvain Pichard has been supporting wealthy families and businesses for many years with structuring matters and international tax planning. A graduate of Université Paris Dauphine-PSL and Sciences Po Paris, Sylvain joined BNP Paribas Wealth Management in Switzerland in 2007 after practising as a tax lawyer in Paris and Geneva.
Article published in www.allnews.ch and translated from French.