Once again the trend is coming from the United States

October 13, 2023

Once again the trend is coming from the United States

"Dynastic' and 'non-dynastic' estate planning for large family fortunes is undergoing radical change. But preserving the family's internal interests remains paramount.
Their names are Peugeot, Swarovski or Botín, and they have built up their fortunes in the automotive, fashion or financial sectors, succeeding one another from generation to generation at the head of a holding company or business. Beyond these commonalities, these families also share a common vision: that of a 'dynastic' organisation where the preservation of family interests prevails. In fact, on the strength of their multi-generational heritage, each of them is preparing the next generation to retain control of the business, either actively or as a majority shareholder. This transmission model, in which values and history play a key role, is now being challenged by a new way of doing things. And unsurprisingly, it comes from the other side of the Atlantic.

Crystallised in 2010 by Bill Gates and Warren Buffet through their initiative "The Giving Pledge", a new model of "non-dynastic" business transfer is making headway, even if it is still struggling to make inroads in Europe and Asia. But what exactly does it involve?

The scenario is generally as follows. When the time comes to retire, the holder of capital - a first-generation entrepreneur who has made a fortune quickly - is no longer interested in passing on the business to his heirs. Once they have achieved social recognition, they prefer to sell all or part of their investment and leave the operational management of the business. The aim: to give meaning to his entrepreneurial career by making an impact. The assets thus recovered will be used not only to ensure a comfortable lifestyle and to make other investments, but also and above all to commit to a philanthropic project. For the majority of these players, the pursuit of financial performance is no longer linked to the growth of the family business, but is intended to have a positive impact on society, the environment or governance issues. And heirs also have a role to play in this programme. As Bill Gates and Warren Buffet have explained, their children will not inherit the company or their immense fortune. They will have sufficient capital to live on and, in turn, to develop a philanthropic activity, or quite simply to invest in projects that meet their aspirations.

The American spirit of free enterprise partly explains this desire not to perpetuate family capitalism. For the advocates of 'non-dynastic' inheritance, wealth implies a duty of responsibility to society. It is up to you and your descendants to fulfil this responsibility.

Private banks have adapted to this paradigm shift. Whereas they had focused primarily on supporting a generation of successors, with an emphasis on business management, investment and networks, their value proposition is now evolving to meet new objectives aimed at supporting a virtuous system with programmes dedicated to nextgen, the environment and philanthropy. Without favouring one system over another, banks are now perfectly equipped to support their customers in this transition. And when they share the same values with the entrepreneur they are supporting, everything comes together to ensure that the transfer is a success, whether it is dynastic or not.

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Emile Salawi, Head of the Middle-East & Key-Clients

Opinion piece published in the newspaper Le Temps, on 22nd September 2023

 

October 13, 2023

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