Transitioning Wealth: Succession planning for today's families

Episode Transcript:

Brandon Ashplant (00:05:00)

Hello and welcome to the Guernsey Finance podcast, where we bring you interviews with leaders from the global finance industry, as well as news and developments from Guernsey's financial services sector. My name is Brandon Ashplant. I'm head of technical at Guernsey finance. For those of you who aren't familiar, Guernsey is a leading global finance centre. The success of the industry here is underpinned by economic substance, political stability and asset security. And we are committed to the cause of sustainable finance.

To find out more about Guernsey's success in sustainable finance, tune into our sister podcast, the Sustainable Finance Guernsey podcast. Today, I'm delighted to be joined by Catherine Grum, founder at Catherine Grum Consultancy Limited, where she advises on enterprising families on family office design, family governance, and succession. The firm's leading ethos is that when families understand their values and the purpose of their wealth, they can build upon much stronger foundations.

By aligning their structures and activities with this, she helps create sustainable long -term solutions. Catherine will be joining us as a panellist for this year's Private Wealth Forum to discuss A New Generation, a panel dedicated to the new world of wealth generation. With entrepreneurs and industries constantly evolving, the wealth management industry is interacting with clients from increasingly diverse backgrounds with needs and attitudes presenting the requirements for unique approaches.

On this episode, we'll be discussing how families and entrepreneurs are approaching this changing world and how those supporting them are adapting to. So without further ado, welcome Catherine.

Catherine (01:38.791)
Thank you for helping me.

Brandon Ashplant (01:40.535)
Brilliant to have you on. Just to start, if you could just start actually by just telling me a bit about yourself and your career to date and how you sort of came to found your own firm.

Catherine (01:50.442)
Sure, sort of going right back, growing up I was always part of a big family. So on both my mother and father's side, we big extended families. And it was always a really important and enjoyable part of who I was and spending time with the family. So it was a bit of a shock when I started work originally as a private client lawyer and soon started to appreciate the fact that sometimes those families with the greatest wealth.

ended up actually being some of the unhappiest families I saw. Thankfully, they're by no means all like that. And there are plenty of families with wealth who flourish and have successful family relationships. But it did kind of stick in the back of my mind. I left law and got a bit of experience both working in wealth management and working with trusts. I was on the board of some international

trust companies. And I found all this kind of practical understanding of how families with significant wealth manage things, but I was always drawn back to the people and the relationships. And so really what I've done for the past 10 years or so is actually help those families think about what that wealth actually means for them, not just what they can buy with it, but what they want to achieve with it.

and the positive benefits that it can bring them, but also what it can do for others. So helping them to maybe work through where appropriate and what's enough for them and to be able to give back or change the way in which they approach things so that actually there is wealth that's kind of being recirculated, if you like. So now today, I have my own business, as you kindly mentioned

where I consult with these families about aspects of family governance. So that's really how families with shared assets work together to make decisions and to manage those shared assets. It also leads into family office design, but really focusing on some of the strategic aspects of a family office. So if families are clear what they're trying to achieve, how might that family office help them? What's it need to do? How can they use it?

Catherine (04:17.498)
in order to achieve what their ultimate goals are. I also chair a charity which is focused on increasing philanthropy amongst high net worth individuals and families.

Brandon Ashplant (04:28.883)
Excellent. Well, that is quite a comprehensive overview there. so as I mentioned in the intro, you're joining us at Guernsey's private wealth forum this year. one of the key topics is that sort of transition in wealth. And, and this is something we hear, you know, time and again, but I think it's nice this year that we're sort of putting a slightly unique spin on it in that we're sort of focusing on wealth creators and, entrepreneurs, you know, which you no doubt can speak to very well with your experience. And we'll come onto that slightly later.

But I just wonder first off, if we could sort of start, I guess, back to front in many respects and sort of, if I could just ask you, what's the biggest question that members of the younger generation typically ask you when sort of, or they have more broadly when approaching this wealth transition and sort of having a perhaps handover of established wealth.

Catherine (05:14.467)
Yeah, well, I think it's different. if younger generation, but not necessarily, you know, if they're the wealth creators, then I noticed that there's a really common question, which is, how do they manage the wealth that they have created, and transition it in a way that actually doesn't cause the next generation harm or damage. And I think there are two concerns that are sort of related. So one,

how if are, if wealth is going to a family and there's going to be some sort of collective shared wealth, how do they make sure that relationships are protected and that the wealth doesn't come between individuals and family members? And then secondly, how do they make sure that the sort of inheritors don't lose motivation if they're inheriting what I would describe as a life -changing amount of wealth?

Usually, if they're asking those questions, particularly the latter question, it often means they haven't addressed what the wealth is actually for. So that kind of obviously leads on to discussions around that. If you're meaning the sort of younger generation in terms of the wealth inheritors, so if they are, you know, coming to me because they are involved in a transition, and they are going to be the recipients of wealth created by other family members, then I think there are usually sort of two key areas that they want

it to explore. So they want to understand what's happening. Often it feels that decisions are being made and whether it involves structures and trust and things like that, or just business shares. It's kind of a new world for many of them. So just what exactly is what's transition involved? What are the options so they can understand the full context? And secondly, there's usually if they haven't been involved in the creation themselves, they want to understand

how it's been created and in particular how that aligns and sits with their values if they are then going to be the ones that have a relationship with that going forwards.

Brandon Ashplant (07:19.573)
Interesting. And the upcoming sort of, guess, as I say, upcoming as it, as it sort of seems to be imminent whenever, whenever it's spoken about, but this wealth transition will see a shift not only in values, but the form of business, businesses transferred as well. So the wealth management industry has great experience of legacy businesses, no doubt, and being passed down generation to generation. However, as wealth is generated in new ways, the new, the concept, I suppose of a family business is also changing, isn't it? So

How is the next generation going to differ to those legacy businesses, if you like, and what implications will this have on that transfer of wealth sort of going down the line?

Catherine (07:58.754)
Yeah, I certainly think if you look at the sorts of businesses that are being created at the moment, and the way wealth is being generated, a lot of them have some sort of technology, contingent and component, and there's a lot of change. And there's also the sort of cycle in which they are sort of come from first steps to perhaps an exit for family members or for whoever the wealth creators are, is happening much more quickly.

I think the result of that will be, as you say, that actually there are less quote unquote traditional family businesses that are going to be passed on and what people will be inheriting instead, more diverse portfolios of assets. And I think there are some interesting implications for that, because if you've got a family business, there are certain decisions that if you're going to be the owners in the future, you need to make. But the choices are generally

more narrowly constrained and the wealth is wrapped up in the business. Whereas if you've got that diverse portfolio, the number of choices you have if you are a collective group trying to work together to sort of have control of that wealth in some way or form, how it's going to be invested, it's much easier to access the liquidity potentially. So what's it going to be used for is more going to come out to individuals.

And I think as a result of that, it's going to be more and more important going forward. I think it's important anyway, but even more important to be really clear on what their objectives are for this collective wealth. Why are they going to keep it collectively together in the first place? And does everyone understand and buy into that? And how are they going to then make the decisions about it going forward in a way that does protect and maintain the relationships, but also

it does give them a lot more options. Because if you've got a business that may be very significant value on paper, but often, you know, the actual value is in the assets or, you know, it's on paper, it's not sitting in someone's bank account necessarily. So if you're looking at philanthropy and things like that, you are focused on what you can do potentially with the dividends.

Catherine (10:16.576)
actually, when you've got these more diverse portfolios of assets, there's also a lot more that individuals can do in terms of accessing that, whether it's for philanthropy, or whether it's actually doing other, you know, investing in social impact businesses and things like that. So there's a lot, again, there's a lot more that they can do, hopefully for good.

Brandon Ashplant (10:39.071)
Interesting. And, and just as we talk about sort of change and, and, and changing business, the concept of the family has changed significantly over the past few generations, but even in the last generation in many respects, how, are conversations surrounding succession planning approached when it comes to sort of blended families and families that are perhaps, know, quote unquote, less traditional.

Catherine (11:01.836)
Yeah, well, I think the key is in, as you said in the question, having a conversation about the succession planning, which doesn't always happen for lots of reasons. But one, I think, very common reason is some of those conversations are likely to be hard or potentially uncomfortable. And that happens whether or not there's a blended family involved. But I think some of the intricacies of blended family can mean that people are even more reluctant to enter into conversations when they're looking at

stepchildren or multiple children with slightly different parents and siblings, and how succession is going to impact those and potentially impact them differently. I mean, it's always a big discussion when I'm working with a family, the difference between fairness and equality and how that plays out. But I think it really brings some of those issues to life. And it just makes that communication even more important.

and important while the wealth creator or whoever is doing the transitioning is still around, if they're the ones making the decisions, creating scenarios where they can actually explain those decisions and their motivations and objectives I think is really key and giving everyone a chance to be part of that discussion. I think people sometimes think when you're talking to say the wealth creators, the older generations, that they don't want to have

they don't want to bring in the younger generations because they don't want them to be making the decisions. And there's a way of communicating and involving them without necessarily handing over all the decision making power. But I think if they're able to hear it firsthand, whatever the decision is, and have an opportunity to ask questions, then they are more likely to accept whatever the arrangements are. they, know, succession and transitions and handing wealth on is, you know,

the core intention is usually, almost always I would say, to make the lives of the recipients better, to help them flourish in some way. And I think it's hard to do that without involving them in a conversation about what it is they need and want. There's a family I was working with recently, it's quite a good example, second marriage of the wealth creator. So he had two children from his first marriage, and then

Catherine (13:24.662)
his new wife had one child. And for various reasons, the children that he'd had with his first wife had both got quite well established careers that were quite financially lucrative. And so they were kind of independent financially, although they enjoyed some benefits from having a family business, but they're effectively his stepchild.

was actually quite financially dependent because of their career choices. And that was fine while the wealth creator and his second wife were around, but they recognised actually that could be quite a difficult situation to maintain going forward if they were no longer around. And so actually one of the things we did as part of the discussion around the succession of the family business was to have a family meeting and we tabled

who was going to receive what not in terms of pounds and pence, but just to understand who was going to be involved, how the decisions were going to be made. And actually, it was a really positive, really healthy meeting and conversation because I think everyone was slightly concerned going into it, but actually everyone was on the same page. So everyone recognised and agreed the importance of continuing to provide in the same way for

siblings as they were currently provided for. They wanted to be treated equally. They didn't want to be referred to as the stepchild and the other children. They saw themselves as equal. And so they communicated and agreed that the parents, you can see the relief on their of shoulders kind of relaxing as we went through the meeting. But had it been differently and had they had different views, again, it would be really important to understand and work through those while you've got the opportunity to do so.

Brandon Ashplant (15:13.277)
Hmm. Well, that's like a very positive outcome. So that's brilliant. and, and we touched on it earlier, but the, idea of sort of wealth, or established wealth holders or to be holders against sort of wealth creators is this sort of dynamic that we perhaps hear less about often when having these conversations around next gen and that sort of term, seems the focus is largely placed on sort of wealth inheritors rather than the next generation of wealth creators. I just wonder how did the needs of those wealth creators?

and those who perhaps are new to wealth and are less familiar with traditional wealth management services on offer and that sort of thing. How do they differ from those sort of established and sort of legacy wealth holders?

Catherine (15:54.242)
Yeah, I think this is a really interesting topic. I think it's fair to say that the sort of new wealth creators, while there are still some sort of carving out more traditional business routes, many that are creating significant wealth are creating it quicker. And therefore they are a lot younger at the point at which they might need services from the wealth management industry, whether it's investment services for, you know, proceeds that they've drawn out the business or sold the business.

or whether it's just more sort of private client support. And I think the impact of that, there's a few things. So firstly, they've had less time to get prepared and perhaps to educate themselves about how things work. And they may not have peers who they can lean on in a way that actually often once you get to a point in a more traditional business and you may be in your 50s and 60s, you've often got peers who are also going through the same thing and that you can...

of learn from and they've also been treading a sort of more well established path. So there's that kind of not knowing what the options are, potentially having slightly different attitudes to risk, they're not so concerned on the whole with legacy, at least if you're speaking to someone in their 30s, they may not even have had their family yet. And if they have, the likelihood is that their family are still very young, so they're not thinking about passing assets on in a way that they're

children might be involved in the management. A few other things. So if they are the wealth creators, then they do have a bit more freedom in terms of how they manage things. And, you know, if they want to give away assets, they find it, I think, a little bit easier than if you're inheriting assets, because you've got that stewardship responsibility, and it's not always clear, you have to work within a more established framework if you are going to get involved in charity. Also more interesting conversations around

tax and how they manage and sort of pay, you know, in some instances, more tax than perhaps advisors would traditionally be able to manage for them. they kind of the not always but there can be attitudes that are more open to paying tax. And it's important to have those conversations with those sorts of wealth creators to make sure you don't make assumptions on their behalf. But I think, you know, one of the really interesting points is that

Catherine (18:19.764)
know, it's always traditionally been recognised that actually the younger you are, you kind of start off with a more liberal attitude and you tend to get more conservative around sort of social and economic issues as you age. And, you know, that may well have been the case historically, but it's not just a question of how old you are as to what shapes your attitudes. And obviously, there are people who don't fit that curve anyway, but

the climate in which you go through your formative years also has a major impact on your attitudes and your values. I think so millennials and Gen X in particular now, not only perhaps because they're younger, they have a more liberal attitude, but it's more likely that those attitudes may not shift as dramatically as perhaps previous generations have.

And so I think that will also inform sort of decisions they're making around giving back, you know, creating socially positive businesses, their attitudes to tax and things like that. And the final thing, I think, in terms of, you know, what advisors can do and what they're looking for, sort of jumping tax lightly and going more towards the sort of solutions, if you like. But those wealth creators are often still in the midst of

juggling. So they're still creating wealth, they're still busy. Even if they're exiting a business, they're likely to be going on and they'll have probably multiple other business ideas in hand or they might not have exited, but they might have drawn significant proceeds out. And so what they often need help with is support and sort of infrastructure around them to help them manage those investments and to give them back time. And from my perspective,

you know, said I advise on family office strategy for these sorts of wealth creators. They don't those with a sort of significant wealth who need that extra degree of support. What they're looking for is not a traditional family office model and sort of multi generational legacy, but actually what I would describe as a founders office. So a support vehicle that gives them coordinated advice, take some of the weight off their shoulders.

Catherine (20:39.992)
but is much more focused on supporting them first and foremost, rather than thinking in terms of multiple generations and broader services.

Brandon Ashplant (20:48.459)
Hmm. And that seems to be like a very good segue onto the, to my next question, because you touched there on, your ability to devise on strategy and so on. And I wonder, because you yourself are an entrepreneur, you founded your consultancy in the past few years. So I wonder what advantages do you think you have working with families? with

you know, against sort of companies that are perhaps slightly larger, more bureaucratic and slightly less entrepreneurially minded. What, you know, what, what benefits do you think families have working with firms like yours?

Catherine (21:20.652)
Yeah, well, I certainly think that they I found from the clients I've worked with over the past year or so, that they really admire the fact that I've set up on my own. So that's always a nice place to start the discussion. And they like the independent model, particularly for both family governance and that family office design conversation, because they feel that I'm there advising them based on what's in their best interest, not because I'm part of a wider firm.

I mean, don't think, be honest, most advisors in big firms, they still advise clients based on what they need. But from the client's perspective, they've said time and again, they like the fact I'm independent. They also like the fact they know it's going to be me doing the work. The sort of conversations I have are so personal. If they buy into me and want to work with me, then that's who they want to work with.

I've found they've really embraced the fact that I've set up on my own. And the other thing I would say is that, you know, working with these sorts of entrepreneurs, the issues that I'm covering again, sort of an intersection, you've got family dynamics and relationships, but you're also often working with wealth structures, with their investments, and that sort of complex ecosystem. And it means that they have, they don't tend to have quite

simple needs presenting, there's often quite complex problems or challenges that they're trying to kind of unwrap. And I have the flexibility to draw on all my different knowledge and skills and help them in a way that works with them. I don't need to, whereas larger firms generally tend to need to have kind of clearly defined offerings, partly to help them manage their own risk. It's completely understandable that I've just got that degree more flexibility in how I help. And so for example, I might

get involved and sit on a committee for them. So I chair for one of my clients, I chair their family shareholder committee, or I might help them develop the sort of education program for the next gen and have conversations with some of the next gen myself. It means I can just adapt and flex and I'm just able to kind of, I guess, address needs as best as I can.

Brandon Ashplant (23:39.042)
Excellent. And how do you think setting up your own firm has assisted in conversations with new wealth generators and sort of those younger sort of wealth creators coming through?

Catherine (23:48.982)
Yeah, I think again, they like the fact that I'm in business myself. It took me a while to kind of realize that that's what I was doing, because I was so focused on the clients, what I was doing for them. But yeah, just understanding and understanding the need, how managing your accounts, dealing with companies house, all the things, because they're in the same shoes as me, they've had an idea, they're probably good at something. And they focused on that.

Brandon Ashplant (23:57.474)
You

Catherine (24:18.776)
But then the size of their success has meant there's been a lot of complexity that's kind of come along in areas where they've either got blind spots or they're a lot less certain. So actually having somebody who also kind of feels and appreciates that and understands that, I think they find really helpful.

Brandon Ashplant (24:36.161)
We've seen recently a lot of, a range of global events in the, the, in the past four or five years that have sort of thrown the world up in the air in many respects. But I wonder, what is the approach to philanthropy amongst sort of the younger generation and younger wealth holders, I should say, that you've worked with and how have these sort of turbulent years sort of impacted their approach to the, to this and their decision -making, I suppose.

Catherine (25:05.164)
Yeah, I'd certainly say there's a greater sense of urgency, I think, in those sort of younger wealth creators who are said to formative years. And there's been not only a lot of instability and disruption and challenge and things like  COVID and everything else that you've described. But there's also been a lot more visibility about it's not to say things weren't happening.

when previous generations were growing up. But I think the way news and social media is these days, that it's much more in your face and that going on in their formative years and so it really does shape their attitudes and their approach on the whole without kind of wanting to make too many stereotypes to be more liberal in their approach. And therefore I think it's not just about philanthropy, which some actually have a challenging relationship with because some

are concerned that philanthropy is seen as the domain of rich, older, typically white men who are able to make big grand gestures. And some actually kind of are quite uncomfortable with that idea and are more interested in aspects such as social impact, their wealth creation activities, or how their businesses.

can give back in different ways. So not just necessarily traditional philanthropy. And again, you know, issues like how much tax they pay and how they approach that. It does play out differently depending if they are the wealth creators or if they're the inheritors. I've already mentioned, you know, if you're an inheritor, you may have to work within an existing framework. And for those, I sometimes see a bit of tension there when they feel very strongly that there's a certain way of doing things or that certain ways.

of not doing things, but they have less ability to influence what's being done potentially under their name versus the wealth creator who, if they have a particularly strong viewpoint, they can on the whole go and execute according to that view.

Brandon Ashplant (26:54.497)
Hmm.

Brandon Ashplant (27:10.049)
And we've seen an ongoing sort of shift in values. touched there on slightly, you know, the younger generation being slightly more liberal and sort of, see this in other sort of cultures, cultures around the world in the middle East, perhaps with, with younger generations having studied in the West in the US the UK and so on. how are values and dynamics changing with the next, next generation of wealth holders?

Catherine (27:31.82)
Yeah, I mean, I think, again, there's plenty of examples you can see in in older wealth holders, who have done some amazing things, who sort of, you know, for example, Patagonia, and that's, you know, lots been made about talked about that already. So it's, it's not just the domain of the younger wealth holders, but I do think for the sort of millennials in Gen X, I think values are more

front of mind. think previously, people were doing things intuitively, and now it's much more explicit. And I think for them, it's really important that their sort of decisions aren't, they're not comfortable with things being compartmentalized. So historically, often, it was the case that you made your wealth in one way, but then you would say use philanthropy.

to sort of offset, or at least kind of that's where you did your good. And it didn't matter so much how you made the money. Now it's much more important as alignment across the board with their values. And it goes, you know, not just how what they're doing their wealth, how they're investing it, their choice of employer, which providers they want to work with, it comes out, you know, in all those different domains. And

Also within families, think, you know, there is a potential if you're dealing with a group of individuals to have different values across that group. So really understanding, I've been doing a lot of work recently looking at how you can get the best of both worlds, because both generations will have strong values and neither set of values is wrong, but how can you take the best of

what the older generation have been doing and the values that they hold strongly and then blend in the values and approach of the younger generation so that if you get something that works for everybody rather than seeing it as a binary choice, you either have those values or you have these values. Because if you end up looking at it like that, it's really hard to come to solutions that work for that sort of collection of individuals.

Brandon Ashplant (29:43.697)
And we live in an increasingly sort of transparent world as well. And especially with the younger generation growing up as sort of digital natives, so to speak. How has this increasingly sort of transparent world impacted families and their approach to decision -making and even in information sharing when it comes to their wealth?

Catherine (30:03.052)
Yeah, I think it's a really interesting one. There's certainly, because of the level of transparency in society and the level of information available, I think that whets their appetite. And therefore, there is an expectation for that degree of transparency across the board. And for example, within family businesses, where historically, they may have been very private and very careful about the information, even sharing it amongst family. So trying to manage

and broach those two different approaches again kind of comes back down to the point I was making before about understanding why each approach is being promoted by whoever it's being promoted by and what the benefits are of each and trying to find solutions that work for both. think with an increasing amount of information being available or potentially being available. So for example, for the next generation coming in and being exposed to the whole range of

information that kind of can be thrown at you in the wealth management world, there's a potential for them to get overwhelmed by it and end up with kind of information paralysis. So it really does help to have an agreed and structured approach around what information is needed, why and how that can be shared or sort of introduced in a way that achieves the end desired results. So again, having the goal and the aim in mind, not just sharing it for sharing its sake.

But then at the same time, there also needs to be discussions around how the information is going to be used and about sharing it. So for example, what can and can't go on social media. Most families and certainly most of the older generation want to maintain as much privacy as possible around their own personal affairs generally. But for example, if one member of a family

is perhaps quite outspoken on an issue that might not be sharing anything too detailed about the family, but simply by going out and talking about something you can draw attention to the family. So actually having those discussions about how information is going to be used, how social media is going to be used, so that there's a shared understanding before that sort of situation arises.

Brandon Ashplant (32:20.021)
And, and just to finish the, just to find a question, the shift of values is something translated to, I guess, every decision in, you know, in modern life in, many respects with individuals. I suppose I'll go back to that point about the younger generation sort of having those values, holding those values very dear and therefore sort of extending them beyond and only for example, choosing to work with companies that share those values, for example, given all that.

How are families choosing jurisdictions today and what can jurisdictions like Guernsey perhaps offer to clients looking to manage wealth across the globe?

Catherine (32:55.362)
Yeah, I think there's a few things that kind of come up based on all the points that we've been talking about. obviously, firstly, there's the sort of the traditional hygiene factors that families might look at when choosing jurisdiction. having good quality firms and having a safe, stable reputation, I think those remain important to families now. But I think it's also about the people. So

you know, understanding the relationships, the rapport, and how the service providers that are that the wealth creators are talking to are going to actually work with them as people. And I think governance and those sorts of conversations will be increasingly important. So those firms that are open and understanding about not just structures and solutions, but the whole kind of ecosystem of that family and how they help and work with other advisors.

because that generation of wealth creators tend to be more collaborative. I think there is going to be an increasing desire to see how they can work and get a team together around them to support them. And so the more that Guernsey and the firms in Guernsey are open to that approach, I think the better off Guernsey will appear. And the other point is they will choose based on their values, both jurisdictionally and firms. So those firms,

who and the country themselves, know, Guernsey is clear on what it stands for and initiatives like everything around sustainability and green finance that Guernsey has been really strong on, I think will resonate really well and will be really important. And the fact that you know, Guernsey has been leading on some of those issues for quite some time. I think that will will mean that it resonates as a jurisdiction and the firms that are involved.

will resonate well with wealth creators and inheritors who for whom values and alignment are really important.

Brandon Ashplant (34:59.211)
Well, brilliant. Thank you very much for joining us on the podcast today, Catherine.

Catherine (35:03.36)
It's been a pleasure, I've enjoyed it.

Brandon Ashplant (35:05.793)
And was great to talk through the changing world of private wealth, especially through your lens as an entrepreneur yourself. Thanks also to you for listening. If you enjoyed this discussion, we have a backlog of interviews on the Guernsey Finance podcast channel. You can check them out by searching for Guernsey Finance on your preferred podcast platform. We also have links to Catherine and Catherine Grum Consultancy Limited in our show notes. So check them out to hear more from them. To find out more about Guernsey and its specialist financial services industry, head over to our website, guernseyfinance.com.

Until then, we look forward to welcoming you back to the Guernsey Finance Podcast. Goodbye from Guernsey.