How Liquidity can help in Succession Planning for Family businesses?
Most families face the problem of successful succession planning for family businesses when they finally come at crossroads with the future. Family-run businesses are built with a lot of time and energy, which means that entrepreneurs are likely to want to preserve it for their next generation.
However, according to statistics, only less than 30% are able to do so. If you want your high net-worth clients to be able to preserve and pass on their family business, liquidity can help you. Nevertheless, succession planning is a sensitive and complex topic.
The significant challenges that come up when planning for next-generation:
– Making all family members happy with the succession.
– Creating a safety net within the succession plan to preserve wealth for future generations.
– Focusing on wealth and company expansion as part of the succession plan
For most high net-worth clients, the priority ticker tilts a bit more towards wealth preservation than expansion. This is because they want their future generations to have the same standard of life. However, there is a significant focus placed on wealth expansion as well.
While succession planning for family businesses, high net-worth clients have three primary concerns – one for themselves, one for their families, and one for their companies.
1. Transitioning Smoothly
As a financial advisor, it is your duty to help your clients and their businesses to get ready for the family’s financial future. To ensure that, you need products that enable a seamless wealth transfer to the next generation.
Maintaining liquidity can become key in such cases. It helps with a successful transition by managing tax and wealth equalization for families. Not just that, liquidity also supports the business through tough times when it loses its founding member or primary driving force during successions.
So, if you can design life insurance products that protect your client’s liquidity, allow them to leave behind a philanthropic legacy, and preserve the existing wealth, then you are much more useful to your clients.
Also Read: Why are more Middle East Family Officesfocusing on transition?
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