Wealthy Business Owners Rethink Succession, Location Plans Amid the Pandemic – Barron’s
By Joe Dziemianowicz
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A persuasive 88% of surveyed business owners plan to keep the business in the family by leaving it to a spouse, child or grandchild.
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Wealthy business owners have significantly tweaked their plans for retirement, location and succession in the wake of the COVID-19 pandemic, according to a new survey.
The study, released this week by Clarfeld / Citizens Private Wealth, focused on planning among high- and ultra-high-net-worth business owners in the U.S. and how they’ve been impacted by the global health crisis.
Half of those surveyed plan to sell their businesses because of the pandemic, while about one-third have sped up retirement plans, according to the online survey conducted in July by Ipsos.
Between the pandemic, the vagaries of business and shifts in the political landscape, “we expected business owners would be thinking about transition, succession and so forth,” says Jose Reynoso, director of Advanced Tax & Estate Planning, Trust Services at Clarfeld, based in Tarrytown, New York.
The survey of business owners with 2-500 employees and a net worth between US$2 million-US$10 million and investable assets exceeding US$5 million found that 97% of respondents felt the impact of the pandemic. About one in five laid off employees, while 21% applied for federal aid through the Paycheck Protection Program and 21% closed branches.
The study showed that challenges of COVID-19 sparked wealthy business owners to look beyond the day-to-day of their enterprises and consider the future of them as well as their own.
Of those surveyed, 70% planned to change leadership roles, with 34% choosing earlier retirement and 35% accelerating succession strategies. A persuasive 88% plan to keep the business in the family by leaving it to a spouse, child or grandchild.
The study found that 89% are confident about the next generation of business leaders. It also revealed 21% of grandchildren who were not interested in inheriting a business before the pandemic now are.
“There’s been a lot of communication of how family enterprises will thrive and survive with more engagement across generations,” Reynoso says. “The key to successful succession is all about planning and looking carefully at how to structure a business.”
Since March 2020, 65% of those surveyed moved their businesses. Reasons for relocating include going to states with lower taxes (34%), being closer to family (31%), and better remote options (27%).
“It’s no surprise to see that like many Americans, business owners have chosen to relocate as a result of the pandemic,” said Donna Cuiffo, Clarfeld’s Director of Family Office Services, in a statement. “No decision should be made hastily.”
“Time is our friend,” says Reynoso, adding that the current changing landscape means that “succession and transition are going to continue to be topics of conversation.”
