Financial Education for Business and Estate Succession

As members and the next generation of entrepreneurial families operate on an increasingly global scale, combined with the continuing rise in the number of business succession cases among small and medium-sized enterprises, this inevitably leads to more and more global transactions and succession processes. Financial literacy is therefore crucial for competently managing and supporting such processes!

Not only can the sale of a business constitute a cross-border transaction in global markets, but the transfer of assets is also frequently a global transaction through which the total assets are passed on to the next generation. Increasingly, the next generation of entrepreneurial families is no longer focused solely on the continued existence of the traditional family business; rather, NextGen prefers a particularly sustainably diversified asset structure in which assets are not primarily tied up in a single traditional family business. The focus is often on a diversified portfolio of business investments—ranging from private equity and venture capital to particularly sustainable projects or investment forms such as impact investments.

Therefore, not only should the transfer of ownership of the company be particularly well organized, but so too, of course, should the transfer of the family’s total assets—viewed holistically—including the entrepreneurial family’s inherent “family legacy.” In addition to corporate shares in companies—as defined by the “Five Dimensions of Wealth” from the BeeWyzer NextGen Masterclass—total assets also include private capital, human capital, social capital, and “family value,” defined as the opportunity costs incurred if insufficient preparations—such as a family constitution—have been made in the event of succession.

To successfully plan and implement these complex and often global succession processes, as well as to sustainably preserve the total wealth across generations, all parties involved—especially the NextGens—need a certain level of financial knowledge. The complex decision-making processes involved in executing a (global) business sale or succession planning for a global family fortune must be navigated from tax, legal, and regulatory perspectives. The successor does not need to know everything themselves, but they should at least be aware of where and how to access relevant external support and independent advice. Above all, the asset owner should clearly articulate the strategic guidelines and specify the necessary goals and measures for the transaction.

Relevant financial education on such topics is far too rarely taught as part of standard schooling. Since one typically inherits from one’s parents only once, it is difficult to build up one’s own wealth of experience, and there is therefore a great need for relevant financial knowledge for such transactions.

In times of increasing geopolitical uncertainty, holistic wealth management—as well as the management of a family business—is no easy task if the assets are to be transferred securely and, above all, sustainably to the next generation. Above all, the family of shareholders often faces the difficult decision of whether the existing group of shareholders is the “best” option in the given situation, or whether selling to another (co-)shareholder might be the better solution. As a result, the financial education of the next generation—with a focus on competence as shareholders—is becoming increasingly crucial. The next generation is facing ever-greater pressure to manage the family’s assets responsibly. The current and next generations of entrepreneurial families should therefore possess sufficient knowledge and relevant personal skills to manage their complex finances—either to build up their own expertise or, alternatively, to at least be able to formulate clear requirements for their network of advisors.

That is why we—Christian Stadermann and Peter Brock—founded BeeWyzer GmbH (www.beewyzer.com), which provides educational videos and tools for optimizing asset structure as part of an integrated and personalized learning journey toward sustainable wealth transfer. The BeeWyzer NextGen Masterclass not only includes modules on determining one’s own strategic asset allocation, implementing an investment strategy, and structuring assets, as well as on controlling and risk management, but the learning program also includes modules on defining family values, drafting a family constitution, and supports the next generation in choosing their own path of involvement in the business or in wealth management to create a positive impact at all levels. Often, NextGens are no longer willing to accept a “business as usual” approach, whether in the business or in wealth management. The program is therefore holistic (in that it covers all assets, including businesses and human/social capital), independent (because it does not offer any investment products), and practical to implement (through additional worksheets and tools for personal use).

In addition to the topics mentioned above, the concrete implementation of an impact investing strategy often comes into play as part of the search for new and interesting sustainable investment strategies. Here, it is important for high-net-worth individuals and entrepreneurial families to explore concrete implementation options and solutions for sustainable wealth management, impact investing, and philanthropic strategies. Members of the next generation, in particular, are often the driving force behind this investment philosophy, as they frequently no longer wish to simply follow in their parents’ footsteps. Their intention is not only to reinforce their social status through donations to charitable organizations, but also to make the world a little better through all their investments and entrepreneurial activities—whether through operational roles in social enterprises or impact investing funds. They seek to consciously and proactively achieve a financial return while also striving for an additional social or environmental return that can be evaluated and measured—these are, as is well known, the prerequisites for true impact investments.

The continued existence of the family business within the family or the sale of company shares—whether domestically or globally—is therefore also part of such an overall strategy and is evaluated according to the same criteria.

Just as a cross-border transaction as part of a global succession process requires careful planning, holistic wealth succession should likewise be prepared within an integrated strategic process. There is no reason why private wealth should not be managed just as professionally as the business or the sale of the business. Such succession processes can only be successfully implemented if the next generation has sufficient financial literacy.