At the end of last year, we got together with 25 of Scotland’s most enterprising families. These families operated in a range of business sectors, and those present included a very lively mix of first through to 24th generation family members.

The very dynamic message that came from this forum, and which is repeated by clients the length and breadth of Scotland, is that family businesses are moving from wealth preservation to wealth generation. Whilst the natural instinct for good quality stewardship of family wealth still remains, there is also willingness for these well managed and well advised family offices to embrace greater entrepreneurialism.

This has to be excellent news for Scotland, where almost 70 per cent of businesses are described as family businesses, accounting for 45% of GDP. Indeed, I believe that around 40 of Scotland’s 100 biggest companies are family-owned. This greater entrepreneurialism is in many ways a reaction to recent unprecedented events. Holding wealth as cash is no longer an attractive option, and so investing in capital-generating assets becomes a compelling alternative. Many family businesses have the ability to adapt and are well positioned to take advantage of the opportunities, be they distressed property or other business assets.

‘In some families it is a case of ‘what can grow under the mighty oak’!’

Another powerful reason for this shift in approach is that owning a family business or having the good fortune of family wealth is no longer a status symbol; both come with responsibilities. A recent survey in the US found that more than a third of wealthy parents were ‘a little nervous’ or ‘not confident’ of their children’s ability to handle wealth. This has in many cases been the rationale behind stricter conditions being applied to how and when children inherit. It is not unusual for the age of inheritance to be 30 or over, or perhaps when the child is in a settled relationship.

No parent wants to lose control over the money if the child is immature or enters a relationship that ends in divorce. Therefore, more than ever, helping prepare the younger generation to receive wealth is a priority for wealthy families.

Mighty oak

At our forum there was intense interest in leadership and leadership styles. As one speaker put it, in some families it is a case of ‘what can grow under the mighty oak’! Yet our experience is that parents want their children to have a bit of entrepreneurial flair about them. They will assist by helping them invest in or set up businesses in which they can learn through their mistakes and understand and recognise the pitfalls and the success.

Increasingly, parents want their children to get more involved and properly trained to ensure that they have the full ‘tool kit’ to manage a business for the future. They need to be motivated to earn their money rather than simply relying on inheritance. They need to prove themselves capable before the control of a business or Trust is handed over.  Very often, it is a private bank like ourselves that is brought in to provide the support and guidance so that the parents are not seen to be hovering over the shoulders of their heir-apparent.

In response, HSBC Private Bank regularly runs ‘legacy’ workshops, typically for 22 to 33- year-olds, who will inherit both money and a vast array of generational issues. For the enterprising families we have met in Scotland we are also looking at ways to link them into HSBC Private Bank’s global family forums.

As, without doubt, bringing people together so that they can ask questions of each other as well as their bank, works.

Fieldfacts

Contact Joss mitchell, director of hsbc private bank scotland tel: 0131 338 2494 email joss.mitchell@ hsbcpb.com