Learn from the experts on succession planning, philanthropy and wealth management in turbulent times

FAMILY businesses underpin the Scottish economy and most have endured a particularly turbulent few years.

While many businesses have sadly struggled, others have adapted, and family businesses, in particular, have demonstrated a remarkable resilience and ability to positively respond to the market in these uncertain times.  

There is a familiar cycle of growth that all businesses face, from nurturing a fledging enterprise to sustaining early success and planning for the future.

What can make matters more complex in a family business setting is the relationship between all family members – irrespective of whether they play an active role in the business, particularly when considering succession planning. 

No two families are alike and, following that logic, no two family businesses are the same either.

Each has its own strengths and weaknesses, which can make transferring the business to the next generation all the more complicated. There is no magic formula to guarantee a smooth and successful transition but it is often a helpful starting point to consider the points of view of all parties when looking to the future.

CAN PARENTS STRIKE A BALANCE BETWEEN EQUITY V FAIRNESS?
FIRSTLY, let us consider the parents who are running the family business. It can be helpful for the current family business leaders to look to the future and the next generation of leadership as early as possible.

Considering who the next custodian (or custodians) of the business could be may highlight family members who are interested in becoming involved in the business or opportunities for training and support for those who are already involved but not quite ready to step into a senior role.

Many family businesses will likely not involve all the children. Depending upon the parents’ ages and stage of their lives, their thoughts may also turn to inheritance, estate planning and the need to strike a balance between equity and fairness of those children involved with the business and those who are not.   

Where possible, such conversations should be initiated sooner rather than later, particularly when considering the value of the business compared with other family wealth, such as property or investments. 

This is not an easy comparison to make; the business’ worth will not necessarily be restricted to a monetary value, depending upon the views of the children and their plans for the future. 

INVOLVING ALL OF THE NEXT GENERATION
SOME members of the next generation may already be working within the family business or planning to join following completion of further education, while others may follow paths that lead them in different directions.

For those who are involved, there may already be an expectation (either their own or set by others) or an ‘understanding’ that they will step into the shoes of their parents to run the business in years to come.  

Being appointed as a future leader of the family business may engender feelings of pride, recognition or trigger a real motivation for that family member to drive the company forward.

We also regularly see, however, that such a role brings with it a heightened sense of responsibility and accountability, not only to shareholders and employees but also to the wider family, as well as an added pressure to maintain or exceed expectations set by earlier generations.  

Where family dynamics allow, involving the next generation who are not directly involved with the family business is key to formulating a solid succession strategy and will allow all family members to set out their expectations.

Where possible, open communication between all family members can play a key role, not only in setting out the business’ future direction but also in avoiding misunderstandings. 

A well planned succession strategy can create a platform for the next generation’s ambitions – whether those aspirations relate to the family business, or not. It is also vital to involve professional input early on when considering any succession planning and Shepherd and Wedderburn’s private wealth and tax team, along with colleagues in other relevant practice groups such as our corporate team, are proud advisors to a wide variety of Scottish family businesses.

Family businesses are undoubtedly feeling the sustained impact of the pandemic but are now looking to the future (which may not even remotely resemble the future they had anticipated even three years ago) and especially, to the next generation, to grow and adapt the business and cement their place in the market.

For more information, contact Susie Tweedie, Senior Associate in Shepherd and Wedderburn's private wealth and tax team, at susie.tweedie@shepwedd.com or on 0141 566 7245

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Philanthropy leads to personal growth

It is never too early to start creating a legacy inspired by a sense of social responsibility, writes Shepherd and Wedderburn's private wealth and tax team Director Keith McLaren

THE term philanthropy is commonly defined as benevolent behaviour towards others in society, usually in the form of making charitable gifts.

It is a term that has long existed but a topic that has, in recent years, appeared with increasing frequency during conversations with clients regarding their own personal wealth planning.

Whereas, historically, topics such as wealth protection and tax efficiency were key discussion points, we are now finding that the concept of philanthropy is also of growing importance to our clients.

PHILANTHROPY IS MORE THAN A WORD 
SOME of the world’s wealthiest people, such as the entrepreneurs Bill Gates, Mark Zuckerberg and Jeff Bezos, among many others, have committed to donating a significant proportion of their wealth to philanthropic endeavours.

Closer to home, John Caudwell, founder of phone retailer Phones 4u, has pledged to donate at least 70% of his wealth to good causes during his lifetime, while the Welsh actor Michael Sheen last year declared himself to be a “not for profit” performer who will donate his future earnings to worthy causes. 

These news stories have certainly raised awareness of philanthropy, with a common theme invoking the old adage that “you can’t take it with you”, so why not give some or all of your accumulated wealth away, have control of where it goes and see the positive results with your own eyes? 

There may be some who believe that those pursuing philanthropic aims are doing so to salve their conscience regarding the size of their estates, or are simply seeking publicity.

Interestingly, some of the most significant philanthropy that takes place is on a strictly anonymous basis, and in many cases our role as advisors is to help facilitate this. John Caudwell is often quoted as saying that philanthropy gives him far more pleasure and satisfaction than making money, and his aim now is to use the wealth he generates to benefit others. 

IS PHILANTHROPY ONLY FOR SOCIETY’S WEALTHIEST?
WITNESSING celebrities commit vast sums of money to charitable causes, in the hope of solving environmental, economic and social issues, has led more people to embrace philanthropy, even if their ambitions and commitments include significantly fewer zeros. There is a growing sentiment that we can all contribute to good causes. 

As wealth passes down through generations, those that hold the family wealth are becoming increasingly interested in using it for social change. 

Having identified the importance of this to their clients, many major banks now have dedicated teams to assist their high net worth clients in pursuing their philanthropic ideals.

Some also operate anonymous and discrete philanthropy-focused round table events for clients to share ideas and speak to like-minded people, and we often collaborate with financial advisors in these discussions.

DO YOU NEED TO BE A BILLIONAIRE TO BE A PHILANTHROPIST? 
ABSOLUTELY not. Although you have to be in the position to give wealth away, you certainly do not need to hold a place on the rich list to make over some of your wealth or set up a charity – during your lifetime or through 
your will. 

More and more clients are choosing to do just that, leaving clear instructions to those they entrust to follow their wishes after they are gone. 

As trusted advisors to our clients, we have a unique insight into the planning and thought behind these wishes, and it is clear there is no exclusivity to philanthropy. 
In fact, there are many philanthropists who simply either do not recognise they are a philanthropist, or would not willingly identify as one. 

The rise in new wealth created by cryptocurrency trading has brought another pool of philanthropists, many of whom embrace philanthropic ideals from the outset. And although it remains a niche form of donating, advocates for cryptocurrency philanthropy are anticipating a boom in donors this year, with the founders of The

Giving Block claiming the donation platform is on track to process over $1 billion in crypto donations over the next 12 months.

A DIFFERENT TYPE OF FAMILY PLANNING 
WE are often involved in discussions where parents plan their charitable commitments with their children or grandchildren, educating the next generations in the processes of who, how and – most importantly – why they are making charitable commitments. 

It is certainly never too early to start creating a legacy that can promote social responsibility. 

Raising a generation of people who wish to drive positive change may go some way to avoiding future social and economic problems. 

There are also additional estate planning benefits, such as reducing your estate for inheritance tax purposes, especially if you planned to leave your estate to beneficiaries who would then undertake philanthropic activities of 
their own.

It could be argued that a more strategic purpose and process in identifying how philanthropic endeavours will make a difference in the longer term is what differentiates philanthropy from charity. 

Yet the two sit side by side, playing a crucial role in fostering a fairer and more sustainable society.

One of the greatest pleasures when working as a trusted advisor to individuals and families is being a party to discussions of this nature. 

The desire for philanthropic giving can build up over time or simply come out of the blue following an impactful event in a client’s personal or professional life. 

In some cases, clients and their families have a very clear idea of how they wish to contribute and require some assistance merely with the logistics, whereas others wish to undertake charitable acts but are not quite clear how to go about making a change. 

We welcome these opportunities to be a part of the philanthropic journey with clients old and new. 

For more information please contact Keith McLaren, Director in Shepherd and Wedderburn's private wealth and tax team, at 
keith.mclaren@shepwedd.com 

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Keep a hold of wealth during turbulent times 

It is inevitable that higher inflation and interest rates – combined with stricter fiscal and tax policies – will act as headwinds for private wealth, writes Partner in Shepherd and Wedderburn's private wealth and tax team Chris McGill

THE turbulent nature of recent years, not least the impact of the global pandemic, stock market volatility, the rising cost of living and rising inflation, has left no sector of the economy untouched, and so it is for wealth management.

There has been a marked change in the macroeconomic factors influencing capital wealth valuation, from the fiscal support policies introduced in the wake of the financial crisis, and latterly in response to the COVID-19 pandemic, to rising inflation rates and record-high taxation. 

Meanwhile, societal norms are evolving to champion a more considered approach to tax rates and planning, alongside greater enthusiasm for personal philanthropy and values-led investing. 

These changes are impacting significantly on personal wealth and asset protection.

HOW THE PANDEMIC HAS INFLUENCED PRIVATE CAPITAL
INFLATION has remained low for most of the last two decades. Since the financial crisis, this has been accompanied by low interest rates and fiscal stimulus packages rolled out by central banks – both factors that have recently been pushed further as governments and central banks have wrestled with the economic challenges of the pandemic. 

This prolonged period of low inflation and low interest rates has been good news for those holding capital assets. 

This is demonstrated by valuations in a number of asset classes often held by clients, including residential property, forestry, and ‘growth’ companies – often in the tech space – earning remarkable valuations. 

This tendency is reflected further in capital markets, where the last year has seen a record level of merger and acquisition activity. While there will always be variation across sectors, the general themes have been very positive for private capital.  

Due to the pandemic and other factors, however, inflation rates have started to climb. 

Ultimately, it would seem that we have now passed a tipping point, with inflation hitting levels not seen for a generation, driven by factors including a sharp hike in energy prices and unprecedented pressures on supply chains. 

As inflation increases, interest rates will inevitably follow suit. Concerns around this combination of factors has driven market volatility in the early weeks of 2022. International government stimulus packages, including the much heralded quantitative easing, have now substantially slowed or ceased altogether.

THE EFFECTS OF UK TAXATION
UK taxation is at a record high, and is set to rise further with the increase in National Insurance contributions. Set against the rising tide of capital valuations, tax levels have perhaps not been as keenly felt as they might have been in a less stable economic environment. 

On one hand, the tax taken from, for example, Inheritance Tax is at an all-time high, reflecting increasing values of estates.

At the same time, levels of Stamp Duty Land Tax (SDLT) and Land and Buildings Transaction Tax (LBTT) act as a de facto wealth tax on higher value residential transactions.  

The mood around tax planning has also evolved in this context. A combination of elaborate anti-avoidance measures and well publicised failures of tax planning schemes (some of which involved celebrities) are certainly important factors. 

But it may be that rising capital valuations have meant that the general desire for tax planning beyond the prudent has been less of a priority.

THE EVOLUTION OF ESG, PHILANTHROPY AND VALUES-LED INVESTMENT
FOR many, the deployment of wealth more in tune with positive ethical values is becoming increasingly important.

Environmental, social and governance (ESG) considerations seem to have rapidly become ubiquitous when dealing with finances, as the benefits of impactful, ethical investment have struck a chord with people seeking to use their wealth to effect positive change. 

This is hugely welcome for a population grappling with unprecedented environmental challenges.

Furthermore, personal philanthropy continues to be a growing theme, demonstrated by the likes of the Microsoft founder Bill Gates and Leonard Blavatnik, the UK’s wealthiest person. 

The engagement of so many in ESG and philanthropy-focused activities must be easier when underpinned by a general rising tide in private wealth. But, will changes in prevailing economic conditions impact upon these features in private wealth?

It would seem inevitable that higher inflation and interest rates alongside stricter fiscal and tax policies will act as headwinds for private wealth. 

For the sake of current and future generations, we must all hope the positive trends we are seeing in terms of ESG and philanthropy are now so embedded alongside the more values-led thinking of younger generations that they will continue to develop successfully, and reflect well on what private capital can achieve across society outwith the direction of the state. 

We are entering a pivotal moment for private wealth, driven by shifts in the stable economic framework to which we have all become accustomed and a growing desire to use wealth to effect positive societal change. 

Planning prudently for the long-term has arguably never been as important, and we are here to help our clients and their families on every step of their journey.

For more information please contact Chris McGill, Partner in Shepherd and Wedderburn's private wealth and tax team, at christopher.mcgill@shepwedd.co.uk