Estate planning and business succession

Keeping founding vision and values intact through estate planning

Single-family offices are an invention of the English-speaking world but are proving increasingly popular in Italy, accounting for around half of all family offices operating in the country. In particular, the great business dynasties are leveraging them to fulfil a key mission involving more than simply managing wealth: safeguarding the corporate identity and its values through effective estate planning, plus the governance framework embodying the strategy of the founder or first generation of founders.

“Each entity has a bespoke design, tailored to each family’s story, values and aspirations,” according to Alessandra Losito, Country Head, and Paolo Ramondetti, Deputy Country Head of Pictet Wealth Management in Italy. “Single-family offices are much more than entities for managing people’s wealth. They are primarily the channel through which the family ethos and its culture are passed down.”

The role of single-family offices in estate planning in Italy

How do single-family offices operate these days? “Their formation is often connected with a liquidity event, in more or less 56% of cases, and they are located predominantly in Northern Italy, with Lombardy home to roughly half of them, 48% to be precise. This is a relatively recent but also a growing segment, with each office on average employing nine specialists, then bringing in outside advisors whenever needed.” According to Losito and Ramondetti, there are two growth drivers: “First, the need for more sophisticated wealth management; second, the demand for platforms capable of passing on values and assets to the next generation to ensure a successful business succession.”

Challenges relating to business succession and next generations

The biggest challenge, in this setting, “is still the point of generational transfer and business succession: today, only 21% of inherited wealth has made it to the third generation, showing that there is still much to be done”.

From protecting wealth to actively managing assets: a new approach to family-owned businesses

To meet the challenge, specialists serving these high-net-worth families are putting a range of strategies in place. One such strategy is “shifting from basic capital preservation to the active management of a family’s resources, namely its assets, people and its ethos”. Single-family offices are become a testing ground for new ways of managing wealth in Italy, combining corporate heritage with business innovation, safety with ambition, past with future”.

Training the next generation to successfully take the reins

Another development is the active involvement from younger generations. “Heirs are being trained increasingly early in life about how to manage wealth and handle the responsibilities that come with it – through family academies, mentorships, specific study curricula, and hands-on work experience in family firms and foundations.” As a result, family offices “are becoming centres of business and cultural education in which ‘relational real estate’ – the networks of business leaders, advisors, institutions and other family offices of a similar style – is a fully fledged strategic asset providing for opportunities, cross-fertilisation and continuity to ensure successful estate planning.”