Wednesday, 19 October 2011

Desire and riches are dividing families

Barclays survey finds that the wealthy second generation value materialism above all, making them look less responsible to their parents

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Guanyu 道 said...

Desire and riches are dividing families

Barclays survey finds that the wealthy second generation value materialism above all, making them look less responsible to their parents

Lulu Chen
16 September 2011

Intergenerational wealth transfer among rich families in China is creating tensions, as younger people place materialism above other values.

This was one of the findings of Barclays Wealth when it conducted 48 interviews with the sons and daughters of business families with a wealth of US$45 million or more in the Asian region. The majority of the respondents were males aged 35 or below, with university degrees.

The desire to possess goods seems to be much higher among the wealthy second generation in China, including the mainland, Hong Kong and Taiwan, than Asian regions such as Singapore, India and Indonesia.

About 91 per cent of the respondents in China said it was important for them to possess the ability to purchase what they want, while only 48 per cent of interviewees had the same view in the other Asian regions.

This desire to possess goods trumped other personal values such as moving with the times and building on family achievements.

“Part of the reason people in the greater China region have a stronger desire for goods is because they grew up in a society with growing consumerism from one with little consumerism only a few decades ago, “ said Peter Brooks, a behavioural finance analyst at Barclays Wealth.

“Throughout history, one will see similar findings throughout countries that have gone through the same development,” Brooks said.

Though this presents huge growth potential for the wider economy, the effect on the individuals comes down to whether they are overextending their financial abilities, he said.

One downside is the ostentatious image that materialism projects. Many second-generation children believe their parents think they are less responsible.

“While we cannot say whether that is really the case, lavish lifestyles of the young will increase this perception. For the family, this can cause a barrier to involving the next generation in important financial and business decisions,” said Brooks.

Among the interviewees in China, 48 per cent said they believed their parents saw them as less responsible, while only 36 per cent among the other Asian countries held the same view.

Wealthy families in China also seem to have a greater appetite for risk - 83 per cent invest in equities, 65 per cent in fixed income and 61 per cent invest in real estate and mutual funds.

Only 52 per cent of respondents in China feel the older generation is less likely to take risks than the younger generation, while 54 per cent of Asia respondents share the same view.

Of the interviewees, about half studied overseas, mainly in the US and Britain, for at least a portion of their education.

The majority of respondents currently reside in their countries of birth, and few work for salaries outside their family businesses.

About a quarter of respondents are the sole heirs, with the rest having an average of one to two siblings. However, very few of the siblings take an active role in managing the family wealth or business.