It’s never too early to plan your succession.

By David Penney

At the end of August this year Warren Buffett will be celebrating his 91st birthday.

A famously frugal man, Buffett is unlikely to make too much of a fuss of the occasion and despite his advancing years, he still has much to occupy him as CEO of the company he started more than half a century ago.

Buffett is a living legend and rightly considered one of the great investor minds of our times and through his leadership, Berkshire Hathaway Inc has grown into a $631bn conglomerate with major holdings in some of the world’s biggest companies including Apple, Coca-Cola and American Express.

However, as he moves further into his 10th decade (and his business partner and vice-chairman Charlie Munger moves closer to his 11th), the question about succession and who will take over the reins when he decides to step aside has become ever more pertinent.

It is a topic that has generated much recent conversation and speculation and this week it was confirmed that current vice president Greg Abel – a veritable spring chicken at the age of 56 - would become the next CEO.

Of course, Berkshire Hathaway is not your average company and the succession conversation is made all the more difficult due to the standing of Buffett, particularly with Berkshire Hathaway shareholders.

However, the fundamental necessity of having a good succession plan, whether for a business or a family that is looking to smoothly transfer its wealth to the next generation, cannot be underestimated.

History is littered with examples of financial empires that have crumbled in the face of change – when wealth is transferred without the requisite wisdom to match. 

The success of most corporations – Berkshire Hathaway included – derives from the successful transfer of knowledge and understanding so they can successfully protect and grow the company’s assets, a scenario that makes perfect sense in business, but surprisingly few people think like this when it comes to their personal lives.

More often than not, a wealth transfer will be in the form of a Will – a division of assets that is often little more than a divide and dump with no attempt to focus on the desires and beliefs that will help protect and grow assets in the future. 

From our experience dealing with many different families over the years, leaving the future to chance is a strategy that very rarely works. 

Families are complicated organisations – often more so than your average business – with second timers, step-families and multiple generations all scenarios that need to be considered. 

Unfortunately, it is often a crisis that initiates the first conversations about succession and while people like ourselves may be appointed to support the process, we don’t often meet them until the point of need and that can be too late to provide the best service. 

There has undoubtedly been a shift in attitude over the past decade, but the reality is that as a general rule, people are still not thinking about succession early enough to ensure that future generations reap the full financial and emotional benefits – indeed, half the population still does not even have an up to date Will.

There is roughly £11 trillion of wealth currently held in the UK and over the coming decades there will be the biggest transfer of wealth to the next generation in the history of mankind and yet too many people who intend to transfer their wealth don’t know when or how to do it. 

Succession planning is never easy, whether considering a business or a family. Those responsible for building the wealth may be reluctant to entrust the fruits of their many years of toil with others or be fearful of the impact of change, something Buffett intimated when he this week when he said “there are no perpetuities” even for a company as revered as Berkshire Hathaway.

Whether a family or a business, there is never a bad time to start to talk about succession. Ultimately it is both natural and a necessity and done in a structured and timely manner, it can have huge long-term benefits.

And of course, we would certainly recommend making succession a priority long before reaching your 91st birthday but then the great Sage of Omaha doesn’t appear to be going anywhere soon. 

The Partner Practice is an Appointed Representative of and represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group's wealth management products and services, more details of which are set out on the group's website www.sjp.co.uk/products The 'St. James's Place Partnership' and the title 'Partner' are marketing terms used to describe St. James's Place representatives.

Penney Financial Partners is a trading name of Penney Financial Partners Ltd. Penney Financial Partners Limited is registered in England and Wales, Number 09964340. Registered Office: Kensington House, Knights Way, Battlefield, Shrewsbury, Shropshire, SY1 3AB, UK