Facing the challenges of succession and wealth management

18th September 2012
Media release

Russian entrepreneurs don’t want to pass on businesses

Russian entrepreneurs show little desire to pass their companies onto their children, as concern about the business environment in the country means most are focused on short-term goals, rather than long-term ones.

This was the main finding of the third Campden/UBS Russia’s Wealth Creators research, which spoke to a wide-variety of entrepreneurs across the world’s largest country.

The report found that Russian entrepreneurs typically don’t have a “dynastic will” – that is, a desire to pass on the business to the next generation, despite the success of their businesses. This sentiment was expressed by one of the respondents, who said: “I don’t plan for the future. I know I probably should do a little bit more of it, but that is our culture. Our history has taught us that there is not much point in planning ahead.”

“It is a concern that many Russian entrepreneurs aren’t looking towards the long-term prospects for their businesses and looking to pass on their businesses to the next generation. This will have consequences for the development of a healthy competitive economy in Russia,” said David Bain, head of research at Campden Media.

Gregg Robins, Managing Director, Head of Wealth Management for UBS in Russia added: "The continuing lack of succession planning represents an important issue for the country as well as for the families themselves. At UBS we spend a lot of time counselling entrepreneurs around the world, and while their approaches can vary greatly, they widely view succession planning as a critical component of their wealth management plans.  UBS is happy to support research on the challenges facing wealthy families in Russia, research that becomes more credible and meaningful as successive studies are completed”.

Among the other main findings of the report were:

•    Investment sentiment is generally weak, with almost half of the entrepreneurs surveyed saying they have no plans to expand their business in Russia. Also, few were planning expansion outside of Russia, with only 15% of respondents looking to invest in other emerging market regions like Asia and the Middle East.

•    Russian entrepreneurs are embracing private equity as a funding option, with just under half of the respondents saying future growth will be funded by private equity.

•    Russian entrepreneurs prefer foreign banks, with just 13% of entrepreneurs sourcing funds from local banks compared to 47% who have tapped into foreign bank credit during the course of the last 12 months.

•    Banks were used much more as a source of expertise when it came to wealth management and wealth structuring, with 94% of respondents using banks for wealth structuring, rather than lawyers or accountants.

•    Switzerland and the UK were the most preferred locations when it came to offshore jurisdictions for Russian entrepreneurs.

Notes for editors

Campden surveyed 22 entrepreneurs in early 2012, with face-to-face interviews. These entrepreneurs are domiciled in Russia, or have a core operating business that is domiciled in Russia. The majority of them have a personal net worth in excess of US$50 million, and also own a business or businesses with annual revenues ranging between US$50 million and US$1 billion. More than 70% of respondents said that they lived in the country’s capital, Moscow, which generates 80% of the Russia’s wealth.

For more information about the report, please contact:

David Bain
Head of Research
Campden Wealth
+44 (0)20 7214 0585
davidbain@campden.com

About Campden Wealth

Campden Wealth is the leading independent provider of information, news and education for generational family business owners and family offices globally in person, in print, via research and online.

Campden Research is a business specially formed to further extend this information offering. Campden Research supplies market insight on key sector issues for its client community and their advisors and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique and proprietary data and analysis based on primary sources.

About UBS

UBS draws on its 150-year heritage to serve private, institutional and corporate clients worldwide, as well as retail clients in Switzerland. Its business strategy is centred on its pre-eminent global wealth management businesses and its universal bank in Switzerland. Together with a client-focused Investment Bank and a strong, well-diversified Global Asset Management business, UBS will expand its premier wealth management franchise and drive further growth across the Group.

Headquartered in Zurich and Basel, Switzerland, UBS has offices in more than 50 countries, including all major financial centres, and employs approximately 64,000 people. UBS AG is the parent company of the UBS Group. Under Swiss company law, UBS AG is organized as an Aktiengesellschaft, a corporation that has issued shares of common stock to investors. The operational structure of the Group comprises the Corporate Center and five business divisions: Wealth Management, Wealth Management Americas, the Investment Bank, Global Asset Management and Retail & Corporate.