‘Success and Succession’ study highlights sometimes drastic pandemic-driven changes by HNW and UHNW business owners

While nearly all high- and ultra-high-net-worth business owners (97%) agree that the COVID-19 pandemic impacted or disrupted their businesses, a large majority (66%) reported that the pandemic also accelerated plans to retire or sell their business, according to a recent study by wealth manager and multifamily office Clarfeld | Citizens Private Wealth.

In its Success and Succession study, which explored the impacts of COVID-19 on business decision making among high- and ultra-high net worth business owners, Clarfeld found that respondents had to make tough choices. Roughly one-in-five applied for PPP loans (21%), closed branches or satellite offices (21%) and/or laid off employees (19%). Additionally, a surprising half of HNW business owners plan to sell their businesses as a result of the pandemic.

Passing the Baton

Seventy percent of respondents planned leadership changes due to the pandemic-driven challenges. In fact, 34% of respondents decided to retire early and 35% sped up their succession plans, according to the study. A clear majority, 88%, plan to leave their businesses to a family member, including spouses, children and grandchildren.

Nine in 10 business owners (89%) are confident that the next generation will be a successful steward of their business, and interest in taking over the family business is increasing among the successors. Clarfeld found that one in five children or grandchildren (21%) who were previously uninterested in succeeding their predecessors are now interested in taking over the family business post-pandemic.

“Succession planning is a hugely crucial consideration for business owners looking to provide seamless continuity – especially in a volatile period,” said Joannie Bozek, Director of Trust Services and Chief Fiduciary Officer at Clarfeld. “With the counsel of a trusted advisor, bringing family members and potential successors to the table for these conversations ensures accountability, interest and ultimately, a smooth transition when the time comes.”

The Great Migration

In addition to the succession planning considerations, Clarfeld found that since March 2020, two thirds of wealthy business owners (65%) have moved their businesses. The top impetuses include moving to lower-tax states (34%), moving to be closer to family (31%), and moving because the remote environment offers flexibility in location (27%).

Further, three quarters of business owners surveyed see themselves physically moving their business in the next 3-5 years. This is underscored by the fact that 80% of business owners operated their businesses either fully remote or hybrid in-person and virtually throughout the pandemic.

“It’s no surprise to see that like many Americans, business owners have chosen to relocate as a result of the pandemic, but no decision should be made hastily,” added Donna Cuiffo, Clarfeld’s Director of Family Office Services. “There are very specific considerations, from SALT implications to payroll updates and changing domicile that must be ironed out before any move.”

Value of an Advisor

Business changes aren’t made lightly, as respondents indicated they typically consider input from business partners (23%), wealth managers (19%) and accountants (13%) before making financial decisions related to the business. Advisors are also offering insight and expertise during these trying times as a majority of respondents (59%) were proactively approached by their financial advisors around succession planning changes in light of the pandemic.

Moving forward, non-pandemic worries are keeping business owners up at night. Almost half (49%) of HNW business owners anticipate federal tax changes will have a significant impact on their businesses.

“We’re encouraged to see business owners having productive conversations with their wealth and tax advisors in the current environment, as tax policies are evolving quickly and the M&A market remains hot,” added Jose Reynoso, Director of Advanced Tax & Estate Planning / Trust Services at Clarfeld. “Sophisticated advisors can help clients both satisfy current needs and see around corners to leverage tax laws to their advantage.”

Clarfeld advises ultra-high-net-worth individuals, families and foundations, including many business owners, to support their complex needs.

About Clarfeld | Citizens Private Wealth

Clarfeld | Citizens Private Wealth is a leading wealth management firm and multifamily office based in Tarrytown, New York. The firm provides private bank and wealth management services to ultra-high-net-worth individuals, families and foundations in support of their exceptionally individualized, complex needs. The business is the result of Clarfeld Financial Advisors, LLC, joining forces with Citizens Bank in 2019 to deliver banking, lending and trust services in addition to a broad array of high-end financial solutions.

About Citizens Financial Group, Inc.

Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $185.1 billion in assets as of June 30, 2021. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a 24/7 customer contact center and the convenience of approximately 3,000 ATMs and approximately 1,000 branches in 11 states in the New England, Mid-Atlantic and Midwest regions. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on Twitter, LinkedIn or Facebook.

Survey Methodology: On behalf of Clarfeld | Citizens Private Wealth, Ipsos conducted an online survey between July 7, 2021 – July 12, 2021, with a sample of adult (18+) business owners (employees 2-500), with net worth from $2M - $10M+, and investable assets of $5M+.

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