Experts chart path for wealth consolidation, transfer

Nigerian grown businesses stand a better chance of cross-generational success when entrepreneurs device strategies to pass on wealth to their offspring through early preservation planning, structured investment and philanthropy.

This was the submission of wealth management experts at the Zela Wealth Forum convened by the Managing Director of Zela Ventures International Limited, also known as Zela Group, Mrs. Phyllis Okeke, in Lagos.

Okeke said the driving theme of the event was to substantially reduce the epidemic of wealth truncation and erosion prevalent among wealthy heirs and their successors.

Noting that empirical research and statistics show that about 70 per cent of inherited wealth (family and corporations) is lost by the end of the second generation and 90 per cent by the end of the third generation, she said experts have noted that lack of appropriate communication and trust; unprepared heirs and successor as well as conditions such as unprofessional advice and poor planning accounted for the unfortunate trend.

Former chairman of Ecobank and past President of Lagos Chamber of Commerce and Industry, (LCCI), Chief Dr. J.A. Odeyemi, said government needs to take active part in encouraging and sustaining wealth and generational succession by pursuing favourable policies and assuring the right environment for wealth transfer to take place.

“Few of Nigeria’s wealthy class including Dangote, Paschal Dozie and Mike Adenuga has also created wealth, invested and are successfully passing it on through their various foundations, through their children managing with them and also by going to the stock market,” he said.

The Managing Director of Meristem Wealth Limited, Sulaiman Adedokun, speaking on the topics: “Why Does it Fail? The Wealth Life Cycle, Dilemmas Of Family Wealth and Locking In the Family Wealth, said the low statistics of successful wealth transfer to the next generation is majorly due to late estate planning by progenitors, and when this is the case, “At that stage of life (old age), emotion clouds better judgment.

Represented by the Head, Wealth Management at Meristem, Mrs. Damilola Hassan, Adedokun said succession planning should be gradual, thoughtful and with lots of sharing of knowledge, such that at the end, it all seems effortless.

“The wealth life cycle involves the three critical stages of growing, preservation and transfer. At the wealth transfer stage, the recurring questions on the mind of the progenitor are: It is time to pass on the baton, but I don’t know how to let go of the business; What do I do with my time after letting go, and how do I preserve my connection with the family wealth; My children are not interested in running the family business. Do I then, hand over my years of labour and hard work to ‘strangers’?”

On her part, Ms. Ada Ijara of Private Trust, United Capital Plc, noted that with tools such as long-term investment plans; annuities; personal retirement planning; estate planning through wills/Trust, among others, the path to wealth transfer can be methodical and predictable.

She said: “The difference between a will and a trust is a knowledge worthy of note viz: While a will is a public document, a trust is a private and confidential document. A will goes through Probate process and probate fees, a trust enjoy seamless process and tax advantage. A will could get very contentious but a trust has little or no contention. A will has no opportunity for test run but one can test run a Trust during ones lifetime. So at the wealth transfer/estate planning stage of getting professionals involved, the progenitor should look out for corporate organizations with confidentiality, sound corporate governance system in place and objectivity. This will ensure prudent asset management.”

The Managing Director of Thots and Works and SME brand expert, Mrs. Oluwaseun Ayanfeoluwa, emphasised the need to discover, develop and harness innate talents to create wealth, noting that poverty is not just the absence of money but it a mindset, a perception, the way one thinks, sees and carries oneself.

“If an individual can expand, leverage, harness and cultivate that one major talent within, then this leads to a discovery. If one aligns with that inherent asset and takes the pains to self-discovery and consciously and consistently builds value into your name, talent, knowledge and skills, you become strengthened and your dominant talent rises. Note that been passionately dogged is required and essential in the pursuit of creating lasting wealthy legacy that can be successfully passed on from one generation to the next,” she added.

For the Managing Director of ARM Trustees, Mrs. Folashade Adeloye, mutual funds are a good wealth driver, as they promote collective investment schemes like real estate and treasury bills.

“The investment guarantees your principal will not be eroded though not as high yielding but quite safe and guaranteed. Private equity is another investment option; shares and stocks in your pocket of investment.

“There is need for forming a holding company structure, having a trust in place even if a will exists because unlike wills, beneficiaries do not know a trust exists if you do not want them to. It is usually the trust company that calls the beneficiaries when the progenitor passes on. This is because; publicity is one of the major disadvantages of wills unlike trusts.”

Former Managing Director of UPDC Plc and Chairman IFPL, S. Mayaki, said that real estate and property remains the most lasting generational wealth asset in Nigeria, noting that banks and other such institutions, as evidenced in recent history, may die off, but real estates almost never depreciate in value.

According to him, “For example, of the 21 banks traded in the Nigeria Stock Exchange on January 8, 1996, only three exist today. If one invested in the other 18, that investment is eroded. Recollect African Continental Bank or Allied Bank? Remember where your father’s house used to be? Property value may decline with time but hardly ever below its original value.

“There are different classes of real estate and different forms of real estate as a wealth investment vehicle; this is coming from. Agricultural real estate exists in form of farms, forestry, plantations and pastures. The Industrial plants are where wealthiest Nigerians invest.

“These are in form of stretches of warehouses, factories etc. Residential is the most common type we are familiar with in Nigeria, this includes flats, apartments, houses for rental purposes. Commercial properties are the more enduring one in the form of office blocks, shopping malls, markets, hotels.”

Noting that there is need to invest in items that are worthwhile, he said, “An individual can hold a rental property to earn annual income and save for the future and pass it on to your successors or heir via a trust system. Those in the business of creating wealth with real estate do this mainly through what is known as “flipping”. This involves buying, holding it till prices rise then selling to make a profit and the circle continues.”

“In Lagos especially the island and environs, properties have been rising 20 per cent per annum because of government’s decision to control the general ambience of the area through demolition of the blighted “maroko” of old to give way to Lekki and Oniru; dualization of roads and installation of toll bridges and gates,” he said.