Entrepreneurs fear heirs reject family business legacy

Succession planning remains one of the most sensitive challenges for family businesses.

Succession planning is emerging as a pressing challenge for family business owners in Singapore, as generational gaps in aspirations and location raise concerns about long-term continuity, according to HSBC Global Private Banking.

A recent report from the bank found that while 83% of Singaporean entrepreneurs feel supported by their families, over half—52%—are unsure whether their children will take over the business.

“If you look at a lot of businesses, not just in Singapore, but across the region, they are the more traditional businesses… sometimes not the most exciting new economy businesses, and that's why the families are concerned whether the next generation will actually want to take over,” said Tommy Leung, Head of Global Private Banking, HSBC South Asia.

The gap, experts say, is being driven by structural and cultural shifts. Many second-generation heirs have grown up in more affluent environments, studied abroad, or developed interests outside the sectors their families built wealth in.

“Building a business and growing a business, or managing a family business, can be very, very stressful. It can be all consuming,” Leung added. “So the stress can be huge, especially for the second generation... they have slightly different aspirations compared to their parents.”

Sharnika Silva, Head of Trust and Fiduciary Services, SEA, HSBC, noted that the issue is not just one of interest but also logistics and mindset. “The second gen have more options than the first gen, so they tend to pursue what's in their heart or what their passion is,” she said. “And second and third gen are not ideally located in the same location as the families that generated the wealth, sometimes they are located in high tax jurisdictions and they have other commitments.”

To bridge this divide, families are experimenting with new ways to involve younger generations—without forcing a full takeover.

“Quite often, the first generation will still stay involved running the core business, but at the same time, try to involve the younger generation… to explore new distribution channels,” Leung said. “So for example, if it is in a retail business, go from the more traditional bricks and mortar to online distributions, or expand the customer base beyond a country like Singapore.”

Silva pointed to long-term planning and governance tools as critical. “Trust structuring is one area where we bring the family trust assets, and then we will work on the values and the family legacy through different means, such as family governance, charitable philanthropic endeavors… So there are many ways to go about it, and we have seen successive stories over the years.”