Russia’s serial entrepreneurs are still very actively involved in their business, with an emphasis placed on creating wealth through their operating businesses rather than via wealth management strategies. Few have given serious thought to the issue of succession with 90% having no succession plans in place for their business. While 68% have established estate plans, only 16% have developed long-term personal wealth plans.
The 19 respondents all have core operating businesses domiciled in Russia with annual turnovers between $50 million to $1 billion and personal net worth in excess of $50 million. The respondents had operational businesses across a diversified number of sectors, including manufacturing, technology, financial services, real estate, pharmaceuticals, mining and telecommunications and the goal was to capture a sense of their perspectives about their companies, their families and building their business and wealth.
UBS is delighted to support independent research to understand better the issues facing wealthy families in Russia. Such research becomes even more valuable when carried out over time in a structured and consistent manner as it allows us to identify trends and ongoing needs.
Many of the research findings echo the concerns and requests that we hear from our clients, especially the need for long-term planning, including succession planning, an area highlighted in last year's findings and still in need of greater focus and attention.
I am particularly pleased to learn of the growing interest in philanthropy, an area in which UBS has deep expertise and hopes to contribute over time to our Russian clients to support their efforts in helping their country. In light of this research, I am pleased at the strategic direction we are taking in Russia with our wealth management business, and the solutions we are developing to meet the needs of clients in an ever-evolving environment,” – said Gregg Robins, Managing Director, Head of Wealth Management in Russia, UBS.
Given Russia’s volatile history and its unpredictable economy, Russian entrepreneurs are not used to planning further than two years ahead, and this has strong influence on how they manage both their business assets and personal wealth, areas they keep strongly segregated.
Predominantly the businesses are not currently perceived as “family” businesses with only 16% of the companies having shares held by family members other than the entrepreneur and 58% do not expect immediate family members to be actively involved at any time in the future.
There is a sizeable group of entrepreneurs who have become less optimistic about new business opportunities in Russia, and are looking to expand abroad or consolidate their businesses within Russia. In 2009, the vast majority of respondents (84%) said that there were new opportunities arising out of economic turmoil. In 2011, this figure has fallen to 63%. Similarly, 68% of respondents saw only limited merger and acquisition opportunities in current market conditions, compared to 48% in 2009.
Russian wealth creators undoubtedly have ambitions to diversify and expand globally, with the government’s support for indigenous companies seeking to acquire assets abroad. Although there are still attractive opportunities domestically, over half the respondents 56% intend to expand their business operations in Europe. Interestingly though, few intend to develop business in North America, China or Africa.
63% of the respondents use both local and international banks for their business needs, and 79% have found a noticeable difference between the competence and professionalism of international versus local banks. Since the financial crisis, their view of international banks has become much more positive. The numbers of entrepreneurs working only with international banks has increased significantly – from 12% in 2009 to 37% in 2011.
One of the key dynamics underlying the survey is that the children of the original Russian wealth creators are growing up, and are starting to take more control of their own destiny. They have a more international outlook, fostered by their education, travel and work experience outside Russia. 60% have been educated both in Russia and abroad, principally in London.
Finally the respondents are also showing greater interest in concepts like family offices. In 2009, only 28% of respondents said they were “very familiar” with the family office concept. This has now risen to 44%.
“The second edition of Russia’s Wealth Creators report showcases the gradual evolution of the Russian entrepreneurial experience. It highlights a growing confidence in international financial institutions, not reflected in the first study in 2009. There is also a growing awareness and interest in family office structures as a viable means of managing and preserving private wealth in the uncertain local environment,” - said Dominic Samuelson, Managing Director, Campden Wealth
Contacts for media:
Dominic Samuelson, Managing Director, Campden Wealth
T: +44 (0) 20 7214 0576
Oliver Gadney, Media Relations, UBS
T: +44 20 7568 9982
Anna Shatilova, PRP Group
T: +7 (495) 937 31 70
About the report
The goal of the study is to capture a sense of significant Russian entrepreneurs’ perspectives on critical issues they, their companies and their families face in managing and building their business and wealth. This study provides insights into the issues that keep these entrepreneurs awake at night.
It explores three key dynamics of the Russian entrepreneurial experience: business development, family participation and wealth management. Business development covers the growth and professionalism of the company. Family participation looks at family involvement in the business, the transfer of ownership, control and wealth, the next generation and philanthropy. Wealth management looks at investment strategies and plans, onshore versus offshore portfolios, preferred asset classes, the role of wealth management service providers and family offices.
Headquartered in Zurich and Basel, Switzerland, UBS is a client-focused financial services firm that offers a combination of wealth management, asset management and investment banking services on a global and regional basis. By delivering a full range of advice, products and services to its private, corporate and institutional clients, UBS aims to generate sustainable earnings, create value for its shareholders, and become the choice of clients worldwide.
About Campden Media:
Campden Media Ltd, founded in 1987, is a mixed-media publishing and events company serving the private wealth management community. 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.
Campden Conferences is the global leader in providing knowledge and private forums for significant business and financial families and their private offices. For over a decade, Campden has been bringing together families from throughout Europe, the United States, Asia and the Middle East for exclusive closed-door meetings covering family business, family office and wealth management issues.
Campden also publishes the leading international business titles Campden FB and Campden FO. With unrivalled access to CEOs of the world’s leading family businesses and comment from the most respected experts in the field, Campden FB is aimed at members of family-owned companies in at least their second generation and with annual revenues that exceed €100 million. Campden FO is the international magazine for family offices and private wealth advisors. For more information visit: www.campdenwealth.com