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Wealth management A boot camp for billionaires anxious to stay ahead

Can good planning prevent poor wealth management?


It is an overcast morning, and about 20 casually dressed men and women are standing on a terrace enjoying a break from their seminars. Lake Constance glimmers before them, surrounded by pristine Swiss countryside.

The panorama is breathtaking but the delegates are probably used to better. They are mainly billionaires, congregating at this UBS “boot camp” in Wolfsberg and hoping to gain insights into a topic that unites their ten nationalities – how to pass their wealth to the next generation without family feuds and foolish business decisions.

Here they are stripped of some of the trappings of the super-rich. No staff are allowed. Everyone stays in the same style of hotel room to “create a community”, so there are no suites, just regular rooms with large beds, two comfortable chairs, sleek en-suite bathrooms and local art on the wall.

The wealth management arm of UBS casts itself in the role of adviser and educator for the three-day camp, which the Swiss bank uses to deepen client relationships and entice new ones to its private bank, the group’s most important division. Outside speakers are also used.

Such families will already be surrounded by “myriad experts and professors and lawyers and all that”, says Joe Stadler, UBS’s head of ultra-high net worth business.

The Swiss financial services group is trying to drum up business by offering something that is less easy to procure than on-call expertise, though: the opportunity to rub shoulders with the other guests staying in Wolfsberg’s merely-luxurious digs.

“Like-minded families from across time zones ... that’s what they really value,” says Mr Stadler.

At this particular camp, attendees include a European family into their fourth generation of succession, trying to work out how to keep the family business together.

The father tells the group he favours having a specialist run the business but his wife, sitting next to him, wants to keep things in the family.

Across the room, an Asian father ponders what do to about a son who has no interest in leading his family business. An Egyptian dad frets about how he can keep his four daughters involved in the business when, traditionally in Egypt, married women are closer to their husbands’ families.

“I am greatly relieved to see different families with almost similar experiences,” says one attendee, who prefers to remain anonymous, adding that the camp had given him ideas he could present to his wider family.

Botched successions

Beatrice Rodenstock’s father, who was the firstborn son of his generation, inherited a controlling stake in the family eyewear business from his father in 1976 in what was supposed to be a textbook early succession.

But there was a catch. “My grandfather was a very strong personality,” Ms Rodenstock recalls. “He couldn’t really hand over the responsibility.”

For 14 years, the company had a double leadership. “It was almost the ruin of the company and the family, because no real decisions were taken,” she says, adding that the situation was made worse because the German market fundamentally changed over that period after the government stopped paying for glasses frames.

The two men ended up having a “big fight” and the younger Mr Rodenstock said he would step down unless the older one handed over the reins properly.

He did and Rodenstock made major changes, including moving production to Thailand, but too much damage had already been done and the company was eventually sold.

Ms Rodenstock, who now advises family businesses, believes things could have panned out very differently if her family had undertaken clear succession planning, and she counsels families to develop a written plan.

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Course offerings

UBS, the world’s largest wealth manager by invested assets, is not alone in providing such a service to clients. Other private banks also run educational sessions to woo their richest customers, especially on the subject of younger family members taking up duties in the family empire.

UBS, which has identified “ultras” as the highest potential growth group in its private bank, spends a “low single-digit million euro” amount running camps like this annually.

James Chappell, a Berenberg analyst, says the pay-off is hard to quantify: “Like a lot of what you do around ultra-high net worths, it’s sometimes hard to measure the value of the process, but I don’t see how it’s going to do anything but help.”

The willingness of the super-rich to attend such courses can be viewed as another manifestation of the forces driving the sales of Thomas Piketty’s book, Capital in the Twenty-First Century.

As the squeezed middle classes turn to the best-seller to understand how and why they lost ground to the wealthy, billionaires seek bespoke advice on how to maintain their increased advantage.

Mr Stadler says the rich are indeed particularly concerned about preserving their fortunes now because the wealth held by the top 0.1 per cent has been rising for decades, so they fear an “inflection point” is coming.

Some of the other issues addressed – such as sibling rivalry – are more timeless. Others are cultural. “In the Asian culture, they send the children to places like Harvard, they come back and parents realise very soon that they are not only better educated they are also infected with quite a different culture,” says Peter May, honorary professor at WHU- Otto Beisheim School of Management, who hosts some of the seminars.

In many emerging markets, the tradition of the oldest male son inheriting is still prevalent. “There are cases where the son has been groomed ... and then the father finds out, after six or seven years, the guy is not [the best choice],” says Mr Stadler. “I’ve sat in some of these discussions with families.”

Laura Pancera, UBS’s head of ultra-high net worth development, says cross-cultural exchanges – between, say, Europeans who already have a family office to manage their affairs and Asians considering setting one up – are particularly useful on the course.

First-hand knowledge

When they are not wandering the low-rise complex chatting, the participants are ploughing through a curriculum that ranges from family corporate governance to “ruin probability” – the statistical likelihood of running out of cash.

One issue UBS does not want to discuss publicly is tax, an increasingly sensitive topic after Swiss banks were forced to pay penalties for helping clients evade tax in the US. UBS paid $780 million (CHF725 million) in a 2009 settlement and avoided criminal prosecution.

At Wolfsberg, delegates also get first-hand accounts of botched successions, including from Beatrice Rodenstock, of the German spectacle maker Rodenstock (see box). Experts agree, though, that there is not just one path to success.  

Mr Stadler cites two extremes to make the point: the Haniel investment company in Germany, which traces its roots back to 1756 and whose more than 680 family shareholders are not allowed to run anything in the business; and the family behind the French luxury goods maker Hermès, which is much more hands-on in its approach. “Both are successful,” Mr Stadler says.

Lasting three days, UBS’s “family transition programme” does not claim to be able to convert ill-suited or reluctant successors into CEOs of the future. Nor does it offer the kind of entertainment some attendees might be used to.

“I’m not supporting bringing the young guys to a disco,” says Ms Pancera. “In the past we did a lot of that and what happened was they didn’t come in any more in the morning.”

Copyright The Financial Times Limited 2015

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