Russia’s Super-Rich Lack ‘Dynastic Will’

Sept. 21 – Russian entrepreneurs have shown little desire to pass their companies onto their children, according to a survey released on Tuesday by Swiss banking giant UBS and Campden Research.

The research polled 22 businessmen domiciled in Russia who have a net worth of about US$50 million each. The total revenue of the businesses of 14 of the respondents was between US$50 million and US$100 million. In 2011, the survey sampled 19 people in a similar wealth bracket.

The report found that Russian entrepreneurs typically don’t have a “dynastic will” – a desire to pass on the business to the next generation – despite the success of their businesses.

“The continuing lack of succession planning represents an important issue for the country as well as for the families themselves,” said Gregg Robins, managing director and head of wealth management for UBS in Russia. In 2011, 90 percent of respondents said they had not implemented a succession plan. This year, the figure was 95 percent.

This sentiment was expressed by one of the respondents, who said: “I don’t plan for the future. I know I probably should do a little bit more of it, but that is our culture. Our history has taught us that there is not much point in planning ahead.”

“It is a concern that many Russian entrepreneurs aren’t looking towards the long-term prospects for their businesses and looking to pass on their businesses to the next generation. This will have consequences for the development of a healthy competitive economy in Russia,” said David Bain, head of research at Campden Media.

In addition, the research found that investment sentiment is generally weak, with almost half of entrepreneurs surveyed saying they have no plans to expand their business in Russia.

In particular, 95 percent of wealthy respondents believe that the current environment is not encouraging innovation and entrepreneurship, up from 42 percent in 2011 and 36 percent in 2009.

According to research findings, respondents have not lost any of their traditional preferences: Switzerland was the favored offshore wealth management location for 89 percent of those surveyed. Over 90 percent said that if their children are educated abroad, they’d choose schools in Britain.

The survey respondents prefer foreign banks, with just 13 percent of entrepreneurs sourcing funds from local banks, compared to 47 percent who have tapped into foreign bank credit during the course of the last 12 months.

Meanwhile, philanthropic traditions are becoming more entrenched among Russia’s super-rich. One in three identified themselves as patrons of the arts, compared with one in 10 in 2009.

Most of Russia’s super-rich think that corruption is currently more of an acute problem than it was in recent years. While just 4 percent of those contacted in 2009 identified graft and bribery as a key challenge for their businesses, this year that figure has risen to 55 percent and become the most pressing problem, ahead of cash flow, slowing demand, and access to credit.

Forbes estimates that Russia’s 200 wealthiest businessmen have a net worth of US$499 billion. Moscow has more resident billionaires than either London or New York.

In contrast, 13.5 percent of the country’s population, 19.1 million people, is surviving on less than 6,307 rubles (US$204) per month, according to the latest available data from the State Statistics Service.