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Technological innovations have minted billionaires in the last decade, but at the same time, multigenerational family businesses could become obsolete overnight. In Asia, how should multigenerational family businesses ensure longevity? A J.P. Morgan whitepaper based on surveying ultra-high-net-worth clients provides clues.

Just over half (55 percent) of the next generation of ultra-high net worth families feel ready to confront technological disruption in the family business. Amongst the next generation who feel they were prepared, more than half (56 percent) say they lack experience, according to a white paper published by J.P. Morgan titled: «Embracing Data, Digital, and Disruptions».

«Our clients acknowledge that technology is having a significant impact on their businesses. The way they manage their wealth has been similarly disrupted; However, only one in four family offices have integrated technological disruption into their strategic plans and are equipped to adapt,» said Karen Tan, Head of Wealth Advisory, South East Asia at J.P. Morgan at a media briefing on Thursday.

The private bank, in collaboration with RFi Group, surveyed 133 clients and interviewed 13 across North and Southeast Asia to explore the topic and ensure that the business and its advisors are well prepared to provide the advice clients need to face the future. The white paper was presented in conjunction with the launch of J.P. Morgan Trust Company (Singapore) on Thursday.

Understood But Under-Planned

A majority (80 percent) agree that the family business will experience tech disruptions in the next ten years, and a significant 92 percent in the 41 - 60 years age category agreed. Data analytics, artificial intelligence (AI) and online transactions were ranked as the top disruptors to family businesses. 

The lack of preparedness amongst the next generation has to do with three top factors: lack of relevant experience, uncertainties about the future, and the constantly changing nature of technology. As a fair number are under 30 years of age, they are perhaps also not as closely involved in the business. 

Decisions At The Top

Only half the next generation business leaders felt that they were ready for technological disruption, a data point that corroborates with their perception that decision making remained very much at the helm of the family, or in few hands. Given that the vast majority of family businesses represented in this study are owner-operators (68 percent), it is not surprising to find that 36 percent of the respondents say the head of the family ultimately calls the shots, Tan notes.

For 50 percent of businesses with an annual turnover of $1 billion or more, and similarly, for those with an annual turnover of under $50 million, decisions are made by the head of the family. «That billionaires are taking it upon themselves, and do not give non-family executives decision-making powers to address external technological shifts is noteworthy,» the whitepaper wrote.