NETHERLANDS: An Introduction to Wealth Managers
Navigating Generational Wealth Transfer and Philanthropy in the Netherlands
The Netherlands, known for its thriving economy and progressive financial landscape, is witnessing a transformative shift in the dynamics of its high net worth individuals (HNWIs). As the torch passes to the next generation, an array of challenges and opportunities emerges, shaping the future of wealth management and philanthropy in the country. In this article, we provide an overview of some current issues affecting HNWIs in the Netherlands.
According to the latest available data, the Netherlands is home to a substantial population of HNWIs. As of 2023, based on our own data, we estimate there were approximately 10,000 individuals with a net worth exceeding EUR10 million.
The next generation
The transfer of family wealth to the next generation is currently an important topic in the Netherlands. Many entrepreneurs who have accumulated wealth by starting a successful business are now in their 70s. The new generation is ready to take over. Successful wealth transfer involves thoughtful planning, open discussions and consideration of practical, human and financial aspects. It requires allowing the next generation to find their own path while maintaining a sense of collectivity and shared values within the family.
A family fortune is passed on through generations, with each generation giving it a distinct purpose within their era. Parents face the challenge of effectively transferring the responsibility of the family wealth to the next generation. We would like to emphasize the importance of open discussions and careful planning. Successful wealth transfer involves more than just financial and legal considerations. It requires recontextualising family relationships and shifting roles and responsibilities. Parents need to allow their children to approach wealth transfer in their own way, while ensuring an open-minded perspective on succession. We consider guiding the next generation to be one of the most important services we offer our clients. We would like to stress the need for a comprehensive approach that goes beyond tax advice. Practical and human aspects must be taken into account to ensure a successful transfer. Involving children in the process, granting them responsibility while retaining some control, and establishing open lines of communication are recommended.
Both the older and younger generations are interested in the opportunities offered by private markets, mainly because of their entrepreneurial nature. For that reason, we have expanded our services in this area.
A demanding generation
As the reins of wealth transition to the younger cohort, a generation characterised by millennials and beyond, their expectations and preferences redefine the landscape of wealth management. These digital natives are more tech-savvy, socially conscious and driven by sustainability goals. What we see among the families we serve was underwritten by EY’s latest wealth management report. Millennials are a demanding generation, particularly when it comes to digital capabilities in wealth management. This trend is expected to become even more significant as wealth transfers increase in the coming years. Advisors must keep up with these changes.
Moreover, in our conversations with families – for example, during a family council – we also see that the new generation is placing much more emphasis on sustainability, ethics and impact when selecting advisors. They seek sustainable investment options and value diversity within advisory teams.
Advisors, such as lawyers, wealth management firms and family offices must address a wide range of aspects in their value proposition, including product diversity, sustainability focus, digital capabilities and independent advice. By understanding and meeting the evolving expectations of this new generation, advisors can effectively cater to their clients’ needs and ensure long-term success.
Philanthropy obstructed
Philanthropy plays a vital role in the Netherlands, with the country boasting a rich tradition of giving back to society. The ANBI (Algemeen Nut Beogende Instelling) status, which grants tax benefits to charitable organisations, has been instrumental in fostering philanthropic initiatives. However, as regulatory measures tighten, navigating the philanthropic landscape and maintaining tax efficiency pose emerging challenges for HNWIs and philanthropic organisations alike.
Due to interventions in the gift and inheritance tax, common ways to transfer assets to children or to charities in a tax-friendly manner are under pressure. From the various measures, we would like to mention one. The limit for non-cash donations will be set at EUR10,000 per calendar year; for tax partners, the limit will be EUR20,000 for joint gifts. While this may seem small, it will have major implications for donating art to museums, greatly limiting such contributions. Many affluent families possess their own art collections, and in previous decades, it was common to see these collections eventually donated to museums to keep them together. However, this practice will be severely restricted by the new regulation.
Conclusion
As the torch passes to the next generation, Dutch HNWIs face a transformative era. Successful wealth transfer requires careful planning, open discussions and consideration of practical, human, and financial aspects. The younger cohort brings forth demanding expectations, emphasising digital capabilities, sustainability and ethics in wealth management. Moreover, the rich tradition of philanthropy in the Netherlands faces challenges as regulatory measures tighten, making tax-efficient giving more complex. Advisors must adapt to meet the evolving needs of the next generation and navigate philanthropic obstacles effectively.