The problem they face is one that’s unique to the country’s particular brand of capitalism. Russia’s tradition of dynastic wealth ended when the Bolsheviks swept to power a century ago, and the post-Soviet economy that has been shaped under Putin favors cultivated personal relationships and a mastery of rules that are for the most part unwritten.


Power Ties


“The combination of an aging generation of entrepreneurs with the tendency to exit rather than pass on to the family is a specific characteristic of the Russian market,” said Ilya Solarev from UBS Wealth Management, which manages nearly $500 billion for high net worth individuals.

As a result, the vast majority of wealthy Russians have had to nurture ties to people with various kinds of power -- from lawmakers and tax officials to regulators and other owners -- for years and even decades. This creates a form of “intangible capital” that can’t be “automatically transferred to the next generation,” the Skolkovo center said.

“The most important thing is law enforcement,” one respondent is cited as saying in the survey. “Why earn another billion if the first one will be seized?”

Contrast that with the rest of the world, where the rich have long benefited from legal structures that safeguard the transfer of wealth between generations.

In the U.S., people have used the ever-growing sophistication of the legal system to safeguard the transfer of wealth between generations for decades. Sam Walton, for example, handed ownership of Wal-Mart to his four children in the 1950s, creating the world’s largest family fortune. His offspring use charitable annuity trusts to maintain control of the retailer through a family investment vehicle.

One-third of the 400 billionaires on the Bloomberg index inherited the fortunes they control. A quarter of the 125 billionaires from the U.S. in the ranking inherited their wealth while half of Europe’s 106 biggest fortunes were passed down at least one generation.

With little of the legal framework in place to protect their assets, at least two wealthy Russian businessmen are attempting to pass their hard-won aristocracy to an heir, including Andrey Guryev, who is currently the only billionaire among the country’s richest who has appointed a child as chief executive of his core business.


Political Consequences