Getting succession right: How family offices are preparing for the next generation
Key details
- Family offices are adapting to generational wealth transfer by updating governance, investment strategies, and succession plans to reflect the priorities of younger investors.
- Gen Z and millennial investors increasingly prefer technology-enabled, values-aligned investing, driving demand for hybrid advice that combines digital tools with human expertise.
- Early succession planning, transparent communication, and next-generation education help family offices preserve wealth, manage family dynamics, and ensure smoother leadership transitions.
Family offices are adapting to a changing of the guard, as younger generations inherit wealth and begin to decide what they will do with it.
Family offices have traditionally had a clearly defined purpose: to preserve capital and manage investments.
Today this is becoming more complex, in part because of the intergenerational wealth transfer that will continue for years to come.
Younger generations may have different attitudes to a range of issues. They are often faster adopters of new technology, such as artificial intelligence (AI). They can be more internationally minded, and they may have different ideas of what purpose and legacy mean.
A recent report from the CFA Institute Research & Policy Center on how Gen Z and millennial investors are reshaping financial advice pointed to a preference for hybrid advice that combines technology and human insight. Gen Z and millennial clients are also driving a rise in demand for values-aligned investments, according to the report.
As a result, family offices have to adapt to the needs of the next generation of investors. How are they doing that, and what do they need to consider?
One family, multiple clients
Generational wealth transfer affects all aspects of the family office model. It is also a global phenomenon, driving the professionalization of family offices in Southeast Asia, for example, as well as in the Middle East and Latin America.
The range of considerations stretches from organization to governance, investment mandates, and the delicate balance between risk, wealth preservation and values. The generational differences in all these aspects can be substantial.
“Many single-family offices mention that they service clients across multiple generations,” said Francois Botha, founder and CEO of Simple, a global platform for family office insight. “I would argue that that is actually a multi-family office and not a single-family office, because you need to look at different clients as individuals.”
Botha was speaking at a recent CFA Institute webinar on the implications of generational change for family offices. The next generation may have a different attitude to investing, and family offices must have processes in place to manage this transition.
“I’ve seen different viewpoints from younger generations and how they perceive long-term investments,” said Nick Fafoglia, CFA, SVP Manager, Portfolio Management, at Commerce Trust, who was speaking at the same event. “There is definitely a different mindset there – not necessarily a wrong one, but perhaps the investment policy statement needs to be amended.”
That may mean accommodating different views on investing and on philanthropy, added Fafoglia. “These are all family office-type issues that hopefully can be mediated by the family office and its leadership.”
Family office succession planning
Every generation also has its own set of values, which may influence the choice of investments. Some values will be shared throughout a family, but others will be specific to each generation and some will be personal to each individual.
“If you look at a shift in values and then new ways of investing, we can expect that there are going to be shifts in what a family office is doing,” said Botha.
Sibling rivalry is a common issue, and older generations are also often concerned about the so-called third-generation curse, which can lead to a reluctance to engage with a younger generation.
It’s why family offices often recommend that their clients act early to define how and when decision-making will be passed to the next generation. It will be best to address this before a time of need such as a sudden death in the family or other crisis – even if discussions around family office succession can be uncomfortable.
“I wouldn’t hold the information close,” said Botha. “Be open and transparent about this. Have the difficult conversations.”
Sometimes this is about creating a space for the next generation to step into, Botha added. “[It’s about] being open to the idea that that might look different for somebody stepping in with a different set of values or a different perspective,” said Botha.
As well as the emotional side, there are practical issues to overcome.
“Some of it is the establishment of trusts that can be funded for separate family members to keep everybody in their own guidelines,” said Fafoglia. “But the educational part is important too, and it’s one of the most difficult decisions.”
Early preparation is also good advice for family offices themselves. That’s because as much as a family office must adapt to the incoming generation, it must also be able to help prepare that generation for taking responsibility for its wealth.
“When you think of the tidal wave of assets that are going to flow down to the next generation, in some cases they will be not all that well prepared for it,” said William Thompson, CFA, Managing Director, Global Family & Institutional Wealth, at UBS, who was also speaking at the CFA Institute webinar.
Governance can help to provide the structure that is needed. To tackle these issues, family offices often recommend formal preparation such as documents that set out ways to prepare the next generation.
The benefits of a broader network
As family offices plan for succession, they are increasingly looking to engage with younger generations to smooth the transition – both for themselves and for their clients.
This often means providing or facilitating family advisory services, including hosting and organizing family meetings.
“Family advisory practices can help with how you talk to your children about wealth, or when you talk to them,” said Thompson. “There’s no formula. There are just guidelines, and each family will have its own idiosyncrasies and figure out what makes the most sense for them.”
Involving the next generation in the management and operational side of the family office can also bring benefits. For example, they can shadow board members to get practical experience.
The family office can also help source placements for the younger generation in other businesses to give them exposure to a broader network.
“It might be a bank or consultancy where you have the ability to have your child meet other folks that are similar to them and have similar challenges, and then have a network of people they can draw on,” said Thompson. “It’s pretty powerful if it works.”
Family offices themselves are getting more creative about other ways to mentor the next generation too, inviting the children of similar families in to observe and learn.
“Some are opening up their workspaces to others, so you can go and shadow not just in your own office but in others to see how they are doing things,” said Botha. “I think that’s a very interesting way to learn and get out into the world at the same time.”
To learn more about family office trends, explore these stories:
How family offices balance emotion and strategy in private markets investing
Seven trends reshaping family office careers today
The modern family office: Balancing legacy, innovation, and risk
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