The next generation in family offices faces several challenges. It includes defining future roles, leadership and skill development, navigating family dynamics, communicating between generations, and investment strategy. It is important to give them a voice and engage them in the decision-making and promote inclusivity. This engagement is through clear communication, learning and development opportunities. Advisors can help families overcome these challenges by normalizing engagement and promoting incremental inclusion.
Introduction
Family offices often face the challenge of defining the role of the next generation. This generation may be a long way from having a vote but need to have a voice. The Family Office Exchange (FOX) identified five primary challenges that the next generation faces: defining future roles, leadership and skill development, navigating family dynamics, communicating between generations, and investment strategy. In this article, we will discuss each of these challenges and provide examples and solutions to overcome them.
Defining Future Roles
Defining future roles is the most significant challenge faced by the next generation. It involves having positive and engaging conversations with children from a young age and emphasizing the pursuit of their interests. The leadership generation should define family involvement and readiness. Equally, the rising generation should understand clearly what it takes to meet those expectations. Families should establish a family mission statement to clarify the family’s values, goals, and roles.
Leadership and Skill Development
Leadership and skill development is another challenge for the next generation. They need to be capable of planning for the significant family office assets they stand to manage. Families should engage them in the decision-making process, provide learning and development opportunities, and establish a mentorship program. Families should encourage the next generation to develop these leadership skills. It can be done by allowing them to participate in volunteer activities, enrol in training programs, and take on leadership roles in school or community organizations.
Navigating Family Dynamics
Navigating family dynamics is crucial for the success of family offices. Poor communication can harm transition planning and lead to conflicts and tensions among family members. It is essential to promote inclusivity and engagement through clear communication, respect, and understanding of different perspectives. Ideally families should establish a family governance structure that includes a family council, a family constitution, and regular family meetings to promote communication.
Communicating Between Generations
Effective communication between generations is vital to avoid misunderstandings and promote transparency and trust. The next generation needs to feel that their opinions are valued and that they are heard. Families should provide opportunities for the next generation to participate in family meetings and discussions and encourage them to share their ideas and perspectives. One way is to involve them in the family’s philanthropic activities and encouraging them to take on leadership roles.
Investment Strategy
Investment strategy is another challenge for the next generation. Its imperative for them to understand the family office’s investment goals, risk tolerance, and asset allocation. Families should provide opportunities for the next generation to learn about investment management and financial planning and involve them in investment decisions.
Inclusion and Engagement
To overcome these challenges, families need to promote inclusion and engagement of the next generation in the family office. Incremental inclusion through clear communication, learning and development opportunities, and participation in decision-making processes can help the next generation prepare for their impending transition. Advisors can assist families in normalizing engagement and promoting incremental inclusion to ensure a smooth and successful transition.
The next generation’s role in family offices is critical for the continuity and success of family wealth and legacy. To overcome the challenges of defining future roles, leadership and skill development, navigating family dynamics, communicating between generations, and investment strategy, families need to promote inclusivity and engagement of the next generation. Advisors can help families normalize engagement, promote incremental inclusion, and provide learning and development opportunities to prepare the next generation for their future roles.
In summary, families managing investments and wealth in family offices should consider the following key takeaways:
- Give the next generation a voice by engaging them in the decision-making process, clarifying their roles and expectations, and providing learning and development opportunities.
- Promote inclusivity and engagement by establishing clear communication, respecting different perspectives, and involving the next generation in family meetings, discussions, and philanthropic activities.
- Normalizing engagement and promoting incremental inclusion can help families overcome the challenges of defining future roles, leadership and skill development, navigating family dynamics, communicating between generations, and investment strategy.
Overall, by promoting inclusivity and engagement, families can ensure a smooth and successful transition from one generation to the next and preserve their wealth and legacy for future generations.