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Engaging the Rising Generation

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While successful families are each unique, they share a common hope that their resources will be a source of opportunity and motivation for future generations.

Working toward that outcome requires making wise investment and business decisions, as well as thoughtfully engaging and preparing future family leaders.

“It’s not just about preparing the rising generation to be responsible owners of wealth, but also preparing them to lead the family, whether that’s running the operating business, leading the family foundation, taking charge of the family office, being a client of the family office or one of the many other ways to lead,” says Jane Flanagan, Director of Family Office Advisory at Northern Trust.

Attending to family dynamics

When family office leaders are asked about what’s keeping them awake at night, succession and engaging the rising generation top the list, along with market concerns and cyber, according to the 2020 Family Office Benchmarking Report.

In response, forward-thinking families are creating roles for future leaders that acknowledge each family member’s unique gifts and circumstances. The goal is to facilitate participation in a way that works for everyone and that offers opportunities for smooth, well-planned transitions.

Building a bridge to the next generation

Families tend to pay the most attention to the dynamics of the rising generation as a new family office is created or an existing family office anticipates a generational transition. The process often starts with a family meeting.

“A family meeting is the baseline of governance,” says Flanagan. “Especially in multigenerational families, it’s an opportunity to build relationships and share what brought them to this place, perhaps beginning with the history of the family business and the family’s shared values.”

Large families and families experiencing generational transitions may be wise to incorporate a methodical approach to engagement. Consider checking in with family members through conversations or a survey to understand how well their needs and desires are being met.

Families can also tap into outside sources as they work to improve engagement. The 2020 Benchmarking Report showed that more than half of next generation family members would be open to networking with other family offices. Valuable resources include:

  • Meeting with other family offices to compare notes on governance structures and engagement efforts.
  • Reviewing research and analysis from respected advisors and peer networks such as FORGE and FOX.
  • Engaging a family office governance consultant to assess the family’s current state and provide recommendations for improvement.

Moving toward more flexible, personal solutions

It’s vital to provide many avenues for engagement, even if participation looks different for each family member. Special consideration should be provided for different life stages and skills, as family members balance their own careers and families with the needs of their extended family.

While some family members may want to be involved in the business or sit on the investment committee, others may consider alternative roles, including:

  • focusing on charitable work for the family foundation
  • actively volunteering with charitable grant beneficiaries
  • educating the next generation, including mentoring new or rising board members
  • managing communications or planning events

As a best practice, families should create written descriptions of each role that include the time commitment and expectations for participation. As the next generation steps up to assume new roles, families may want to pair them with current family leaders to provide education and context around issues at play.

Families should also include at least one member of the rising generation on the planning committee for events such as the annual family meeting, to ensure their learning styles and topical interests are represented. “Events that are co-created with the audience in mind are the most successful,” Flanagan says.

Whether and how to engage spouses and in-laws in the family office is a complex question that every family answers differently. As part of their governance efforts, families should consider whether non-bloodline spouses and in-laws may be involved in family office activities and, if so, whether they have voting rights. Families may want to involve members of the rising generation in their discussions of this challenging dynamic.

Setting the stage for success

Making plans to thoughtfully engage and prepare the next generation of leaders can help position a family for sustained success. For instance, families should consider being open about the family office’s goals and priorities and the state of the family assets, as well as inviting family members to participate in a way that feels appropriate and authentic. “The key to engaging future family leaders is transparency,” Flanagan says. “Transparency breeds trust.”

Providing personalized options for education and participation can help to fully engage emerging leaders even as they navigate the shifting demands of different life stages.

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Disclosures

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel.  All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

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