Even extreme wealth isn’t guaranteed to span the generations. In fact, roughly 70 percent of families will see their wealth disappear during the second generation’s reign. Family offices can do a lot to prevent this, particularly by paying more attention to the kids.
Catering to the kids isn’t just a smart strategy to help the family retain wealth. It’s also in the best interests of the family office, seeing as only 25 percent of family offices even make it to the second generation.
Training Imminent Leaders
Eventually, the older generations will transfer at least some of their wealth to the younger generation. One of the reasons that money often disappears with the second and third generations is because they are not taught how to properly handle money. A family office that helps the kids figure out how to properly manage family wealth before they inherit it helps strengthen the family to last through intergenerational wealth transfers.
Specializing in New Priorities
If your family office doesn’t heavily invest itself in engaging younger generations, you may fall behind in gaining a more sophisticated and nuanced understanding of the types of investments they are interested in. This worsens the next generation’s engagement in the family legacy and can spell disaster for wealth preservation. Not only are younger generations more interested in new ways to accumulate wealth that might have escaped the radars of those in the older generations, younger generations may also be more interested in specialized investing strategies such as impact investing.
Improving Overall Efficiency
Catering to younger generations will certainly help them better engage with the family wealth and legacy, but it can also prompt your office to streamline communications and information distribution in a way that saves you both time and money. When adopting new technology to increase reporting efficiency, it may be much easier to get the buy-in from the younger generation, which can help influence the older generations to become more adaptable.
The Maturation of Wealth
More than 50 percent of existing family offices were opened in just the last 15 years to support newly built fortunes for a broad swath of high-net-worth individuals. Whether a new family office has sprung to guide an unheard of wealthy founder in Silicon Valley or a household name like Jeff Bezos and Elon Musk, it’s critical the office remembers that the founder of the family office might have different ideas, priorities, and needs than the future generations who will eventually control the wealth they built. Just as people mature, so does wealth. For a family office to mature and continue to safeguard the assets and legacy of its founder, the younger generations cannot be ignored.