The Evolving Family Office

Leadership Strategies to Ensure the Office Remains Relevant to the Millennial Generation

Much has been written about millennials – individuals born between 1982 and 2004 – who are having a powerful, and sometimes disruptive, impact on organizations, both public and private. Summarizing current research, millennials are:

On its face, this profile suggests possible tensions with the stereotypical view of the family office as simply a vehicle to pass along both family wealth and the traditions of its creators. It also raises critical questions: Will different generations clash over an understanding of what a positive future looks like? Will they clash over how the family’s assets, financial and other, should be managed? Increasingly, family office leaders are expressing frustration over their inability to capture the attention and commitment of millennials. Not surprisingly, reigning leaders in family offices believe that when the baton is passed to the next generation, they will not value or understand the full benefits of collective management of a family’s legacy and wealth. This is no small matter when looking at the size and scope of the intergenerational wealth transfer expected to take place in the decades ahead.   

According to a recent article in Trust and Estates, millennials have surpassed baby boomers as the largest segment of the population. In the coming years, they will inherit more than $30 trillion.

It is a time-honored tradition for family offices to adjust their working model to meet the preferences of succeeding generations.  But will simple tweaks sufficiently address the needs of this disruptive generation and the massive wealth transfer that lies ahead?

Evidence suggests that radical changes are needed to integrate the millennials into the fabric of the family office.  

Today’s family office leaders are refining and reinventing their management strategies to fashion a high-performing office that can serve all generational needs and expectations. At the risk of generalizing about an industry that is well known for the unique structure of each office, three essential strategies have emerged from our research.

Strengthen Your Governance Policies

Reinforce the values that are unique to your family

Millennials appear to be more sophisticated about financial matters than prior generations, are skeptical of authority, and are impatient with dysfunction. This generation values governance structures that facilitate efficient and informed decision-making and candid dialog. Thus, it is essential for family offices to define the roles and responsibilities of each office executive and the charter for each committee. Who, within the family or among outside advisors, has control of which assets, and who has the authority to change existing arrangements? 

If a family governance process has been clarified to answer these questions and to address issues of control and money, this will serve as a means by which problems can be resolved before they become destructive. Make succession plans clear and establish expectations around when the younger generation might begin to assume a leadership role. Develop a budget and business plan for the office. Empower millennials as early as possible and assign them a project for which they will be held accountable. Engage them early and often. While millennial loyalty to institutions can be low, research suggests that they are more inclined to be loyal to individuals. If authentic relationships are developed between family members and office leadership through this work, a higher level of trust will ultimately form between generations. 

For an office to survive multiple generations, the family must have intention, focus, and clarity about its values. John Davis, founder of the Cambridge Institute for Family Enterprise, is a strong believer in families taking the time to reflect on their purpose, characteristics, needs, and aspirations in order to define their overall mission.

With a mission in hand and a strategy established to achieve specific goals, succeeding generations will have a road map in place to survive leadership transitions.  

This begs the question – what happens when the millennials challenge the underlying family values and mission? Industry guru James E. Hughes Jr. has identified a consistent thread among hundreds of international families who have successfully transitioned a family enterprise through multiple generations. These families have pivoted their focus from simply building a great business to building a mission-directed family that reflects the goals of the group. In so doing, they often come to recognize that the value of the family’s human capital is equal to or even greater than the value of their financial assets. To strengthen the bond, it might be useful to reflect on the “family glue” from time to time via candid dialog facilitated by an outside consultant. We highly recommend reading The Voice of the Rising Generation by James E. Hughes Jr., Susan Massenzio, and Keith Walker, where these ideas are explored more fully.

Embrace Transparency

Using technology and new forms of communication

Privacy has historically been the cornerstone of the family office, and families have typically been conservative about the information they provide to the younger generation. Millennials are disrupting this tradition. They share life experiences on Facebook, Instagram, Twitter, TikTok, and Snapchat etc. This poses risks for the families as reputations can be damaged and security concerns arise when millennials are careless about broadly exposing what they do with their lives.

The office head needs to accept the reality of social media and coach the younger family members on how to coach the younger generation to not share private information and to minimize security risk. 

This generation can be impatient; they don’t like to wait. This phenomenon is frankly a good thing; offices have accelerated the implementation of technology upgrades to provide financial data on demand. Millennials are avid networkers and attend conferences to communicate with other offices in the quest for “best practices.” They are virtual learners and like to teach each other. Because millennials have shorter attention spans, family office leaders must integrate new forms of communication such as diagrams, texts, white boards, dashboards, and summary documents, in order to achieve the desired impact. Forget long meetings, white papers, group conference calls, or thick legal documents. Consultants to families report that millennials prefer to receive information via podcast, allowing them to listen and learn when they choose, rather than the imposition of a meeting or conference call.  

In keeping with the tendency of millennials to be transparent about their life activities on social media, this generation wants transparency from the family about its wealth and how it will impact their lives. They want to be brought “under the tent” at a younger age. 

A challenge facing many families is whether younger members have the maturity to handle this information and when is the right time for them to take an active role. Additionally, as millennials are armed with more information about best practices at other offices, they may question whether the family office team is delivering top quality advice and performance. The stakes are high for family office leaders to demonstrate the worthiness of an independent office versus allocating family assets to institutional wealth managers. 

Understand the Quest for Impact

Learning how millennials view the world 

The millennial generation is optimistic about the future and believes that individuals can make a difference – to have social, environmental, and even financial impact on their world. But if you happen to be a millennial in the shadow of a “larger-than-life” patriarch, it can be a challenge to find your role to make that difference.  

The Voice of the Rising Generation addresses this subject both thoroughly and thoughtfully. How can succeeding generations find their “voice” and how can they lead meaningful lives? The authors encourage each family member to define his or her dreams, gain self-knowledge, and develop resilience and independence. 

Many who head offices recognize that empowering a succeeding generation is a life-long journey, and they devote a fair amount of time counseling younger family members on their social and emotional well-being. Some of the largest and most mature offices have created a new full-time position in the office, a Life Long Learning Specialist. The goal is to empower each family member, through shared learning experiences, to make an impact with the tools that are uniquely his or hers. The curriculum goes well beyond financial literacy.  

Millennials like to participate in direct private equity or venture investments rather than the more typical investment program where assets are allocated to third party mangers. To be directly involved in crunching the numbers, preparing spreadsheets, and researching industry trends, they feel they will have more impact on the success of the investment. Increasingly, they are involved in launching new entrepreneurial ventures in virtually every segment of the economy. Since millennials love social media and collaboration, it is not a surprise that they have led the growth of crowdfunding, a vehicle for peer-to-peer investment collaboration. Lastly, millennials are strongly behind the growth of social impact investing, where investments are evaluated through environmental, social, and governance lenses, better known as ESG. Such investments aim to achieve both financial returns as well as having a positive impact on society.   

Private family foundations are useful tools to help keep families together and actualize their shared mission. In fact, making an impact through charitable giving is every bit as important today as it has been in previous generations.

However, millennials approach charitable giving in ways that differ from their parents. In general, volunteering or “doing the work,” feels more satisfying to them than writing a check. Another defining millennial behavior is the desire to touch as many people as possible and to hold charities accountable for their promises. An observation made by an executive of the Silicon Valley Community Foundation that was reported in the the Journal of Philanthropy (9/14,2017) succinctly makes this point: “They want to know impact, scale, how many, and how come. They’re engaged to an extent that people of my generation find uncomfortable.” 

In Conclusion

The three strategies discussed above are designed to help family offices achieve the ultimate goal, which is to build trust with a generation that inherently questions tradition and distrusts the established way of doing things. 

As a family leader, ensure that the family mission is always top of mind, and create a governance structure that facilitates the execution of the mission, open dialog, and conflict resolution.                

Learn to communicate to millennials in ways that will reach them in meaningful and memorable ways.

Be ever mindful of the millennial desire to make an impact:  in investing, in philanthropy, and in their lives.  Nurture human capital as diligently as financial capital.

And keep the faith knowing that the millennials are optimistic about the future.  They are committed to making the world better – in their own unique, and sometimes unorthodox style.   

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Jane Bierwirth is co-head of the Asset Management practice. Her clients are traditional and alternative institutional investment firms, endowments, foundations, wealth management firms, and family offices. For all of these clients, she recruits talent in all functional areas including Trustees and all other C-Suite positions. Jane has also been a recognized leader in recruiting talent for family offices for more than 20 years. Our dedicated Family Office team, led by Jane, focuses on attracting best-in-class C-Suite talent in the areas of general management, investment, operations, and client service, and has adapted to the profound growth and transformation of family offices nationwide over the past several decades.