Preparing for Future Leaders in a Family

In a previous article in February 2020, we looked at succession planning so we would now like to focus on the Future Leaders of families and their businesses.

As a reminder the current research concludes:

• 43% of family offices have a succession plan in place. 
• Of these, only one quarter (24%) have a formally agreed written plan, 
• 9% have an informally agreed written plan and 
• 10% have a verbally agreed plan. 
• 17% of family offices have no plans whatsoever. 

In preparation for succession, nearly a third (29%) reported that the next generation of family members currently hold management or executive roles within the family office

• 23% remarked that they sit on the board. 
• 26% reported that they have no involvement in the family office whatsoever. 
• In terms of how the next generation will influence family offices’ investment strategies once they assume control, 39% of respondents reported that their future leaders will likely increase their allocation to impact and / or environmental, social and governance (ESG) investing. 
• 22% also expected them to embrace a more illiquid investment strategy, favouring asset classes like private equity. 

I would say based on this evidence that the Future Leaders of family groups are going to be a lot more ready than the previous generation. 

This journey is ongoing, so we spend a lot of time with the next cohort in group settings with the family as well as a lot of time with individual one-on-one’s as well.

• 44% of Future Leaders train in the family office.

In terms of how the Future leaders are being prepared for their forthcoming careers, the most common forms of training are work experience at external firms (45%) (e.g. investment banks) or in family offices (44%), or participation in educational projects (44%). 

Involving Future Leaders in philanthropic or impact investing projects is also common.

The biggest thing that we try to push for from a governor’s perspective is to use the philanthropic structures as a way to engage the next generation, to help educate them on investment opportunities, allocation building, how to actually vet a charity, how to actually make a grant. It’s a way to bring the next generation up to speed.

Is any family member from our client group prepared to manage the family’s wealth when the time comes?

In our case, only a very small minority are capable of doing that. This creates frustration for the other members of the family. This is why having a charter and discussing all of these kinds of topics, and why we need to prepare is very important.

By heeding this advice, other families can benefit from taking a precautionary and preparatory approach to ensure that the next generation is sufficiently equipped to assume the large responsibility of being good stewards of wealth. 

• 23% of Next Gens sit on the board 

In terms of the professional roles Next Gens play within the family office, nearly a third (29%) of respondents noted that they hold management or executive positions, while a quarter (23%) reported that they sit on the board. 

• Only 26% of respondents noted that they have no involvement in the family office whatsoever.

This suggests that many families are focused on absorbing their children in the investment practices and other responsibilities that come under the family office remit as a means to prepare them for the future. 

Do get in touch if you’d like to know more.

Mark Estcourt 

Founder & CEO 

Cavendish Family Office 

Dedicated to serving families and securing their wealth for generations to come.