Family offices are at a turning point. Not only has there been an acceleration of extreme wealth over the past few years, which has resulted in the creation of new and expanded family offices, but in addition, there is about to be a turning of the tides, as it relates to the generation in charge of these family offices.

In a 2017 survey conducted by Campden Wealth and RBC, family offices were asked when they thought the next generational transition would occur, and nearly 70% of respondents answered that they believed this would occur within the next 15 years. A 2020 Campden Wealth/RBC survey found that almost half of the next gens had already assumed control, and 22% expected to do so over the next 10 years.

However, as the next generation of family offices prepares to assume control, current and next-generation family members are not in agreement about succession preparedness.

50% of family offices surveyed in The North America Family Office Report 2021 reported not having a next-gen family member qualified enough to take over.

30% of respondents noted an unwillingness for the patriarch/ matriarch to relinquish control as a primary succession-planning challenge.

There is also a concern that the next gens are not terribly interested in taking over their family office.

Another challenge? Only 50% of North American family offices even have a succession plan, and of these, less than half have plans that have been formally documented.

Interestingly, when the next gens themselves were asked how prepared they felt for succession, 71% of them reported feeling either very or somewhat prepared.

Another Campden report, specific to North America notes, this disparity between responses might be attributed to an overconfidence of these next gens, or it could be due to a lack of communication between these generations – or possibly both.

What can be done to help bridge this gap between the generations?
How prepared the next generation is for their family office management role clearly depends upon who you ask, but one element is unmistakable: keeping pace with technology in the family office space is paramount.

As the family office space grows, so too do their needs. What previously might have been managed with a fax machine, an excel spreadsheet, and one or two employees, now requires far more complex services and support. In fact, 25% of North American family offices surveyed noted a rise in staff levels over the past year. And when it comes to technology, 45% of them pointed to their IT infrastructure as a key area of growth over this same period.

How can technology help?
Most family offices are well aware of the important and transformative role that technology plays – and will continue to play - in their investments. A 2019 UBS/Campden Research survey found that 87% of family businesses believe artificial intelligence will be the next substantial disruptive force in global business, and 57% of those surveyed believe that blockchain technology will fundamentally change how they invest. What these family offices also need to begin to embrace is the idea that the right family office-focused software tools and technology can help them manage their daily lives while also providing a lifeboat to help them bridge the seemingly ever-widening generation gap.

Technology can help with communication
Improving the communication between these generations can go a long way towards bringing them together and allaying concerns. Access to the right technology can help family offices communicate more regularly and at a faster pace. Conversations can be documented and referred to as needed. When all parties are privy to both the big picture and smaller, day-to-day tasks of their family office, they are better equipped to work together towards a shared goal.

Technology can help with efficiencies and productivity
It is common knowledge that technology can help businesses operate more efficiently, and family offices are no exception. The implementation of the right technology can provide the necessary tools to manage investments and assets, as well as the all-important daily operations of bill paying, account reconciliation, expense tracking, cashflow management, wire transfers, and all the relevant reporting needs.

Access to real-time data has the added benefit of allowing the family office to make the best decisions possible – at the moment they need to make them. As the generation who grew up with mobile apps and anytime-anywhere access gets ready to take the helm, updating family office technology might also make the next gens even more interested in stepping into these difficult-to-fill management roles.

Technology can help with flexibility
If there are two things we have all learned over the course of the past two years, is that access to secure, cloud-based applications is integral to remote work and that an amazing amount of work can be completed remotely. Gone are the days when we need to rely on locally-stored servers and in-person workspaces. At a time when younger generations have an expectation of being able to work remotely, wherever they may find themselves, it is important that family offices have the infrastructure to allow for this.

Technology can help with security
This is arguably one of the most important aspects of how technology can assist in bridging the generation gap. If there is one area that everyone can agree on, it is the critical need for privacy, safety, and security. The generations might not agree on the direction and goals of their family office, but they know how dangerous a cyber-attack can be, as is evidenced by cybersecurity climbing to the number-one concern for Family Office Exchange (FOX) members, according to the 2021 FOX State of the Family Office Industry survey.

The best family office technology tools will provide bank-level security and 24/7 monitoring to ensure that any and all personal and financial data is protected.

Succession and future planning is not an easy task, but it is a vital one, and all family offices should have their succession plans clearly outlined. The sooner these family offices integrate the use of technology into their business, the easier and smoother the transition to the next generation will be.

Click here to read and download the full report.

Sources
1 The Next Generation of Global Enterprising Families - Shaping Tomorrow, Today 2020. Campden Research/RBC.
2 The North America Family Office Report 2021. Campden Research/RBC.
3 The Global Family Office Report 2019. Campden Research/UBS.
4 2021 FOX State of the Family Office Industry survey. Family Office Exchange.