“A lot of this trend in America is being driven by millennials, who are deploying capital in effective ways. The challenge here is that this type of investing requires more staffing within the family office,” Battaglia says.
Another important issue for family offices is succession planning. Family offices can address this problem by creating investor policy statements and establishing clearly defined roles for the members.
The report found that 43 percent of family offices expect a generational transition within the next 10 years, and 69 percent in the next 15 years, making this a pressing issue for the community. Yet just 37 percent find that the younger generation wants to be more involved than they presently are in the family office.
Against this backdrop, participants were asked for their main governance priority over the next one to two years and ‘implementing a succession plan’ topped their list of responses.
Just two in five respondents have personally experienced a successful transition of a family office. These individuals pointed to a number of factors that were important: a willing and able next generation; an older generation prepared to give up control; and a flexible and trustworthy family office.
Higson says, “In our experience the risk of disruption from a generational transition should not be underestimated. It is the number one reason for beneficial owners to make changes to their family office structure and management team.”