The past few years have experienced massive and rapid economic and social disruption, largely driven by the COVID-19 pandemic, as well as growing differences across generations that have had a major impact on family offices. These rapid changes on nearly every front, from economic turmoil and rising social and political debate to investment innovation, pose challenges and challenges for those tasked with managing family wealth, an annual survey by BNY Mellon Wealth Management finds. Opportunities are causing both.
According to Vincent Hayes, Global Head of the Family Office at BNY Mellon Wealth Management, “This pace of change is naturally leading to challenges, and more importantly, to opportunities within global family offices, across its portfolio. How to approach ESG and cryptocurrency, develop an integrated philanthropic strategy and a comprehensive action plan.”
In particular, succession planning is posing a serious challenge because of the difficulty of reconciling the values of the older and younger generations. Nearly three-quarters of family offices surveyed believe that the next generation will focus more on environmental, social and governance (ESG) and responsible investing, along with decentralized finance, and that they will leave some gains for social good. are ready to , Forty-five percent of respondents also believe that the next generation of family office leadership is generally more difficult to engage as they focus more on their family and/or career.
No need to look far for examples of this—a recent new York Times The article documents the growing desire of the children of the most famous Italian fashion houses, such as the high-end luxury brands Etro and Missoni, to go their own way rather than run the family business. “I prefer mass rather than niche,” Alice Atro told the publication, “Luxury should be for everyone. It doesn’t have to be expensive and out of reach.” This change of mindset among the Next Gen is one of many reasons family offices are increasingly at a loss for how to handle transitions of power.
A quarter of family offices also believe they are not equipped to include the next generation of leaders. Although most family offices agree that succession planning is extremely or very important, many believe that they could use outside help in succession planning, one with a lack of expertise and aligning values as constraints. Citing difficulty in finding reliable partners.
Before we assume that family offices are completely incapable of handling the next generation of family leaders, many family offices have already jumped on the bandwagon to embrace the new potential opportunities. For example, the survey finds, “[f]Despite concerns about the regulation and volatility of these assets, the Emmy office is no longer prepared to show any indifference to cryptocurrencies and the role they play in the future of investment and finance.
More than three out of four family offices currently have at least some interest in or participation in cryptocurrencies, with 23% taking limited risk and 20% actively investing. Many in this group are motivated by a desire to keep up with new investment trends and nearly half cite interest from NextGen family leaders as a driving factor for the decision.