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In our previous White Paper on “When does it make sense to set up a Family Office
” we explored the huge and unprecedented era of transfer of wealth from one generation to the next, as the world’s most affluent individuals approach retirement and contemplate their succession and wealth planning issues.
The needs of these families are extensive, complicated, and require expert advice, so many are considering a Family Office to help them manage this transition and provide a crucially provide a framework for the Next Generation (Next Gen).
The problem is especially difficult for many advisers is that they are ill-equipped to connect with these Next Gen clients who are technology savvy and expect a very different service experience than their parents did.
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Getting started: Ensure a smooth transition with Next Gen
Engagement leads to stronger relationships. Education coupled with strong communication results in a more empowered and engaged Next Gen. Conceptually it’s simple. In practice, it’s not.
Old-fashioned trumps high-tech
Millennials, Gen Y, Gen X – all names for the Next Gen – are often described as tech savvy, data-driven and social media-obsessed. However, when it comes to engaging with their advisors, they prefer face-to-face meetings. 82% of those in the 2016 Veritage Next Gen study said they prefer in-person engagement, followed by phone (72%), and email (68%). Communication through social media and internet/video/skype weren’t particularly sought out, with a mere 15%, and 5%, respectively, seeking such interactions.
Building relationships takes time. More than half (54%) of the 2016 study respondents began working with their Family Office advisor when they were under 20 years old, and 38% did so in their 20s. Initial discussions often centre on who the advisor is and what she does for the family. Over time, advisors become more sophisticated in maintaining the level of disclosure with which the matriarchs and patriarchs are comfortable. Much can be shared without putting specific dollar amounts on expected family wealth or inheritance.
Forge bonds with educational programs
It’s crucial to identify a manner to reach out to the Next Gen, whereby the older generations are comfortable and the Next Gen are interested. General education fits that bill. Gatherings including members of different families are particularly attractive. Approximately 75% of the 2016 study participants said they would be interested in attending a Next Gen program hosted by their Family Office advisor. Next Gen members need the most support with investments.
Appeal to a sense of social consciousness
A hallmark of the Next Gen is that they tend to be socially conscious. Discussions around mission-related investing, philanthropy and making an impact are ideal to generate interest and engagement. All of the subjects can be used to teach about wealth management and as a stepping-stone to getting them more involved in learning about managing their wealth.
Understand family values
The majority of the Next Gen has similar values as their parents. A key to engagement is to find out what’s important to them—how they view wealth and its purpose.
Education is Key
There’s a direct correlation between how educated, and by association, how empowered, a Next Gen family member is, and her comfort and happiness with the Family Office advisors and wealth plans. By establishing relationships with the Next Gen and helping them learn about their wealth, family offices will significantly increase their ability to retain their roles as trusted advisors.
Article first published April 12, 2017. Mark Estcourt is CEO of Cavendish Family Office in London. For more information, see cavfo.com.