This article was first published in the Financial Times.
Approximately $84 trillion will be transferred across generations over the next 20 years, according to Cerulli Associates.[1] There’s no ignoring that financial assets of Millennial and Gen Z’ers are on the up[2], whether that be from self-sufficient wealth creation such as sports stars and influencers, or from inheriting windfall wealth.
Predicting and preparing for the future is one of the most challenging aspects of being a trustee. At their core, families don’t necessarily change, but it is everything that changes around them.
With younger generations experiencing a sharper political and moral divide from their predecessors[3] than in previous handovers, it is naïve for advisers to assume that they will automatically be lined up to advise the same family when wealth is passed over generations. During what may already be a difficult time of change within a family office, it is the responsibility of the trustee to manage this evolution.
When a family’s values are at odds with each other, it is more important than ever for trustees to ensure a smooth transition of wealth that adapts to the unique needs, aspirations and interests of each generation while preserving the family’s wealth and integrity.
So how, as trustees, can we navigate the great wealth transfer?
A family thrives on trust, providing its members with a sense of security and acceptance. This trust fosters a sense of belonging, creating an environment where individuals feel safe and valued. These same qualities are essential for a professional firm aiming for success.
When we compare a firm to a family, we see that both entities often have a person in charge, internal politics, and occasional conflicts. However, just as families unite against external threats, a cohesive team within a firm will stand strong together against external challenges.
Positive client relationships are forged and maintained through personal interactions. The strength of your team underpins the success of any wealth management organisation.
Strong communication is also key. While technology has revolutionised the way we conduct business, it cannot replace the personal connections which are the building blocks of any trust-based industry. Achieving true understanding and fostering trust requires direct, face-to-face interaction.
By fostering strong relationships with beneficiaries and maintaining transparent communication, it is crucial to ensure that all parties align with the long-term vision. This proactive approach enables trustees to anticipate potential challenges and implement measures to mitigate risks effectively.
We as trustees must also engage in continuous education and strategic planning. We must stay on top of market trends, regulatory changes and advancements in technology that could impact asset management and distribution.
One jurisdiction housing one of the largest populations of STEP-qualified professionals, who are experts at dealing with complex family dynamics, is Guernsey.
Trust organisations in Guernsey are deeply committed to building long-lasting relationships with their clients. As a jurisdiction we have a long history of maintaining strong and stable relationships, which is a testament to our reliability and the trust Guernsey has earned over the years. These relationships are built on a foundation of mutual respect, understanding, and a shared commitment to preserving family values and assets.
Housing your family office in a stable jurisdiction like Guernsey mitigates financial risks. Guernsey’s strong reputation and regulatory framework make it a jurisdiction of choice for private wealth clients and family offices.
Guernsey’s trusts also allow for more flexibility in terms of domestic inheritance rules. This allows families to optimise their succession planning without being constrained by more rigid regulations that may exist in their home countries.
The transfer of generational wealth stands as a looming challenge for the trust industry and family offices. The fundamental principles that have long underpinned successful family office management—trust, communication and security —are essential for trustees to maintain during this changing of the guards.
In this industry, where services revolve around trust, integrity, loyalty and evolution, personal communication is irreplaceable. The heart of our business remains in the relationships we build and maintain.
In today's modern landscape, trustees must keep pace with changing family dynamics, generational wealth shifts and environmental and political changes. Despite these changes, the core duty of the trustee—to preserve and enhance assets—remains unchanged.
To effectively fulfil this duty, we must understand the intricacies of contemporary families and tailor their approach to meet these needs. Although the essence of family life remains fundamentally the same, the methods for managing and safeguarding family wealth must adapt. Successful trustees are those who can navigate these evolving challenges, ensuring the protection and growth of both assets and the relationships within the family.
