Business

Family office governance assumes bigger role because of the pandemic

More family offices have delegated responsibilities to the next generation as a result of the Covid-19 pandemic, leading to an acceleration in succession planning. 

A survey of family offices by multi-family office Stonehage Fleming found that 25% of them had changed roles and responsibilities.  Around 71% of this 25% have given the next gen more prominent roles in their family offices. 

There has been a noticeable uptick in succession planning. Hinge moments like wars or pandemics tend to speed up change

Other advisers confirmed that family offices had advanced their plans for an orderly succession, partly due to the rise in mortality.

According to one Stonehage respondent: “Much depends on the character and competence of the next generation individuals themselves. But the lockdown has made many members of the older generation more willing to slow down and hand over responsibilities where appropriate.” 

Stonehage provides advice to $55 billion of assets owned by wealthy investors, including 250 substantial family offices. Its survey received responses from 183 family members and their advisers.

Lucy Birtwistle, a director on its family office team, said: “Covid has made parents question their mortality and we have seen families have more open conversations about the future, and succession planning, with the next generation.

“As many families have spent a lot more time together during lockdown, it’s been enlightening for parents to see the next generation working from home, realising how capable and mature their children are.”

According to Birtwistle, next gen has assisted with technology needs, while bringing energy to new ideas. 

The role of next gen often snowballs, as they become more involved in the business. Lockdown can become an extended opportunity for next gen to gain influence, now that home, rather than office, has become the forum for discussions. 

Capital Generation, adviser to the Said family, and others, told Family Capital on 27 May that lockdown benefited decision making by reducing stress levels. 

Birtwistle said: “Once the conversations about transparency starts within families, it usually leads to increased engagement from the next generation and them playing a more prominent role – whether that’s taking an active part in the family business, being responsible for social media, or representing the family, or its business, in public.” Succession can be the end-result.

Adam Wethered, chairman-designate at Wren Investment Office, another multi-family office, confirmed the growing involvement of next gen. He added that family offices have been glad to be able to draw on their digital skills.

In a newly-published survey, UBS and PwC said billionaires had found time during lockdown to discuss family arrangements and reflect on mortality: “There has been a noticeable uptick in succession planning. Hinge moments like wars or pandemics tend to speed up change.”

Around 59.5% of billionaires in the UBS survey plan to accelerate succession planning in the next twelve months, against 16.7% over the last year. Around 34.5%, against 15.5%, intend to change the structure of their family office.

According to a Singapore billionaire: “Neither life nor success can be taken for granted.”

A third of Stonehage survey respondents expect a permanent shift in family office priorities as a result of Covid-19.  Apart from next gen issues, they are debating their own priorities, including serving wider society, and risk factors. 

As a result of its survey, Stonehage found that 40% of respondents lack a process for identifying, quantifying and mitigating risks. 

Around 34% felt that family disputes were the greatest risk to wealth with 32% cited a lack of leadership.

Matthew Fleming, head of family governance and succession, said in a statement: “The survey has emphasised the importance of family leadership and provided overwhelming evidence of how important a role the next generation has played during the crisis.”

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