Young heirs in family offices are increasingly at odds with their founding members regarding investment strategies, according to a recent global study. As the next generation steps into more prominent roles, the study highlights a significant generational divide that could impact how family wealth is managed.
Study Overview
The study, conducted by Ocorian, surveyed 200 individuals involved in family offices across 16 jurisdictions, including Singapore, Hong Kong, the United States, the United Kingdom, and the UAE. The family offices represented a substantial wealth pool, totaling approximately US$119.37 billion. Notably, 79% of respondents indicated that younger family members are now more involved in shaping investment strategies.
Despite this increased involvement, a staggering 97% of participants reported that the priorities of young heirs differ from those of the founders. The areas of contention are particularly pronounced in attitudes toward private markets and digital assets.
Diverging Investment Priorities
The findings reveal that 51% of younger generations prefer investing in private markets, while 42% noted conflicts regarding digital assets. Additionally, 39% observed that heirs show heightened interest in physical assets such as real estate and private aircraft.
Risk appetite is another significant point of divergence. About 29% of respondents indicated that younger generations are more willing to take on higher risks. These differences extend into geopolitical considerations, with 33% of participants noting contrasting views on global issues, as well as preferences for the locations of family offices.
The Need for Succession Planning
The research also underscores growing concerns about succession planning, with 98% of respondents asserting that more effort is needed in this area. Alarmingly, 12% reported that they are not witnessing a natural transition of wealth and leadership within their families.
Ginny Goh, Ocorian’s director of private clients in Singapore, emphasized the inevitability of differing perspectives as family wealth transitions across generations. She stated, “Succession planning is crucial in family offices as they grow and mature.” The expansion of wealth and diversification of priorities necessitate a structured and forward-thinking succession framework.
Global Trends Impacting Family Wealth
Wealth managers in the study noted that geopolitical events, such as the ongoing war in Iran, are prompting ultra-high-net-worth clients to establish new branches of family offices globally. These developments aim to mitigate risks associated with energy fluctuations, tax reforms, and economic sanctions. As a result, clients are reallocating up to 20% of their portfolios in response to these disruptions.
The demand for family office structures is surging as clients seek to navigate complex, cross-border challenges. According to Nigel Green, CEO of deVere Group, families are not only reallocating assets but also restructuring their asset ownership and decision-making processes. He observed, “What used to be multi-year planning is now being prepared and executed in phases over months.”
Strategic Investment Shifts
Capital is increasingly directed toward jurisdictions that offer legal security, liquidity, and political stability. This trend is coupled with a focus on sectors that can thrive amidst structural changes, such as energy infrastructure, logistics, and technology platforms that support regional production and automation.
As traditional financing becomes more challenging, there is a rising demand for private credit in these sectors. This shift is further influencing succession and governance planning, encouraging families to accelerate intergenerational wealth decisions to ensure that their structures remain robust in the face of changing geopolitical conditions.
Future Outlook
The trend toward multi-jurisdictional family office structures is expected to continue as geopolitical risks remain high and the global landscape becomes increasingly fragmented. By the end of 2024, Singapore is projected to have more than 2,000 single-family offices (SFOs) benefiting from tax incentives provided by the Monetary Authority of Singapore. In comparison, Hong Kong is anticipated to have over 2,700 SFOs.
Key Takeaways
- Young heirs are taking a more active role in family office investment strategies, resulting in a generational divide with founders.
- Key areas of disagreement include preferences for private markets, digital assets, and risk tolerance.
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Succession planning is increasingly urgent, with many families recognizing the need for structured frameworks.
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Global geopolitical events are influencing the establishment and restructuring of family offices.
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Investment strategies are shifting toward sectors poised to benefit from significant structural changes.
In conclusion, the evolving dynamics within family offices reflect broader trends in wealth management and investment strategies. As younger generations assert their priorities, the need for effective succession planning and adaptable governance structures has never been more critical. Family offices must navigate these challenges thoughtfully to preserve and grow their wealth across generations.
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