Preparing the Next Generation to take over the Family Wealth
Wealthly families face a dual challenge over time. The first challenge can be easily understood and requires experience and expertise to manage: investing the family wealth across an array of investments to ensure a steady return over a long investment period. Achieving this objective through cycles of economic booms and busts is not simple but a family can surround itself with the right expertise–from top private bankers to family offices–to ensure the family portfolio is invested in enough non-correlated assets in various asset classes to withstand the major economic crisis occurring over time while delivering good average returns over a long period.
The second challenge faced by families is more organic and more emotional. It is about transmission and succession. Changes in governance from a generation to the next are critical moments in the history of a wealthy family. This kind of succession is critical for every organization, whether corporates, foundations or even in politics. A change in leadership brings a wave of new methods, new habits and changes in views that cannot always be accepted easily.
For wealthy families, especially those that have been founded based on a successful entrepreneurial spirit, the concern goes beyond a change of leadership. The concern is about preserving the spirit and the culture of the family.
To become successful, most entrepreneurs have been facing obstacles, difficulties, have had to deal with adversity, had to manage clients’ and partners’ relationships across the life of their business to make it thrive. These challenges are at the core of what makes a successful entrepreneur: overcoming adversity and delivering for its clients, its employees and its business partners.
It is very difficult to perpetuate the entrepreneur spirit from one generation to the next. This possible loss of what was at the heart of the family success is a key concern that most families have and try to address early on. The objective is often to ensure the next generation obtains an experience and an education that allow them to both be able to be the next leaders of the family while upholding the core culture of the founders.
Such training can often be delivered through a combination of formal education and experience in the family businesses or in other corporations. It can also be completed by a close working relationship involving the various generations ahead of a transmission to instill the families’ core values to each member of the family.
Some of the most successful families combine this “on the job” training alongside the older family members, external experiences in reputable firms, banks or consulting firms, with another kind of training, helping the next generation members to learn from each other and from reputed academics globally.
Some of the most advanced private banks have organized such dedicated programmes to assist families in the training of their heirs. For example, BNP Paribas Wealth Management has a dedicated “NextGen” program called “NextGen Experience” where the heirs of its clients can follow a global program (Silicon Valley, Paris, Hong Kong) in a network of conferences and events mixing sophisticated practitioners of the financial markets and investment strategies, the best academics from institutions like INSEAD and other top notch professionals. Such direct learning opportunities are enhanced by the access to a deep ecosystem of startups and incubators to connect heirs with the most innovative and disruptive actors of the digital economy. Through this program, the next generation of our clients can learn from each other and from the top experts globally, and hone their skills to take over the family’s leadership over time.
The combination of the transmission of the values by the family and the training from some of the most reputable professionals and academics gives the next generation the leverage to be ready to become leaders in their time.