Executive summary global nextgen research and practices

A lot is talked and written about how to best involve the next generation not only in the family business, but also regarding the transfer of the family wealth across generations. This is true globally, around the Asian Family Office hubs Hongkong and Singapore, in the middle East amongst others in the new Dubai Centre for Family Businesses.

BeeWyzer has analyzed an array of recent publications on this topic from the likes of PwC, Julius Bär, UBS, Campden Wealth, Spears Magazine and Zeppelin University amongst others, supporting the strategy of the BeeWyzer Method and showing that the main issues are early preparation, financial education of the nextgens, different views on risk and investment strategies, good and systemic governance and structures up to a single family office.

Let´s look at some of the recent research to support what BeeWyzer has been doing for the last few years, offering our BeeWyzer NextGen Masterclass globally:

Early preparation: The Asia-Pacific Family Office Report 2023, Campden Wealth Limited, states: “Start educating early: For successful succession planning, family offices should consider introducing next-generation family members to family leadership (94 percent) and instilling family values (93 percent). These aspects are deemed more important than educational qualifications and external work experience. However, the willingness of the current family leadership to address and embrace the issue of succession is a critical factor (75 percent). Open and early communication within the family can help mitigate challenges and ensure a smooth transition of leadership roles.”                                        

Pending wealth transfers: “A significant generational shift in control is on the horizon for Asia-Pacific family offices. Currently, about a quarter of these family offices have the next generation in control. Over the next five years, it is expected that this number will increase by 47 percent, and over ten years, a substantial 71 percent anticipate a generational shift.”

 Different nextgen views: “The different generations have different views and values, for example with regard to financial decisions. The risks are perceived differently, the younger generation is often more willing to take risks and has better access to and use of the latest technologies. They also prefer to invest in venture capital." ... "A clear definition of roles and responsibilities can also help to avoid conflicts of interest and ensure smooth collaboration. (translated)” …

 ”Generational conflicts can be prevented by setting up a single family office. For example, a rule can be implemented stipulating that the next generation must work outside the family business for a certain period of time in order to gain experience in other areas. Workshops or training courses for younger family members can also be helpful in preparing them for their role as future owners or decision-makers. Another important factor is the development of a family strategy that defines the common path for the future and thus also facilitates the involvement of the next generation in decision-making processes. (translated)”

“Family offices create enthusiasm among the next generation - not only with regard to the family, but also with future professionals: In 2030, family offices will inspire the next generation by adapting their services and investment strategies to the needs and interests of younger family members. By integrating modern technologies, promoting sustainability and social responsibility, and considering innovative asset classes, they will succeed in winning the commitment of the next generation. (translated)” Source: Family Office 2030, Herausforderungen und Erfolgsfaktoren (Challenges and Success Factors), Friedrichshafener Institut für Familienunternehmen, Zeppelin University, 2023.

Different risk tolerance and investment approach (Family Barometer 2023, November 2023, Bank Julius Bär & Co. Ltd. in collaboration with PwC):  It suggests this group has a more risk tolerant approach to investing than older generations – and has clear priorities when it comes to finding the right advisers.

“More than half (55 per cent) of survey respondents noted the rising generation begin making their first substantial independent investments between the ages of 26 to 35. This is true across all four regions surveyed: the Americas, Europe, Asia and the Middle East.”

“The survey portrays just such an organized approach to the rising generation – defined as individuals from 18 to 40 years old. It shows families giving their young adults greater responsibility one step at a time: starting with decisions about the management of family wealth and interacting with the family advisors, before moving on to having a say, or voting right, in important family decisions.”

“This period from the late 20s to early 30s is around the same time that the majority of families start involving children in decisions about wealth management (52 per cent of respondents). A similar proportion introduce the next generation to wealth managers at around the same age. Yet the critical stage of giving the next generation voting rights on decisions involving family wealth comes later: the majority of respondents (56 per cent) noted families wait until children are 35 years old or older.”

“An essential part of ensuring that the rising generation reaches its full potential is education – whether practical or academic. This equips the young not just to be fulfilled in life but also to learn about the purpose and management of a family’s wealth.  … This focus on education is nothing new. Once again, many families take a systematic approach, with some even having their own educational programs.” … clearly this is the reason, why we offer the BeeWyzer NextGen Masterclass.

More direct and startup investments (from The PwC Global Family Office Deals Study 2023 – From Wealth to Opportunities - (https://www.pwc.com/familyoffice)): “However, while overall deal volume is declining, it’s also shifting between asset classes. Our research shows that family offices are increasingly transitioning their investments away from real estate and towards start-ups.” … “While start-up investments now dominate family offices’ deal volume, the story on value is quite different, with direct investments accounting for the largest proportion of money flows, and start-ups gaining ground in terms of deal value.“

“Alongside the recent decline in the volume and value of family offices’ direct deals, we’re also seeing them embrace smaller deals while scaling down large and mega-deals. The proportion of small deals – defined as those with a transaction value of less than US$25 million – among all direct investments backed by family offices rose to an all-time high in the first half of 2023, accounting for just over half of their total deal volume for the first time.“

…if a family office or very often the nextgens themselves, do more smaller deals, this would imply that need for the relevant financial know how, as involvement of professional advisers will become less efficient.

PwC concludes: “Family Offices have expanded their focus from safeguarding wealth to seizing opportunity, wherever it may arise. This change of role and mindset promises an exciting future for family offices.”

All in all, the quotes from relevant professional research houses show that BeeWyzer offers a very timely collection of relevant knowledge responding to these trends. The BeeWyzer Nextgen Masterclass bundles know-how and wisdom from different areas in the depth needed for the younger generation to tackle the challenges that await them.