Generational wealth transfer and family unity

The passing of wealth from one generation to the next can have a profound impact on the goals and functioning of the family office, according to Citi Private Bank’s Global Family Office Survey Insights 2023.

“When the third generation is in control of the wealth, they prioritize fostering family continuity and unity twice as much as average,” said Alexandre Monnier, global head of family office advisory for Citi Private Bank.

On average, 21% of families said the primary focus of their family office was fostering family unity and continuity. For families where the first generation controls the wealth, the number was 19%. For the second generation, it was 17%. But for families where the wealth has passed to the third generation, it was 41%.

It’s important to note that this is not simply a question of younger people having different priorities from older ones. Rather, it’s a measure of how much time has passed since the wealth was created, and how many times control of the wealth has changed from one generation to the next.

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Monnier said there are several likely reasons for this disparity. First, families where the third generation is in control tend to be larger. This can mean that they have larger family office staffs and stronger communication and governance strategies. It can also mean they are more diverse.

“It’s not just the parents and siblings who grew up under the same roof and share the same values,” Monnier said. “Family unity and continuity typically requires more intent and attention and focus by the third generation.”

These families may also have learned from watching other families struggle to maintain their cohesion.

There is also “a natural selection element” that comes into play, Monnier said: “The third-generation family offices that did not prioritize family unity and continuity may not be around anymore. Those that are still around are not around by accident.”

This desire to use the family office to promote family cohesion may also be behind another generational gap the survey uncovered: the percentage of family offices that prioritize environmental causes in their philanthropy. For first-generation families, it was only 13%, but the number rose to 43% for families where the fourth generation (or beyond) controls the wealth.

“Most likely, families in which the wealth has already transitioned several times tend to be more concerned about how to engage the next generation in the wealth,” Monnier said. “If you want to use philanthropy to engage them, it cannot be the philanthropy of their parents or grandparents. It has to be something that gets them fired up. You see that trend in those numbers.”

About the Author

Margaret Steen

Margaret Steen is the editor of FO Pro, The Family Office Professional. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years.


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