As demographic shifts drive a massive international transfer of wealth, the issue of preparing the next generation to inherit is taking on new urgency.
J.P. Morgan Private Bank’s 2024 Global Family Office Report, a survey of 190 global single family offices, found that three issues regarding preparing the next generation had a majority of family offices either very concerned or somewhat concerned:
- They want members of the next generation to have a sense of personal achievement and not have wealth lead to complacency. Among U.S. respondents, 57% were very or somewhat concerned. (International respondents were even more likely to express concern about all these issues.)
- They want members of the next generation to be prepared for the responsibility of inheriting wealth. Among U.S. respondents, 56% were very or somewhat concerned.
- They want to be sure the next generation does not end up having family conflicts over issues related to inheritance and succession. Just over half — 53% — of U.S. respondents were very or somewhat concerned.
So how are families approaching this transition?
“In the U.S., we’re seeing philanthropy being used much more often as a tool to engage the rising generation,” says Elisa Shevlin Rizzo, head of family office advisory for J.P. Morgan Private Bank, U.S. “You don’t have to open the whole balance sheet, but it gives people the opportunity to exercise skills and learn to make decisions with one another.”
Another strategy mentioned may be less promising: shielding the next generation from the family’s wealth. More than one in five respondents said they were doing this.
“That might work when you have younger children or younger grandchildren, or before there’s a liquidity event that goes public,” Rizzo says. “But that might not be a long-term viable plan.”
Interestingly, the percentage of family offices that report using “shield the family” as a strategy drops off with the larger family offices. In the U.S., for example, 26% of family offices with between $50 million and $500 million said they use this strategy, but only 17% of the family offices with over $1 billion did. International family offices followed a similar pattern.
An alternative to shielding family members: Start preparing them early.
“If you start when they’re young, you don’t have to share the balance sheet — that comes later,” Rizzo says. “But you can talk to a 5-year-old about saving, sharing and spending. They learn that money can have different purposes.”