A generational transition in the family office can be challenging for the person who is retiring, for their successor and for the family office as a whole. With that in mind, it’s understandable that everyone involved may approach these transitions with some trepidation.
“The current decision makers have likely been in the roles for some period of time,” says Jonathan Flack, PwC’s global and U.S. family office and family business leader. “So there’s a high degree of comfort with those individuals. There’s also a high degree of expertise.”
“As they move to the next generation, some families are thoughtfully thinking about spreading out some of their decision making among multiple parties instead of having them concentrated in one or two individuals,” Flack says.
Why do some generational transitions turn out to be difficult? One reason is what Flack calls “the legacy challenge, where the current generation is reluctant to stand aside.”
“That’s a challenge for a lot of leadership as their identities are built up the roles that they have,” Flack says. “Respecting that challenge is really important.”
A situation in which a family office leader resists retiring can happen both with family members and non-family professional staff.
“Sometimes there’s so much identity wrapped up in it: ‘I play this role for my family’ or, for a non-family member, ‘I have worked for the XYZ family for 30 years,’” says Kirby Rosplock, founder of Tamarind Partners.
Taking the time to create — and communicate — a clear succession plan can pay dividends at all levels of the family office.
For example, Rosplock says, a planned handoff, with key nonfamily leaders shadowing the outgoing leaders, can be an important part of illustrating that the family office is intentional with its strategic plan. This makes it attractive and a good place to work.
“You’re showing other key family office professionals that people can ascend, if that’s how it’s happening, or they’re having very clear line of sight of how someone is being brought in,” Rosplock says.
A solid plan will be both strategic and tactical, Rosplock says.
“It’s a roadmap of how the family office will get in front of the upcoming opportunities and hurdles, such as a trust termination, an operating company that’s getting ready to be sold or a generation of family owners that are no longer going to own the family office,” Rosplock says. “The strategic plan is really critical for the family office to be able to meet these challenges of succession.”