More Family Offices Are Redefining Why They Have Wealth, Not Only How to Manage It

As the great wealth transfer continues to unfold across the United States, family offices are looking beyond investment strategies to address the growing concern clients have regarding the ‘purpose’ of their wealth. 

More younger individuals are predicted to gain access to generational wealth, and families are challenging the ways it will be allocated, according to a new report from wealth and alternatives manager AlTi Global.

Close to 50% of respondents said they have already started reevaluating and defining the mission of their personal capital and are actively seeking methods to implement plans around it. The figure is up from 33%, which was reported last year, per the Global and Campden Wealth Family Office Operational Excellence study, which was fielded between February and May across 126 family offices. 

As natural disasters and other large economic issues arise, affluent families are tapping into various avenues to help prepare younger family members for looming financial uncertainty. 

As financial literacy continues to play a huge factor in how information is received across generations, about 65% of respondents state that they began leading the drive in guiding the next generation of wealth inheritors. However, the survey revealed that only 17% of respondents report that members from the rising generation, are “very engaged” in defining their financial purpose, while 41% are “somewhat” engaged, 30% are not yet involved in having those particular conversations, and 5% have expressed no plans to involve the rising generation at all. Additionally, 71% have not yet, or not yet fully, engaged the next generation in the process.,” the survey noted.

While gaining mentorship and support from family members who are more educated on wealth transfer can also be a resourceful tool, nearly six in 10 respondents stated they either relied on external support during the process or after, the survey revealed. 

Though, traditionally, clients turn to wealth advisors to assist with multi-generational legacy planning, an increasing number of clients have turned to other efforts that go further from conventional financial planning tools.

“Many family offices are at a pivotal moment as they prepare to transition wealth to the next generation who may have markedly different world views and values,” Jill Shipley, head of Governance and Education at AlTi Tiedemann Global, said. “For many families, the conversation is shifting from simply preparing the wealth for the heirs, to preparing the heirs for the wealth.” 

While wealth continues to grow, about $60 trillion of wealth in the U.S. will go into the hands of Gen Z and millennials before 2048, according to a study from Cerulli Associates. 

Millennials will be inheriting more of the assets over the next 25 years, which is estimated to be about $46 trillion. However, in the short-term of the spectrum, Gen X stands to control about $14 trillion of the assets in the next 10 years, compared to only $8 trillion from Millennials, the survey found.