As baby boomers and older generations pass control of family offices to Gen Xers and millennials, a notable shift in investment strategies is anticipated. A Bank of America survey indicates that 25% of family offices have experienced generational transitions in the past decade, with many current leaders being baby boomers.
The primary concerns for these family offices include educating the next generation and managing estate tax exposure. However, the transition may face challenges, as 84% of family offices with a potential next-generation leader expect the current principal to remain involved post-transition, highlighting the complexities of family dynamics.
Younger leaders are more inclined to invest in alternative assets, with 79% of family offices anticipating a larger allocation to alternatives, particularly private equity and venture capital. Additionally, 27% of family offices led by millennials and Gen Z are invested in sports teams, compared to 16% of those led by boomers.
The younger generation is also more open to leveraging debt for wealth building, with 84% expressing interest in using credit. Newer family offices, often established by private company founders, tend to have different risk profiles and liquidity needs compared to older family offices.
Philanthropic priorities are also shifting, with over 75% of family offices led by the next generation indicating a focus on different charitable causes, such as climate change and human rights, reflecting a broader societal shift in values. This generational transition in family offices could have significant implications for investment strategies and philanthropic efforts in the coming years