Modern succession planning

The multi-season saga of the Roy family and their business on HBO’s hit show Succession has captivated viewers. The plot revolves around navigating a chain of crises for both family and business brought on by the patriarch’s sudden and severe stroke. Many may not realize that the drama playing out on TV also plays out in real life every day, with very real consequences.

What’s at stake

The transfer of wealth, power, and strategic controls is always a delicate matter, rife with potential confusion, difficult conversations and intricate complexity.

A family member suddenly falling seriously ill or becoming incapacitated can turn what’s merely delicate into an unwanted and potentially very damaging crisis for families and family businesses grappling with strategic control across generations within the office.

Over $15 trillion of wealth from individuals with a net worth of $5 million or more will be transferred to the younger generations over just the next five years. It’s a tremendous amount of wealth moving in a short period.

New global complexities

At the same time, structuring a family office to thrive once assets and control have been passed to the younger generation is an increasingly complex proposition. Globalization means that family members and assets, such as real estate assets, digital assets, bank accounts and investment portfolios, are spread out all across the globe.  This cross-border complexity, in turn, brings a range of risks that need to be addressed.

Shifting generational priorities

Beyond globalization, current family members and business decision-makers may not see eye to eye with their successors on how to enter new ventures. Members of the younger generation often have different priorities than their parents. Impact and environmental, social and corporate governance (ESG) investing, digital assets, and co- or direct investing are all priorities that need to be considered.

As decision-making power is handed over, expect to see the money allocated to impact investing continue to grow.  Families in the U.S. will likely continue to engage in sustainable investing at a higher rate in the coming years.

In addition to sustainable investing, the hype around digital assets — from NFTs to Bitcoin — shows no signs of decline.  But the world of digital assets is still opaque, and family offices need to understand how they verify sources of wealth pertaining to digital assets, and how they can be structured within a trust and/or other holding vehicles.

Trends we’re seeing

To deal with these complexities, family offices are increasingly turning toward specialized outsourced providers. These experts provide meaningful and usable reporting and analysis of families’ assets and their performance, regardless of where the family members and/or assets are based.

Families are also becoming more sophisticated and utilizing institutional methods that, in practice, have led more family offices either to directly invest in assets or co-invest with other family offices. This brings them in direct competition with private equity funds. Driven by an increase of wealth globally, this trend will continue to snowball, as family offices bring the investing decisions in-house but outsource the administration and execution.

Let’s talk

All of this means it is never too early to begin planning. Families should begin the generational wealth transfer process now to avoid the risk and pain of internal succession crises. Family office wealth and the types of complexities families face will only continue to increase. So, planning for succession now, far in advance of any unforeseen, sudden or unpredictable events, will help set family offices up for ultimate success.

In comparison with traditional money managers, Fremont Bank’s fiduciary portfolio managers understand how complex and personal succession planning can be. Our experienced team is ready to support families beginning or continuing the process. We’d be happy to work with you and your family to create a robust generational wealth transfer plan.

Want more information? Talk to Leandro Vicuña, JD, Managing Director of Fremont Bank's Trust & Fiduciary Services. You can reach him by phone (510-456-6955) or email.