How to make a successful generational transition?
For many months now, inflation has been the primary concern of central bankers and investors. The ever-increasing pressure that it is exerting on capital has led to fears of the capital being eroded. Yet, while the world has more millionaires and billionaires than ever, it is interesting to note that much of this inflation is due to an unprecedented increase in wealth. This increase is feeding a cycle of ultra-consumerism at all levels and poses significant risks to wealthy individuals in terms of wealth preservation and development. Particularly in the uncertain environment that we now find ourselves in.
In the age of exponential wealth
The exponential creation of wealth in recent decades is rather extraordinary. Symbolised by the Trente Glorieuses period, it is the result of a combination of several factors which, by aligning themselves, have multiplied their effects. We are talking here of the modernisation of production tools and the increase in global productivity linked to industrialisation. The strong demographic growth – from 2.5 billion human beings in 1950 to 7.8 billion in 2020 – has also accelerated the process. In the end, this mechanism has allowed a whole generation of entrepreneurs, industrialists, engineers and financiers to build up enormous economic empires, some even exceeding the financial weight of many states.
Training for succession
This exponential wealth is now in the hands of a whole generation of heirs, who will have to find solutions to consolidate and perpetuate their assets. It is a challenge that of course requires not only specialist skills in many areas, but also a certain vision for the future. In particular, succession and transmission are among the identified challenges. It is therefore easier to understand why the issue of training the next generation has become so strategic for families. Indeed, a family’s wealth has often been built up by one or two visionary generations who have developed successful management skills and a robust business model. While this experience is an asset for running a business, it is also a serious advantage for facilitating the implementation of a structure for overall management of its assets.
The family office as a tool for perpetuating assets
Operating like a traditional company, but with the family as its sole client and owner, a family office must allow for continued income generation while limiting expenses. Contribution from the founders – in capital, vision, and experience – clearly presents strong added value in this context. Being experienced in the rigours of business and entrepreneurship, they will in effect support the implementation of a solid strategy that allows the right choices to be made. And then the time of transition will come: the time for choosing successors among the most qualified and motivated individuals of the “clan”. LThe generational transition is a crucial stage in the preservation of family wealth, because the new generations must be motivated to get involved. Motivation is the main driving force of a successful transition. And to give the new generation the best chance of success, skills acquisition is a must.
Bridging the generational gap
As we know from experience, during a transition, the degree of professionalism of a family office is essential, as it plays the role of a global and multilateral management platform. However, training of the successors is just as crucial, in particular to reduce the following generational gap: the skills of the older generation were acquired on the ground, continuously through business experience, whereas the development of the new generation is focussed more on network building, via schools and universities in particular. This generation is therefore sorely lacking in experience in business management. This is exactly where transmission professionals can intervene effectively. Coming from the world of banking, finance, or business, they know how to train the younger generation for their future mission, that of succession, by supporting them in a complete and tailored curriculum, but also by advising them. Benefitting from the experience of seasoned professionals allows the new generation to acquire skills that will help them manage and administer family wealth with full knowledge of the facts, not by specialising in a niche field, but by benefitting from a broad vision that will put them in an ideal position to continue making the right choices, and, of course, to prepare for the next transition in turn.
Within this context, whilst it is of course crucial to move towards greater equality, it is also essential to work on awareness and on the lifting of obstacles to investment so that men and women alike can draw the best from their assets in the long-term. There are male and female financial advisors out there to help with this, and who allow us to better understand the workings of the markets, but also to optimise our investments. This help can also prove valuable when it comes to planning retirement, managing your tax or inheritance issues or even when drawing up a financial budget which is suited to your life plans. So you don’t need to be a man to take an interest in your future.
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