The next generation of family offices

Murray Bender: RBC Investor & Treasury Services is pleased to present Insights on the future of asset and payment services across the globe. Coming up on today’s podcast is Rebecca Finley-Schidlowsky from Calgary-based Finley & Associates Management Consultants, discussing so-called next gens and how they fit within family businesses and family offices. Welcome, Rebecca.

Rebecca Finley-Schidlowsky: Hey, Murray. It’s so great to be here. Thanks for having me.

Murray Bender: So to start out, Rebecca, how do you define next gens?

Rebecca Finley-Schidlowsky: That’s a really great question. So for me, when I think about a next gen, they’re really the up-and-coming generations within a family business or a family office. And I would really break them down into three key segments.

So I would break them down into, first and foremost, young kids, which I would say are between 0 and 11 years old. Then I would go into your teen segment, which is more your 12 to 16 years old. And then finally, your young adults, which is 17 to 30 years old.

What I would say is that, working with each of these segments, they definitely have their own preferences and ways that you can engage them. And I would say my favourite group to work with is definitely the young adults. They’re awesome.

Murray Bender: Why, in your view, is this segment so important from a family business and family office perspective?

Rebecca Finley-Schidlowsky: They’re literally the future of your family, Murray. And if you think about the longevity and really trying to shift that paradigm away from the “shirtsleeves-to-shirtsleeves,” I quite often find that family offices don’t spend enough time even thinking about how to engage their next gens until it’s too late and their family’s already fallen apart, which is quite sad.

I think that the next gens are so important because they offer such a diverse and fresh perspective that can help pivot legacy businesses into new generations and to new directions, and into the next century.

A really fantastic case study is, if you look at the company Gucci, they set up a shadow board of young millennials in 2015 and they eclipsed their competitor, Prada, just by making sure that their senior executives had regular engagement with next gens. And I wish that family offices would put this more at the forefront of their thinking, too, when they’re considering strategy for the future.

Murray Bender: What do you feel the biggest challenges are that next gens face today?

Rebecca Finley-Schidlowsky: I’d say that there are several, Murray. And the ones that I’ve really come across time and time again, I’d say there’s about seven.

So first and foremost, I really feel this massive anxiety from next gens of not being able to really fill the shoes of those that came before them, especially if they’re in a family office that’s into the second or third or fourth generation. There’s massive legacy that’s on their shoulders, and I quite often feel that they don’t think that they can ever live up to that, what their parents have done. And I really feel for that stress too.

The second one, I would say, is that there’s a major lack of basic financial literacy and business training, especially governance. And so quite often you’ll have next gens that own a bunch of companies, but don’t even understand what they own or how they fit into that structure, whether they’re a shareholder or not. And so I wish that families would take more time really helping their next gens learn those ropes.

The second one that I find is interesting, and I’ve seen it done on multiple levels, but there’s a major lack of transparency regarding the magnitude of the family’s wealth, and really what the succession plan is. Although I have seen some families really be very transparent and sit their next gens down and tell them at age 15, this is what you’re going to be inheriting and this is not what you’re going to be inheriting. But I’ve also seen the other extreme, Murray, where they’re not told anything and kept completely in the dark until suddenly the patriarch or matriarch passes away, and they’re kind of completely overwhelmed with the magnitude of what they have to overtake.

The other one I’ve noticed too is that they’re excluded or not engaged early on, which kind of feeds into the previous point, so just left in the dark for way too long, which I think is a really massive, missed opportunity for capacity building. And I’d say that families don’t really think meaningfully about how they can contribute to the current family structure. So you could look at a 15- or 16-year-old and think, what could they possibly do within a family office? But there’s a lot of opportunities that I’ll touch on a little bit later to engage them, say, in your family foundation or your family retreat to start building those leadership skills early on.

The last two points, I would say, for biggest challenges—I know this list is pretty big—is that they don’t often trust people, and they are very skeptical because they know that people know that they have money. And so they’re very worried about who they’re going to work with and being taken advantage of.

And the second point of that too is that they often lack the connections or networks that you think that they’d have. And so just because their parents are well connected, they quite often don’t have the connections or they want to foster their own networks themselves, but don’t know how exactly to do that. So I often play a role in connecting them to people that I think are fantastic.

And then finally, and this is kind of an interesting one, but I’d say that they don’t spend enough time thinking about their “ikigai.” And I don’t know if you’re familiar with that term at all, but it’s this Japanese concept of what is your reason for being. So if you’re given this life of immense privilege, what are you doing when you wake up in the morning? What are you really doing to give back and help society move forward?

And so those would be some of the biggest challenges, I would say.

Murray Bender: A lot of challenges.

Rebecca Finley-Schidlowsky: Yeah.

Murray Bender: What do you find most surprising about today’s next gens?

Rebecca Finley-Schidlowsky: I think that they’re not given enough credit for how thoughtful they really are and how much they want to change the world. I think that they’re increasingly passionate about ESG, so the environment, social and governance initiative. And they really want a lot of corporate transparency. They want diverse boards. They want those voices that have been previously excluded at those decision-making tables. And I think that that’s so phenomenal and that’s a great push forward.

I’d say that they also have a massive thirst to learn and contribute, if they’re given the chance, but they’re often excluded or thought that their ideas aren’t good. And I would say, especially if they come from not a typical business background, if they’re more the artist in the family or the musicians, quite often families will overlook them because they didn’t get a business undergrad or an MBA. But I’d say that sometimes the best thoughts and ideas and creativity come from those family members. And so I think if you give them a chance, it would really surprise you where they can take you.

I’d say that they also understand that they come from a place of privilege, but they really need help figuring out and guidance on how can they best impact the world.

And I’d say finally, what I’ve noticed is that they work differently from their generations before them. I mean, I work with my mom, and her and I work very differently. She’s very much the 9 to 6 to 7 p.m. and I work at different hours. And I’d say next gens are striving for more of that work/life balance, and they recognize that life’s not only about money. And I think that that’s a big shift we’re seeing.

Murray Bender: You mentioned engagement. What are some of the different strategies to engage the next gen segment?

Rebecca Finley-Schidlowsky: Great question, Murray, and I’d share a few with you.

I’d say the first and foremost one that’s really cool is that very sophisticated family offices will often host annual strategic planning retreats, so very much what you would see in the corporate world. And they focus on informal and formal activities mixed together. So these retreats will include multiple days where family members of all ages and backgrounds come together. And they could include skills building, so maybe the opportunity for your next gens to present the business case that they’re working on to their family members for feedback or possible investment. They quite often have external speakers that will come in and speak about financial management or insert other topics that the family’s interested in that year.

The other one that I love is that there’s a lot of leadership opportunities. And I’ve helped families host gingerbread competitions, which sounds crazy, and it’s so much fun because you can engage kids as young as four years old into a high-pressure situation to learn about leadership. And it just brings everyone together and I think it’s really cool. So that would be one type of tool that I’ve seen families use, are these annual family retreats.

The other ones that are really cool is quite often families have started setting up investment councils to get next gens really engaged early on to start learning about investing, and how do you invest in different kinds of companies, and what does that mean to invest in a start-up versus the stock market. And they’ll quite often watch movies together. I know some families have seen ones like the Fyre Festival and then they talk about what went wrong in this case, and where would you have gone differently. And I love that kind of knowledge sharing.

And the final one I mentioned earlier on is the foundation I think can be used as a very critical tool for allowing next gens to not only chair and understand how a board works, but also giving them the opportunity to have governance experience firsthand, which then could lead them to possibly being a shadow board member at one of their family’s operating companies, or to eventually sit on one of their family’s operating boards.

Those would be some of the ones I would think of.

Murray Bender: I certainly hope you invite me to your next gingerbread competition, Rebecca.

Rebecca Finley-Schidlowsky: Definitely. It’s stressful, I’m going to tell you that up front, Murray, but they’re fun.

Murray Bender: Yeah, I don’t know if I’m up for it, but thanks very much for helping us better understand next gens, Rebecca. We really appreciate your time.

Rebecca Finley-Schidlowsky: Definitely, Murray. Thank you so much.

Murray Bender: For additional insights on topics relevant to corporate investors and financial institutions across the globe, including our previous podcasts, visit I’m Murray Bender. Thanks for listening.

This content is provided for general information and does not constitute financial, tax, legal or accounting advice, and should not be relied upon in that regard. Neither RBC Investor & Treasury Services nor its affiliates accepts any liability for loss or damage arising from use of the information in this podcast.