Roundtable: How will investing by family offices change as wealth is transferred to a new generation?
- March 1, 2020: Vol. 7, Number 3

Roundtable: How will investing by family offices change as wealth is transferred to a new generation?

by contributing executives

Roundtable: How will investing by family offices change as wealth is transferred to a new generation? Here is what industry executives have to say.


Mark Bell, head of family office services and private capital, Balentine

ESG investing will go from being a consideration to a requirement as a new generation confronted with a climate crisis and a recognition of the challenges and failures of traditional governance models insists that their investments take into consideration stakeholders and not just shareholders. As intergenerational families seek to have their family enterprise (i.e., family business + family members + family investments) guided by a mission, they will increasingly want their investment program to align with that mission. Social impact will no longer be resigned purely to the purview of the family foundation.


Amy Raskin, senior managing director and CIO, Chevy Chase Trust Investment Advisors
When investments are built around long-term secular themes — such as molecular medicine, automation and the urbanization of wealth — they tend to endure and evolve over time and transition across generations. Younger generations become engaged with our ideas long before they become primary beneficiaries and decision-makers. Two things that do change with new generations are taxes and time horizons. Using a step-up in cost basis helps to tax-
efficiently realize previously unrealized gains, and setting a new asset allocation reflects altered investment objectives. These measures are particularly important after a long bull market.


Brian Spinelli, chairman of investment committee and senior wealth adviser, Halbert Hargrove

We believe that the biggest impact of the generational wealth transfer will be on the interest in ESG/SRI and impact investing. So far, our experience has shown that certain geographies in the U.S. are demonstrating more interest as wealth is changing hands — but this is not uniform across all regions. Family offices with interest in this area will need to clearly define their parameters, as the solution sets within ESG/SRI are quite wide and likely to continue to expand if this trend continues.


Joe Freeman, head of family office services, Abbot Downing

As wealth and control is passed from current “greatest generation” and baby boomers to Gen-X and millennials, several trends should accelerate and develop. Today ESG accounts for 10 percent to 30 percent of investment portfolios, but for many family offices sustainability will become a lens through which every decision will pass. The inclusive nature of the younger generations will mean broader participation by every generation rather than a passing of the baton. Finally, the primary focus of offices will shift from investment companies and operating companies to service organizations supporting the mission of the family.


Michael Farrell, managing director, SEI Private Wealth Management

The fundamental question is this: Do we understand what this generation wants to accomplish with their wealth? This generation is demanding greater impact with their investments and, as a result, we see an acceleration toward ESG adoption — hands-on investing and real assets that simultaneously support a business and philanthropic purpose. There will continue to be a need for lifestyle planning and consequent investing in traditional assets. However, long-range forecasts show diminishing returns for these asset classes, requiring more allocation to alternative assets to fill the gap. This will add complexity in reporting and managing family office assets.


Richard Todd, CEO, Innovest Portfolio Solutions

There will be an increased interest in SRI/ESG/impact investment. Expertise in the space and knowledge of the pros and cons of integrating these initiatives into the overall portfolio and specific asset classes will be required to meet objectives of the next generation. The next generation needs to view their portfolio from a 30,000-foot view that includes all investments — private and public — to make sure they don’t have unwanted tilts or biases. Reporting based on a full picture with accompanying reports will help them make decisions. The new generation will not necessarily stay with their current adviser. It is imperative that advisers establish relationships with the next generation and provide appropriate education.


Patrick Furlong, registered representative at Bangerter Financial Services

Financial planning and investing will not change as wealth is transferred to the next generation in that each heir will have his or her own unique profile that the advisory team must thoroughly understand when developing investment strategies, tax strategies and legal structures. What will change is the way family offices interact with the heirs. Given that most heirs will have been using computers, smart phones and apps throughout their lives and expect service providers to adapt to how they receive and respond to communications, family offices will need to adapt their technology if they wish to keep the heirs as clients.


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