As generational wealth transitions from founders to heirs, family offices face a pivotal challenge: remaining relevant and resonant with the next generation of trust beneficiaries.
How well does the family office know the dreams and goals of the next generation of trust beneficiaries? While family offices often have strong relationships with grantors, it’s not uncommon to have little communication or connection with younger family members. Previous studies found that 70% of wealth transfer plans fail to achieve their goals, which could be a result of inadequate succession planning and poor implementation. Connecting with the next generation and educating them on their family legacy is critical for a successful relationship and a productive family office dynamic.
While trusts are a basic instrument of wealth planning, trust beneficiaries may not fully grasp the trust’s administrative details and wealth growth opportunities. In this blog, we look at the importance of engaging with the younger generation and how to connect with these individuals to best serve a multigenerational family client.
Understanding and Engaging with Younger Generations
Keeping the grantor’s intent as a priority is a must. However, opening up conversations with all generations of a family client allows the family office to identify areas of understanding, education opportunities, and future leadership options while building a rapport with members of the next generation.
Get to Know the Next Generation
The needs and wants of each trust beneficiary can vary greatly. All clients are unique individuals and will have their own interests, goals, and preferred communication methods. To engage these individuals, you need to know how to connect with them. Find ways to meet them where they are:
What is their financial literacy level?
Some individuals know little about budgeting, saving, and opportunity cost, while others may be more prudent with their financial resources. Determine how you can best serve them based on their individual needs and understanding.
Discover their interests.
The interests and values of trust beneficiaries can vary despite their similar age. One family member may be philanthropically inclined while another is eager to further grow the family business. Learn what individuals like and help them see how their investment in the trust can allow them to pursue their own goals.
Do they prefer to communicate via text, email, or phone?
The age of your beneficiary will impact which communication method they prefer. Find what works best for them and use that method. What’s most important to the client is that you provide open communication and are available to help them understand the complexities of the family trust(s).
Establish Trust
Trust is vital to smoothly completing the wealth transfer plan. The earlier and more often you can have conversations with the younger generations, the more likely you are to solidify your relationship with each individual. Remain neutral and keep conversations confidential.
Unforeseen events can lead to sudden changes in a multigenerational family client, especially if the grantor is an older adult. Without establishing connections, working with the next generation may be complicated and could significantly disrupt family harmony and family office operations.
A common way to build connections with the next generation is by sharing the family history—from how the wealth came about to the values established by the grantor and the family’s desires moving forward. This type of communication can establish great rapport with family members in every generation.
Identify Opportunities for Growth & Leadership
Interacting with the next generation allows younger family members to get to know who they will work with directly in the future. Future generations can collaborate with the family office and trustee(s) to learn more about how the family trust(s) work. Through these interactions, the family office can pinpoint individuals who might be a good fit for additional responsibility during or after the wealth transfer process.
How To Build A Strong Relationship To Ease Wealth Transfer
Communicate Expectations Early
It is never too early to discuss a trust’s purpose and goals with beneficiaries. Older generations sometimes keep financial information private, even from their family members. When wealth details and plans are not communicated clearly with others, correct or incorrect assumptions can take hold. Hiding the trust’s intentions can often lead to disappointment, hurt, and confusion among family members.
Cumberland Trust helped moderate a conversation between a client and their family to explain the goals of the client’s trust. The grantors were generous with their wealth throughout their lives and weren’t planning to leave large sums of their estate to the next generations. The grantors wanted to communicate how the distribution of wealth would be prioritized. First, it would be used to care for the matriarch and patriarch during their lifetimes. After their deaths, a small amount would pass to the heirs, while the remaining amount would go to selected charities. Cumberland Trust facilitated this conversation to avoid future disappointment or confusion when the wealth transfer occurred.
Listen to the Trust Beneficiaries’ Goals
Trust beneficiaries’ goals and values could differ from the grantor’s, impacting how they view the trust. Common priorities of the next generation include:
- Homeownership
- Entrepreneurial business ventures
- Technology
- Impact investing
- Charity/social causes
Each of the above examples could require a different type of plan to help the beneficiary realize their goals. The trustee and family office can play an important role in hearing their desires and helping them understand how to utilize the trust assets.
Give the Next Generation Responsibilities
To build and grow relationships with the younger beneficiaries, give them opportunities for involvement. Actively engaging with the next generation through avenues such as learning trusts, philanthropy, real estate management, or working for the business can help identify future candidates for leadership. The younger generations will also feel more connected to the family office and invested in protecting the family legacy when they can contribute.
Cumberland Trust has worked with families that have used philanthropy as an educational tool for the next generation. For example, a grantor may task beneficiaries with researching and vetting charities/philanthropic events to receive funds from the family foundation. The family then votes on the charities proposed, and the selected charity receives the funds. This exercise helps beneficiaries better understand the operations and goals of the foundation.
Supporting Multigenerational Families With the Right Trust Partner
Working with a multigenerational family can be daunting. But with the right trust partner, you can provide your clients with a collaborative support system to guide them through wealth transfer planning.
Cumberland Trust helps families preserve their wealth and harmony with independent trust administration that avoids emotional or financial conflicts of interest.
Commitment to Flexibility and Creativity
Many beneficiaries have specific intentions for their trust distributions. Cumberland Trust takes a relationship-based approach, striving for solutions to address beneficiary needs.
Centralized Expertise and Experience
Our internal team comprises legal, tax, and high-net-worth wealth transfer experts to provide professional, knowledgeable guidance at a moment’s notice.
Open Communication to Preserve Family Harmony
As an independent, objective partner, we can navigate family politics or influence to meet the clients’ needs.
For more ways to engage the next generation, contact Cumberland Trust.