Who are they and what is so mysterious about the ‘Next Gen’?
The Next Gen(s) with their very own colloquial terms, are filled with vibrancy, individuality, intelligence and passion. They are advocates of international social, political and environmental causes. Having been exposed to terrorism, economic instability, climate change and different humanitarian challenges around the world, the Next Gens are stalwarts for human rights and social justice and eager to make this world a better place.
Whether Gen Y (the Millennials born 1982-1994), Gen Z (the Zoomers born 1995-2012) or Gen Alpha (the i-Generation born 2013-2025), these digital natives naturally align themselves with technology for communication, shopping, education and socialising. They collaborate with each other and share a positive mindset.
On the other hand, their predecessors (the Silent Gen born 1925-1945, Baby Boomers born 1946-1963 and Gen X 1964-1994) having lived through some major world events likeWorld War II, the Great Depression, the Atomic Bomb and economic turmoil has resulted in many different beliefs and ideals than those of newer generations. One job or one marriage often lasted an entire lifetime. The Boomers, often being described as ‘a generation of workaholics’, value teamwork, growth and success. Due to their belief in hierarchal structure and traditional approach, they may find it more difficult to adjust and adapt to modern flexibility trends than that of our new generations.
Approach to Generational Wealth
It should be no surprise then that the approach to generational wealth and family values can differ greatly from generation to generation. The Boomers, for example, may wish to preserve their hard-earned family wealth and have their same ideals and values carried on by the Next Gen. However, with each new generation comes new perspectives. Having an innovative and entrepreneurial mindset in this ever evolving world the Next Gen may not have these same ideals and beliefs. They may have very different plans for their future inheritance than traditional family values and wealth preservation. The transfer of family wealth and legacy to the Next Gen can then often become a challenging and complex road to navigate.
There is the old adage from the 20th century ‘shirtsleeves to shirtsleeves in three generations’ which is intended to mean that wealth gained in one generation will be eroded by the third. According to Forbes “Millennials are banking on the Great Wealth Transfer. The Silent Generation and the Baby Boomers, upon their death, will transfer an estimated $30 to $68 trillion to adult children’ in the next few years. So will this old adage stand up?
To avoid becoming a shirtsleeve statistic, families can take certain approaches to ensure effective family succession to their Next Gen.
If a family’s goals and values are misaligned, a family will not be unified which can result in breakdown in communication and next generation succession. In contrast, families that place emphasis on a value based culture and work to ensure that all family members are aligned in the family vision and have a shared purpose are most likely to succeed in a multi-generational transfer
of wealth and legacy. Arranging and attending regular family meetings and gatherings ensures that family cohesion is maintained. All members, including Next Gen leadership, can participate and provide their input in the family values and what they feel is important to them. Differences and skill sets are identified and accepted. The family bond across different family segments is enhanced and a sense of belonging becomes more defined.
The unique skill set of the Next Gen
Due to advanced technology and ease of access to the internet, the answers to most of life’s questions are one click away. The Next Gen have access to investment and financial information at their fingertips. There are exposed and educated in block chain technology and digital assets. Being passionate supporters of climate and social change, LGBTQI+ causes and other human rights, the Next Gen may wish to invest some of the family’s wealth for the betterment of the world or bring innovative ideas to the table. This may present a challenge for current family leaders and advisors to manage due to their traditional investment styles and support of different causes. However, to disregard or ignore such values and beliefs could lead to feelings of alienation and being undervalued by the older generation. Instead of being dismissed, their ideas should be explored. To integrate passions and skill set effectively into the family enterprise creates a sense of personal connection, business acumen and self-worth for the Next Gen, while adding new values to the family cause.
When it comes to succession planning, open and honest lines of communication is vital. This is important from both the current family leader’s perspective and the younger family members. Perceived conflicting feelings of either a sense of entitlement or feelings of entrapment can be common amongst the Next Gen. Some junior family members may believe the natural succession for all roles and responsibilities would be handed over to them and feel comfortable with this idea, even though that may not be the case. On the other hand, other members of the Next Gen may feel overwhelmed and burdened at the thought of such responsibility and feel trapped within the family and its business. They may have a strong desire to leave, to build a career of their own and to establish their own independent life. Current family leaders should be very mindful of this, especially if certain members of the Next Gen are expected to take the reins. Failure to effectively and transparently manage expectations is a common reason for relationship breakdowns. An open dialogue is necessary to ensure that all family members understand their roles and responsibilities and the specific skill sets required to carry those out.
In order to prepare the Next Gen for their responsibilities they must be equipped with the proper tools to ensure they can make informed business decisions. Traditional education, together with practical experience, and exposure to the family business is critical. Involvement in the day to day running of the family enterprise will allow for greater decision making in the future.
Having established that a shared sense of purpose, open and regular communication, transparency, education and involvement are key tools to succession planning, the importance of family governance for multi-generational families cannot be overstated. While governance in a family business is usually informal rather than the more formal governance as seen in larger corporate institutions, the use of Family Charters and Family Councils will not only ensure a well-governed decision-making process but will also provide clear guidance and support for the Next Gen to successfully carry out their new responsibilities.
As professional Trust Advisors, we form an integral part of our client’s family succession planning needs. Our ability to adapt to new trends and be receptive to change is essentially the ability to evolve with the world around us. By taking time to listen and understand our client’s needs, and their family’s diverse generational views, we can create not only long-term relationships but also ensure the Next Gen are thoughtful stewards for the family’s wealth and lasting legacy.