Educating the next gen at family offices: How to align wealth with values

One of the biggest challenges facing family offices is educating the next generation in financial literacy, governance issues, finding their inner purpose and aligning their wealth with their values.

Yet despite the fact that 60% of family offices say preparing the next generation for responsible ownership was a key concern, only one in five families has an education program in place for that purpose, according to a survey by Citi Private Bank. “Most concerning is the insufficiency of leadership succession planning for families and family offices alike and the lack of educational programs for the next generation,” the authors of the bank’s report wrote.

The need for educational programs keeps increasing amid the great wealth transfer of trillions of dollars from baby boomers to younger generations. “We’re seeing more and more requests for our services,” said Mallory Findley, the head of financial education at Rockefeller Capital Management. The wealth management firm’s program was first used by the Rockefeller family itself, and she and her colleagues are “developing new content and scaling it so that more families have access to our program.”

The Rockefeller program focuses on core areas such as personal finance; wills, trust and estate planning; an investing module that looks at the basics of traditional asset classes as well as alternative investments and portfolio construction; sustainability and impact; philanthropy; and entrepreneurship. The latter functions as a mini-MBA program, Findley said, adding, “So many next-gens have awesome ideas that they would love to get off the ground.”

The importance of such education is clear in the oft-repeated factoid that 70% of wealthy families lose their wealth by the second generation, said Gerry Goldberg, the CEO and co-founder of GYL Financial Synergies in West Hartford, Connecticut. The first step he takes is educating Gen 1 “on the importance of having a sustainable legacy.”

When it comes to the next generations, Goldberg said, “It really starts with making sure everyone has the same tools in their toolbox — at a minimum, financial literacy and basic budgeting skills.” Not having those is like “doing sentence composition without the alphabet.”

The education starts with children in grade school, said Goldberg, teaching them about how to handle their allowance — dividing it up into portions to spend, save and donate to charity. “It provides an opportunity early on to engage in discussions around values and those things that are important in life,” he said.

Along the way, it’s key to tailor financial education to the personality of the family office member. “Some of us are numbers-focused and like graphs and charts," Goldberg said. "Some are auditory learners, some focus on the bottom line, and others want to end up hearing a broader narrative.”

Tutors who work with next-generation family office members are trained to tackle challenges such as bullying at school or neurodiversity, said Mark Somers, founder of the recruiting firm Somers Partnership, which works with family offices and private banks on career development.

“The question is how to help the child in that situation," Somers said. "And parents aren’t always the best at that, and teachers might not be on top of it.”

As the child goes into high school, the focus turns to identifying the child's core passion. "What is their zone of genius, what are they passionate about, what energizes them?" Goldberg said. "It’s about helping them to be better human beings."

That foundation gives young family office members confidence and leads to higher levels of training — from financial expertise in investing topics like derivatives to areas such as governance and management, Somers said. It’s about developing the next generation, “so that there is more of a meeting of minds between the generations as the power shifts.”

That might involve facilitating family meetings where difficult discussions about roles and responsibilities and conflicts can take place, Findley said. That can be a great opportunity for next-gen members to share their ideas and to reveal what is important for each generation through exercises that have participants list their values.

Findley recalls a father-and-daughter dynamic — “what was most important for the dad was the least important value for the daughter” — which initially shocked the father until he started to remember that he shared such values when he was her age.

“Where are the commonalities?" Findley said. "And on the flip side, how can we appreciate our differences?”

In the end, it comes down to understanding how wealth can support the family’s values. “It’s easy to transfer money," Findley said, "not easy to transfer values.” 

The goal of such educational programs for family offices is to get next-gen members to understand the core values and legacy of the family, help them to find their rightful place within the family and show them how to have differences of opinion while maintaining levels of mutual respect.