Family Offices Increasingly Looking to Next Generation

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00:00I just want to set the scene a little bit just to contextualize the different families that you

00:04work with. What would be like a typical family's net worth and size? Like what are we talking here

00:09for family office clients for Bank of America Private Bank? Well, it ranges. And in this study

00:14in particular, we talked to over 335 family offices and they ranged from 25 million in assets

00:23that they're managing to over 5 billion. So it really is a wide spectrum of family offices that

00:30we spoke to and we'll talk about here today in the results. So what did you find that was top of

00:35mind for them? What acknowledging that, of course, not everybody has the same priorities?

00:40Yeah, a few things really stood out to us. You know, this was a very rich set of data that came

00:46out of the study. I will highlight that of the clients that we talked to, over 60% of them had

00:54greater than 500 million in assets. So to your earlier question. But some of the themes that

01:01came through, one, I'd highlight, you know, you talked about the wealth transfer that's underway

01:08and that really came through in the results as well. It was really underpinned. We could call it

01:13the great family office transfer. What's not surprising, 87% of the families we spoke to

01:20haven't transitioned yet to the next generation. And that's not surprising. You know, there's really

01:26been an increased velocity in formation of family offices. But what they told us was six out of 10

01:32expect to transition in the next 10 years, one out of three in the next five years. So it's beginning

01:38to unfold. And, you know, as we asked family offices about the implications of that, you know,

01:44they're definitely starting to think about a new generation of error in investing, increased focus

01:52on philanthropy, and a definite increased use of technology. So I think that that wealth transfer

01:58that we're seeing holistically across the U.S. is absolutely impacting family offices. And that's

02:04starting to happen. The second theme I would highlight is the increased focus on alternatives.

02:11What was interesting in the study is two thirds of the of the family offices we spoke to referred to

02:18themselves as conservative investors. But yet their allocation was pretty even between marketable

02:25securities and alternatives. 36% marketable securities, 34 alts. But they're leaning into alts.

02:32When we asked, you know, what do you want? Where do you think you're going to get the greatest return

02:36in the future? What's your area of focus as you look forward? Private equity was number one,

02:41followed by direct investments in companies, followed by real estate. So we see that alternatives

02:47focus, you know, continuing to take center stage. Can I just jump in for a second? I am curious,

02:53do any of them think about in terms of the wealth transfer, what it means? Like,

02:58are they going to also go spending money or like, is it all about, you know, ensuring that the wealth

03:07exists for future generations? I'm just curious if there's a different take, whether it's women

03:11or whether it's a younger generation. Well, it's both. I mean, there's definitely a desire,

03:19you know, what, when we talk to family offices, there's definitely a desire to maintain the mission

03:25and purpose of that family office and why it was created to begin with. And what came through in

03:31the research, which we found really interesting, one of the things we asked family offices is how

03:36involved is your principal in the management and running of the family office? And they have a scale

03:43either, you know, not very, less involved, moderately involved, very involved. And the clients

03:48that have family offices that have less involved principals, they expect 73% of them expect the

03:55mission and purpose of the family office to change when handed to the next generation.

04:01So to us, as we read that, it's a real, you know, call to action that as we know, this transfer is

04:07beginning to unfold, having like early conversations around, like, what do you want that next generation

04:14to do with it? Is it to go spending? Is it to continue the purpose that the first generation

04:21created? Having those conversations and that intention early is paramount.

04:26I'm sure you caught this story in the Wall Street Journal over the weekend, but it was about these

04:30so-called trust reveals where the super wealthy families are having these, not necessarily parties,

04:36but like meetings with financial advisors, maybe family offices to really go through the numbers

04:42of for the next generation. Oftentimes, it sounds like some of these families, they grow up knowing

04:47they're wealthy, but the kids don't actually know they're getting a $100 million trust fund.

04:52What's the communication like? Did that story resonate with you?

04:56Yeah, I think, well, I mean, we see both ends of the spectrum. Sometimes you see families where it is

05:01there, you know, a reveal that happens. Others, though, I find if there's a really intentional

05:08process where that is revealed with milestones and intention, I think that that can have, like,

05:17better outcomes ultimately.

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