A Brave New World – The Return of the Trusted Adviser and the Commoditisation of the Family Office

I am intrigued by the strikingly different views of the next generation, and how families can proactively plan a successful transition of wealth from one generation to another, even where the attitudes of parents and children differ radically. I wrote this article for ePrivateclient’s Swiss Report, published on 1 June 2020. The original article can be found here https://indd.adobe.com/view/8e8e7c08-ca99-4f9c-906f-81a34fe8413a

Every generation despairs of the next, and when we read about ‘millennials’, the terminology is particularly disparaging. ‘Snowflakes’, we hear, are all about eating mashed avocado and no-platforming speakers whose views differ from their own, and can’t read Jane Austen without a trigger warning.  The subtext is that, by the time they are 40, with children and a mortgage, they will (or should) think more like ‘us’.  Let’s test that assumption – while their views (and appetite for avocado) may soften, all the signs are the next generation are genuinely different, and in ways that will prove both interesting and challenging for their parents, and their investment managers.

Let’s take Fintech, for example.  Generation X (the parents) may be active, keen investors in this space, but few will understand it with the instinct of someone who has grown up with technology. Millennials’ lives are connected, online, instant and collaborative (in the sense that they share huge amounts of personal data daily).  Generation X remember the Dotcom bubble with pain; the naïve idea that you could put “.com” at the end of a business name and watch it make your fortune.  But even the oldest Millennials were still in their teens then, and the Fintech businesses they start or work for bear no relation to the 20-year-old forays their parents made into the world of technology. 

Healthcare and wellbeing are important to Generation Y (the Millennials), who largely reject the driven (or they might think greedy) culture of their parents in favour of more balance between work and personal life.  Don’t assume they lack ambition – when one City employer recently created a new platform for working in a more relaxed way, the younger generation kept showing up at the office.  But if this lifestyle feeds into their investment preferences, expect them to be interested in home-working technology, health and wellbeing apps, and other areas reflective of their choices.  You and I may be the wrong demographic to see the thrall of app-led spinning classes at home, but ask your children or younger colleagues how they feel about this.

Work-life balance is one thing, but Millennials do want everything else right now.  Business (perhaps especially retail) has speeded up exponentially over the last 15 years. If you’re a twenty-something and you can’t get what you want immediately, your parents may wait, but you’ll look online for a way to find it quicker.  That generational difference is most evident still in the world of banking: a bank which takes a month to open an account has a short time left to learn from the Tides and the Starlings which take 48 hours, or become irrelevant to Generation Y. A bank which lets you (with passwords and secure number generators) access your balance or make payments online is in the dark ages compared to the app-based banks which give you real-time updates on your neatly-categorised spending.  This translates elsewhere. Wait five days for your department store delivery, or same-day service from Amazon Prime?

As for the environment, when Generation X think about ESG and impact investing, it may motivate them to invest away from oil and gas and other obvious evils, or offset their carbon footprint.  Millennials may regard that as simplistic – offsetting is an apology for bad behaviour, which could be avoided or reduced.  They may look with more interest at investment opportunities which focus on new technology or new methods.  Anecdotally, they may be content with lower returns as the quid pro quo for doing the right thing.

In many ways, of course, Generation X are still correct.  Someone will always manufacture and supply the toothpaste, the bread and the bricks, and those things are unlikely to go out of fashion.  Perhaps this is the perfect illustration of how both generations can be right simultaneously.  Over time, forward-thinking families will neither subordinate the views of the next generation to those of their parents, nor rush to embrace them.  They’ll take a balanced mixture of both.  To do that successfully, however, one has to let the children become part of the decision-making process – not just continue with the parents making all the decisions and trying to understand the benefits of Fintech and ESG, and equally not letting the children take the reins (yet), but giving them the opportunity to learn the benefits of longer-term, more physical investments and sharing their ideas.

Ironically, self-isolation is teaching all generations the value of remote working, video conferencing apps, and online deliveries, and it has had equally devastating effects on airlines, department stores and other more traditional businesses. Will companies continue to regard big premises as essential?  Will we become more, or less, reliant on global supply chains? It will be fascinating to see how this shapes future investment portfolios, with or without the input of Generation Y.

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Arabella Murphy