• David Grammig

The Pandemic’s Effect On Family Office Succession Planning

The COVID-19 pandemic became a wake-up call for most affluent families. Apart from noticeable economic disruptions, the already problematic succession planning sector cued family offices to take a good look at established practices and come up with more relevant solutions. Let’s look at family office succession planning from the perspective of challenges to overcome and new factors to consider.


Main Challenges Of Family Office Succession Planning

According to most family offices reports, succession planning has always been a rather sensitive topic for UHNW families. It’s not at all surprising, as the concept of arranging inheritance goes hand-in-hand with death, intergenerational trust, and power shifts. Therefore, while some family principals addressed the issue only partially, others disregarded it completely. However, the global pandemic’s unprecedented events acted as the splash of cold water, prompting family offices and their clients to reconsider their approach.


Discussing succession is challenging on several levels beyond sentimentality. Starting with a constant re-evaluation of the overall strategy and its implementation tools, all the way to hiring top-tier experts to bring the plan into action. And the intergenerational conflict only adds gasoline into the fire, as the younger generation often finds it challenging to comprehend the preceding practices and organizational mechanisms.


Effective family office succession planning is always associated with the high complexity of marrying many factors and opinions to consider. As practice shows, many FOs employ entire departments of experts who monitor succession planning procedures’ relevancy and urge the family to approve the necessary changes whenever they might occur. Needless to say, it can take up a great deal of time and effort to get everyone on the same page and persuade them to alter the course.


But as the rapidly unraveling pandemic showed us, there isn’t always enough time to make informed decisions. This means that the family offices have to develop action strategies in advance by doing the impossible and expecting the unexpected. One way to accomplish such a task is to consider the transformed reality brought to the table by the coronavirus from every angle.


What Family Offices Should Consider Post-Pandemic


The virus-related crisis affected each individual investor and each UHNW family differently. For the most part, due to the variations of preferences in the investing classes. This way, those who bet on digital media, healthcare, and residential real estate, for example, before the pandemic hit, were able to weather the storm with minimal or no losses compared to investors who favored the hospitality and transportation sectors.


According to the industry insiders, timely asset re-allocation serves as a number-one tool against the effects of global uncertainty. Family offices had to act and act fast. Luckily, similar to the most recent crisis of the preceding decade, the market automatically transformed into a very convenient environment for anyone who has the means to shift between the investing classes. The reduced interest rates presented dozens of promising, tax-efficient opportunities, allowing family offices to choose the most optimal and profitable paths for their clients.


But despite the fruitfulness of the low rates, financial gain turned out to come second after slightly more abstract values, such as human connection. ‘Family’ is the first word in ‘family wealth, and the horrifying reality of the global health crisis managed to remind this simple fact to the affluent leaders. And while on the one hand, some families adjusted to the new circumstances well, others struggled with spending more time with each other than they were used to. This means that effective succession planning is only partially about the asset organization, and mainly — about rediscovering the personal bonds.


Finding The Most Effective Solutions To Succession Planning


The challenges introduced by the global pandemic are highly unique, but the best ways to address them are quite fundamental. For instance, most intergenerational disputes link to a lack of communication, and with it — lack of understanding for each other’s visions. The most straightforward fix, in this case, is for anyone from the family office or from the family itself to initiate an honest conversation. Employing psychological counseling during this process can become a powerful asset towards clear, straightforward, and at the same time, heartfelt interactions.


The central theme of any effective family office succession planning strategy is compassion. Passing along the reins of power, accepting responsibility, and compromising are all matters of enhanced emotional gravity. The elderly leaders have to make peace with the fact that they will not remain behind the wheel forever. At the same time, their successors need to comprehend the significance of the responsibility passed along to them. In fact, it might make sense to set the financial planning aside until the family members manage to balance their feelings and visions for the future of the family business.


Proper communication is a universal tool in family office operations. By interchanging opinions and ideas, both family members and their advisors will develop nearly foolproof strategies. Because even if the family head has no plans of leaving their post in the nearest future, a forward-looking mindset will always benefit the family’s wealth. Investing in innovation in particular, and next-generational practices, in general, are excellent methods of contemporary asset allocation and a powerful glue between generations.


Finally, the key to most effective family office succession planning, whether during the pandemic or regular times, is to realize the complexity of every family’s beliefs and possessions. Ideally, the family office will have an in-house expert for each branch of the client’s wealth, from basic equity investments to luxury portfolio items. This way, no matter the gravity of any particular crisis, the family will always have the most immediate and bespoke response to any inquiry type.


Family Office Succession Planning, In Short


Family offices across the globe are facing a unique set of challenges caused by the pandemic. The already delicate topic of succession planning has become even more emotion-filled as it went from important to crucial. However, this isn’t the time to panic, but to learn from those who managed the crisis by adapting to the new normal, enhancing communication, and growing stronger through broadening their horizons.



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