The family office examines clients' non-financial and financial concerns, ranging from asset allocation in an uncertain world, through to how to protect privacy in a world of social media.

(An earlier version of this article was published in sister news service WealthBriefing yesterday. The multi-family office operates in a number of jurisdictions, so its findings have international relevance, so we hope readers of WBA find this of value.)

A proprietary survey of almost 300 people by UK-based multi-family office Stonehage Fleming finds that for the first time since it began researching these issues in 2013, the investment environment and political risk are seen as the top two threats to protecting wealth.

The survey, conducted between 20 April and 20 July 2023, assessed the impact of events such as the pandemic, war in Ukraine, slowing economic growth and accelerating inflation on the long-term sustainability of family wealth.

“Our Four Pillars of Capital research has taught us that our clients like to have insight into what their peers are thinking and how they have addressed – or are addressing – the challenges and opportunities that they have in common,” Giuseppe Ciucci, chairman and chief executive at Stonehage Fleming, said. “Observations from our 2023 report have reinforced the importance of preparing the Next Generation to assume the responsibilities of wealth and employing a simple and rigorous process for risk appraisal. Other important themes included the vital importance of understanding your digital profile in today’s world, the potential rewards of involving the Next Generation in philanthropy and the need for clear and effective communication between family members.”

The family office examines clients' non-financial and financial concerns, ranging from asset allocation in an uncertain world, through to how to protect privacy in a world of social media.

The 64-page report identifies four "pillars of capital": financial capital, intellectual capital, social capital and cultural capital.

Reputation threats
Among the topics was the challenge of managing reputations in a time of social media and the public launches of AI-enabled text, audio and image generation services that can produce “deepfakes.”

The study showed that 43 per cent of respondents have no formal process for managing the reputation of their family or its members and only 13 per cent of respondents say they actively track their family’s digital footprint. 

“We are surprised by the data showing how few families are conscious of the digital risks they may encounter. In an age of increased transparency, it is almost impossible to be proudly anonymous. With the complexity that social media brings, it is harder than ever to control the narrative. A digital health check is a sensible element of a comprehensive risk management strategy,” Guy Hudson, partner and head of group marketing and communications said.

Philanthropy 
The study found that 86 per cent of families consider philanthropy a central part of their purpose and values, but almost two-thirds (64 per cent) have no pre-determined budget and make regular donations based on an informal process. Surprisingly perhaps, only 7 per cent of respondents to the survey said they have a formal process for agreeing and appraising the contribution they make to their communities and wider society. 

When questioned on how families communicate their contribution to the community and wider society, 64 per cent of respondents prefer to remain discreet. However, when questioned on the extent to which philanthropic activities should be publicised, 51 per cent said a lack of awareness of the societal contribution made by families and wealth creators could pose a threat to wealth. 

Leadership 
Nearly half (46 per cent) don’t have a formal leadership structure and the ways in which families select their leaders remain diverse. The one clear trend is a decline in preference for primogeniture, the report found. Only 5 per cent of families – and none at all in the US or Europe – now believe this traditional method of succession to be a good fit with the demands of modern intergenerational wealth management (a decline from 20 per cent in 2018). 

In most regions, a substantial minority of families employ leaders from outside the family. While in the Americas, a majority (52 per cent) take this route. When asked how families think leaders should be selected in the future, more than 40 per cent of respondents indicated either by committee, or the wider family. 

More than two thirds of families are taking proactive steps to give the Next Generation a more prominent role in the family, with this trend being more advanced in Africa and the Americas than in the UK and Europe. 

Only 36 per cent of families have an agreed purpose for their wealth; however, for a significant number of respondents, it is the acceleration of political and economic volatility since the 2018 Four Pillars of Capital report that has crystallised their thinking. 

Four common themes in respondents’ philosophies are maintenancing the family legacy, caring for family members, achieving philanthropic goals and fulfilling religious responsibilities. 

This paper was drawn from a 34-question online survey, completed by nearly 300 contributors from families and advisors ranging from 18 to over 80, across Europe, the Middle East and Africa, and the Americas, in addition to the base of participants in the UK and its sovereign territories. Also, wide ranging in-depth face-to-face interviews were conducted with 15 ultra-high net worth families and advisors, discussing their long-term plans, attitudes and concerns.