Rethinking Family Office Succession

Small Business

The following article first appeared in the Insights section of Mercer’s website. It is reposted here with permission.

For successful succession planning, a well-designed wealth planning strategy is essential.

When the transfer of authority within a family office is not managed effectively, it can put the preservation of a family’s legacy at risk.

A disrupted transfer of power and authority can result in the wealth and success built by one generation being eroded or lost by the next.

Smooth, effective transition is facilitated by a well-designed wealth planning strategy, backed by a strong governance framework and capable investment managers. 

Successful succession planning requires addressing a number of sensitive complexities.

Successful succession planning therefore requires addressing a number of sensitive complexities. These include managing family dynamics and unity, navigating wealth transfer and inheritance matters, and finding a harmonious balance between the different interests of different family members.

While global family office surveys have consistently identified succession planning as a critical concern for single family offices, a significant number of family offices are yet to establish a formal succession plan.

An issue that often arises in family offices is a tendency for younger members to feel frustrated or ignored by the principal or founder, particularly when the older party is reluctant to delegate responsibilities despite their advanced age.

It is essential for the new generation to have the opportunity to gradually participate in investment management, take on responsibilities, and be actively involved in the decision-making process.

Family Narrative

Extensive research indicates that incorporating a narrative into the governance framework of a family office can significantly enhance understanding and communication within the family, particularly between different generations.

In the past, traditional family charters have been used to outline roles, responsibilities, privileges, historical context, guiding principles and vision. 

However, a governance framework that incorporates a narrative brings a personal element to this process—one that is very memorable.

Narrative frameworks aim to mitigate conflicts, align common goals, and foster positive outcomes for the family.

Unlike a traditional family charter, a narrative is a story that resonates with all family members. It often reflects their individual perspectives, and includes emotions, memories, and personal connections. 

Such narrative frameworks aim to mitigate conflicts, align common goals, and foster positive outcomes for the family.

Indeed, academic studies on governance frameworks and succession have revealed that integrating family narratives into the process can improve these outcomes.

Process Issues

Researchers have identified the following key findings in this regard.

Intergenerational transition is “the ultimate challenge” facing family offices. This is due to the complex task of transferring wealth, values and leadership across generations.

However, effective communication, education and governance structures can serve as mitigating factors that will help family offices navigate this challenge successfully, while preserving family unity and legacy.

Succession is not a single event, but a multi-faceted, delicate and slow process. Careful planning, mentorship programs and professional guidance are key to facilitating a smooth transition.

Succession is limited by silenced or hidden family narratives. It is therefore important to remember that individual choice shapes the narratives shared during succession. A shared narrative can minimize misunderstandings and problems, foster open communication, encourage active participation from all family members and create a safe space for diverse perspectives.

“Founder myths” can either motivate or create emotional burdens. It is therefore essential to foster a supportive environment and provide a balanced perspective. By doing so, the founder’s story can be transformed into a source of inspiration.

Narratives are not always cross-cultural and are dependent on the generations of family involved. European, American, Middle Eastern and Asian family narratives can differ significantly in their resonance and relevance due to distinct cultural contexts. To address this challenge, be mindful and adapt narratives to specific cultural contexts.

Narrator bias is a risk when the narrative process becomes romanticized. A narrator with a particular agenda could potentially offer a biased or exaggerated account of events that limits the potential for interpretation. This can result in a narrow understanding of the story’s meaning. To address these challenges, it is important to question the narrator and consider the perspectives of other family members involved in the story.

Target Operating Model

Having explored the rationale for integrating a family narrative into a governance framework, we will now delve into the design and implementation of a bespoke target operating model, of which the governance framework is a crucial component.

To effectively design and implement a bespoke target operating model for a family office, it is essential to consider a range of factors. 

This process begins by asking pertinent questions about the family’s vision and purpose. 

  • How does the family office identify or present itself?
  • What is the relationship between the family office and the family business?
  • How will the family business affect the investment beliefs and philanthropic activities of the family office?
  • What does the ideal operating model for the family office look like?
  • How can people, technology and processes synergistically support the family’s objectives and enhance the overall experience of its members?
  • How should the future family office be structured to execute the family’s strategy effectively?
  • What are the expectations of family members that need to be incorporated into the family strategy?


Next, conduct a thorough and honest assessment of the family office’s past and current state. This involves gaining a comprehensive understanding of its history, maturity of investments, familial dynamics, prior experiences, governance practices and level of automation.

You should also consider the impact of these factors on the business and the overall sustainability of the family. This assessment can be conducted through various methods such as interviews, questionnaires, genograms, workshops and data analysis.

Once the current state is assessed, it is important to establish a baseline for the family experience by evaluating how different generations perceive the family office.

Additionally, it is vital to consider the interactions that will drive the family office succession. For example:

  • What role will the family office founders and executive leaders play? 
  • How can they transition from enforcing business rules to mentoring the team?
  • What types of interactions should be personal?
  • What key roles are necessary to facilitate a successful succession?
  • Which communication channels will be most effective in reaching different generations within the family and among non-family members?

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