Family Offices Look to Next Generation of Investors

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2:44Now, the study covers a lot, everything from AI and alternatives to wealth across generations and wealth transfers of more than$100 trillion, more like$124 trillion over the next decade to heirs and also to women. It's something that we have talked about a lot in our weekly discussion, Women, Money and Power, where we look at all the economic implications of the massive wealth transfer that's underway. How is impacting, Tim, the investing, saving and also giving landscapes? With some thoughts on that, we welcome Elizabeth Thiessen, head of Family Office Solutions at Bank of America Private Bank.

3:17It's got some$447 billion in assets under management. She joins us from Charlotte, North Carolina. Elizabeth, how are you? I'm great, Tim. Good to be with you both. It's good to have you with us. I just want to set the scene a little bit just to contextualize the different families that you work with. What would be like a typical family's net worth and size? Like, what are we talking here for family office clients for Bank of America Private Bank? Well, it ranges. And in this study in particular, we talked to over 335 family offices, and they ranged from$25 million in assets that they're managing to over$5 billion.

3:53So it really is a wide spectrum of family offices that we spoke to and we'll talk about here today in the results. So what did you find that was top of mind for them, acknowledging that, of course, not everybody has the same priorities? Yeah, a few things really stood out to us. You know, this was a very rich set of data that came out of the study. I will highlight that of the clients that we talked to, over 60 % of them had greater than$500 million in assets. So to your earlier question. But some of the themes that came through, one, I'd highlight, you know, you talked about the wealth transfer that's underway, and that really came through in the results as well.

4:38It was really underpinned. We could call it the great family office transfer. What's not surprising, 87 % of the families we spoke to haven't transitioned yet to the next generation. And that's not surprising. You know, there's really been an increased velocity in formation of family offices. But what they told us was six out of 10 expect to transition in the next 10 years, one out of three in the next five years. So it's beginning to unfold. And, you know, as we asked family offices about the implications of that, you know, they're definitely starting to think about a new generation of error in investing, increased focus on philanthropy and a definite increased use of technology.

5:22So I think that that wealth transfer that we're seeing holistically across the U.S. is absolutely impacting family offices, and that's starting to happen. The second theme I would highlight is the increased focus on alternatives. What was interesting in the study is two-thirds of the family offices we spoke to referred to themselves as conservative investors. But yet their allocation was pretty even between marketable securities and alternatives. 36 % marketable securities, 34 alts. But they're leaning into alts. When we asked, you know, what do you want? Where do you think you're going to get the greatest return in the future?

6:04What's your area of focus as you look forward? Private equity was number one, followed by direct investments in companies, followed by real estate. So we see that alternatives focus, you know, continuing to take center stage. Do I can I just jump in for a second? I am curious to any of them think about in terms of the wealth transfer, what it means? Like, are they going to also go spending money or like, is it all about, you know, ensuring that the wealth exists for future generations? I'm just curious if there's a different take, whether it's women or whether it's a younger generation. Well, it's both.

6:41I mean, there's definitely a desire. You know, when we talk to family offices, there's definitely a desire to maintain the mission and purpose of that family office and why it was created to begin with. And what came through in the research, which we found really interesting, one of the things we asked family offices is, how involved is your principal in the management and running of the family office? and they had a scale either you know not very less involved moderately involved very involved and the clients that have family offices that have less involved principles they expect 73 of them expect the mission and purpose of the family office to change when handed to the next generation so to to us as we read that it's a real you know call to action that as we know this transfer is beginning to unfold, having like early conversations around like, what do you want that next generation to do with it?

7:41Is it to go spending? Is it to to continue the purpose that the first generation created? Having those conversations and that intention early is paramount. I'm sure you caught this story in The Wall Street Journal over the weekend, but it was about these these so-called trust reveals where the super wealthy families are having these not necessarily parties, but like meetings with financial advisors, maybe family offices to really go through the numbers of for the next generation. Oftentimes, it sounds like some of these families, they grow up knowing they're wealthy, but the kids don't actually know they're getting a 100 million dollar trust fund.

8:17What's the communication like? Did that story resonate with you? Yeah, I think, well, I mean, we see both ends of the spectrum. Sometimes you see families where it is there, you know, a reveal that happens. Others, though, I find if there's a really intentional process where that is revealed with milestones and intention, I think that that can have like better outcomes ultimately. Yeah, it's super interesting, right? Just what's going on. You know, we've spent a lot of time, Elizabeth, talking about women specifically and the wealth transfer that is expected to be in the hands of women specifically.

8:59You know, I've gone through the report. I'm just curious what you guys are seeing specifically, if you've seen any transfers already to women and how they approach money perhaps differently. Yeah, we absolutely do. There's a lot of the transition that happens for women in family office and I think you know their approach we do regularly see an increased focus on philanthropy that can play through many times women in a family are getting involved early in philanthropy and then that can play through. The study did highlight that when these family offices transition 51 percent expect an increased focus on philanthropy with the next gen so So we do see that.

9:48I think like the other part of the study we found really interesting is sort of what we called the hidden complexity of a family office. You know, as you mentioned, Carol, it was broad ranging in terms of the topics that we touched on. But one of the areas that we really wanted to get more data around is what we call the hidden complexity. And we really highlighted that, you know, these family offices, it's more than just the investment philosophy that they're executing against. You know, it's all the related operational work that comes with that. Right. Elizabeth, we've got to run. Forgive us.

10:30Forgive us. But hopefully we can continue this conversation in the future. Elizabeth Thiesen, head of Family Office Solutions at Bank of America Private Bank.

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