What wealth managers can learn from family dynamics

No one can ignore the drive for change taking place around us. Across the globe, millions of young people have taken to the streets to increase awareness about global warming. Consumers are demanding more sustainable products.

Governments are reconsidering whether GDP is the best way to measure wellbeing; and companies are assessing if their focus should remain on keeping investors happy, or if a more inclusive form of stakeholder capitalism is a better route to a successful and more profitable future.

Banks, including wealth managers, are also facing winds of change. The next generation of clients, with their need, desire and drive to make a difference, look set to bring to the wealth management industry the disruption that technology has yet to trigger.

Wealth management teams have something of an advantage in that they stand alongside what could arguably be the secret of their own future, and potentially the answer to the future of capitalism: family dynamics.

The role of the family within society

Families are not only the smallest entity in society but are also the first with which we enter into contact. Within this smallest of microcosms, we learn from the get-go the basics of how to communicate and how to find solutions based on an understanding of different needs and respect of differing views.

The skills learnt within the family to strive for a common goal (the wellbeing of the group) arm us with tools to use in the broader world, both professional and personal. But what are the secrets of successful family dynamics?

The key to a family’s success

Recently, I spoke with two heirs of the Rockefeller dynasty. The Rockefeller family boasts many notable achievements in the areas of entrepreneurialism and philanthropy across more than 100 years, and most recently in impact investing.

They explained the key to their family’s success – now in its sixth generation – and how dialogue and sharing the same long-term goals took much work but brought its fruits. They also talked of how their family had to strengthen personal relationships with one another in an effort to preserve these important values and traditions.

That meant – and still means – spending a lot of time together and engaging in many conversations, for example at the twice-yearly family meetings where more than 300 Rockefellers reunite.

The unity and sense of belonging driving this family’s continued success can be linked directly to why family businesses have a history of accomplishment. Credit Suisse has issued “Family 1000” reports for a number of years looking into why family businesses have consistently outperformed their non-family-run peers.

The lessons learned from these reports, looking at 1,000 listed family businesses, indicate that family-run businesses are more successful than their non-family counterparts partially because they focus more on their long-term goals rather than short-term wins, in comparison to their non-family competitors.

What wealth managers can learn from families

Successful family dynamics – merging the different needs and hopes of the young and old with a firm eye on the future – also offer powerful insights and ideas for both governments and businesses, including wealth managers.

I see three particular areas where wealth managers can specifically learn from successful families:

1. Incorporating the future early on

In the Global Next Generation Report – which was published last year by Credit Suisse and the Young Investors Organization (YIO) – the next generation told us that one of the success factors for a smooth transition and adaptation of family responsibilities (e.g. in the family business) was to involve the next generation at an early stage.

This was key, they explained, so that they had time to learn and understand the business, their responsibilities and their future prospects. Thanks to early involvement, the next generation was also able to not only make sure their view was heard, but also to gain the experience for their views to be respected.

Wealth managers are often focused on the issues of today, short-term results and expectations. To strengthen their business in the long run, it is essential that they too include the next generation as early as possible – to help build a business model that serves the needs of their future clients.

The next generation wants to experience the bank early on, be involved in their value proposition. A wealth manager cannot just assume what their future clients will want; they need to experience it first-hand alongside their future clients.

The joint report between Credit Suisse and the YIO revealed that the next generation will want more than a traditional investment advisor but rather a long-term life partner with whom to co-create solutions, an equal sparring partner who genuinely cares about their well-being.

2. Togetherness: empowering the individual and the family as a unit

Successful families have learned to develop into a thriving multi-skilled team, tapping into the abilities and talents of different generations and individuals, while focusing on the benefit of the family as a unit. Wealth managers should apply the same approach.

Banks often have access – internally or externally – to a deep and diverse pool of knowledge and skills. To truly support clients in the future, banks will have to systematically tap into this broad source of knowledge for the maximum benefit of their clients.

Wealth managers and their relationship managers will also have to apply a “network orchestrator model” that goes further than the bank’s four walls. They will have to bring the next generation and their families together with other clients or vetted providers in cases where that could help them find new solutions, learn from the experience of others or even simply exchange ideas.

3. The courage of renewal

Successful families have learnt to listen and open up to the voice of the younger generation and see them not as a disturbing force, but rather as a fresh source of energy or a new attitude that triggers new ways of thinking and acting.

This process requires considerable communication and understanding from all sides. Sometimes it is messy and painful because, although families share the same goals, they might disagree on how to get there.

Banks, especially in Switzerland, are considered a stable and key part of the country’s economy, supporting companies and families to achieve their goals. There is still, however, a need for continuous learning, development and improvement within banks.

Banks and wealth managers, like families, have to be prepared to enter into dialogue and face conflicts. They have to be open to discussion and input from their future partners in order to develop a bank of the future, rather than wait and have to scramble for survival when it is too late.

It is our duty and in our interest to recognize and reflect the needs and desires of the next generation, and co-create a future that benefits all, inspired by the families who we work together with.

We have to develop a culture of “we” and not only “me”.