Family offices sit at the intersection of wealth, family dynamics, and strategy. When they function well, they offer more than just investment oversight, they provide continuity, stability, and governance across generations.

Yet, as families age and wealth move into the hands of younger successors, the challenges of transition can be as much about psychology and relationships as they are about balance sheets.

From Founders to Heirs

One of the defining challenges for family offices is the shift in priorities between generations. The vision and objectives of a founder often diverge significantly from those of their children or grandchildren. This shift can reshape the entire focus of a family office.

“The next generation’s objectives and purpose can vary hugely from the previous one,” says Daniel Aghdami, partner at Heidrick & Struggles. “This can lead to a different focus of investments, often a reduction of risk appetite, reduction of investment asset classes, and a move from active to passive investing.”

The consequences ripple beyond portfolio allocation. A sudden shift in risk appetite or investment approach can create new staffing requirements. Family offices may find themselves seeking new skills – for example, in sustainable investing or digital assets to meet the next generation’s preferences. In some cases, staff turnover is inevitable as roles evolve.

Navigating Succession Dynamics

Succession is often seen as the transfer of wealth, but in reality, it is the transfer of influence, responsibility, and identity. This is where the role of the family office stretches far beyond finance.

“Often, the question of suitable governance arises as older family members retire from the boards of the family’s foundations, operating companies, and the family council,” explains Aghdami. “The family office can play a vital role in ensuring continuity and success in the transition, in collaboration with external experts, with its established trust and knowledge of the family dynamics.”

Importantly, preparing the next generation requires foresight. Training, mentoring, and gradual exposure to responsibilities can make the difference between a smooth succession and a disruptive one.

“The family office can also play an important role in preparing the next generation well in advance,” Aghdami says. “That might mean assessing and upskilling younger family members to take on increasing responsibilities within the family entities.”

But succession is not just about the young. “One of the biggest challenges is preparing the older generation for the transfer of wealth and power,” he adds. “Many first-generation principals can find the process of relinquishing oversight and responsibility difficult, as well as deciding who will take responsibility for what.”

This dual challenge – empowering the young while easing the transition for the older – sits at the heart of family continuity.

Models of the Modern Family Office

Not all family offices are created equal. Their structure often depends on scale, investment complexity, and the preferences of the family.

Smaller family offices typically adopt a simpler approach. “They tend to have a more straightforward investment focus, often relying on asset allocation and external fund managers,” Aghdami notes. “Some will have a highly specialised focus on one or two asset classes, while others prioritise tax efficiency and concierge services over outright investments.”

Larger, institutional-style family offices, by contrast, resemble professional asset managers. Their processes, governance, and teams are often sophisticated, with less day-to-day involvement from principals.

The question of whether to establish a single-family office, a multi-family office, or a hybrid model is equally nuanced. “This largely depends on the family’s wealth, how much of that is investable, and the complexity of investments and non-financial needs,” Aghdami explains.

As a rule of thumb, families with net worths above €400m ($465m) may consider establishing their own dedicated family office. Hybrid models, however, can offer flexibility. “A hybrid model can make sense if they want to keep the size of their own single-family office small but rely on the greater resources of a multi-family office for access to and structuring of certain deals.”

In some cases, success itself changes the equation. Aghdami highlights how families sometimes transform their family office into a commercial business in its own right. “B-Flexion is a great example of this, having opened several of its subsidiary asset managers to external investors.”

Governance for Generational Harmony

If investment management is the technical heart of a family office, governance is the cultural soul. Clear rules and processes are essential in preventing disputes and ensuring cohesion across generations.

Governance models vary widely, but their importance is universal. “Family constitutions and councils are still very relevant,” says Aghdami. “In many cases, they’re being adapted to accommodate advances in governance requirements and evolving best practices.”

In complex, multi-generational families, some opt for highly independent governance structures. “The boards of the legal entities within the family-owned group can be made up entirely of independent board members representing the interests of all shareholders,” Aghdami explains. “The family council may only be consulted for very big decisions.”

This professionalisation ensures that the family’s wealth and businesses are managed effectively, while still maintaining a framework for family voices to be heard.

Striking the Right Balance

At the core of governance is a delicate balance: how much influence should the family retain compared to external professionals?

For smaller families, the involvement of principals remains high. For larger families with complex investments and global operations, reliance on independent professionals tends to grow. What matters is designing governance structures that respect the family’s values while ensuring sound business practices.

Building For Tomorrow

As demographics shift and generational transitions accelerate, family offices face an era of change. Whether in investment philosophy, governance, or succession planning, the ability to adapt is key.

What remains constant is the need for stability. A family office that succeeds in balancing financial stewardship with family harmony becomes not just a manager of wealth, but a guardian of legacy.

And in that sense, its value goes far beyond money.