The business of succession

Family Offices have grown over the last decades and today represent an important priority of many business families – we take a closer look.


It is often said that if you know one family office, you know only one family office. In other words, no two family offices are the same, whether in risk profile, investment aims or expertise. Some may be investing on behalf of one clan alone, while others may be serving several family groups. Some, in fact, may be investing on behalf of just one branch of a sprawling business dynasty, while various cousins might have set up independent family offices of their own.

London Business School alumnus Colby Richardson, for instance, is a sixth-generation member of the Winnipeg, Canada-based agribusiness dynasty, Richardson International. But his family firm, Countryman Investments, was established by his father in Vancouver, as a personal investment vehicle “with the theme of sustainability, agriculture and construction.” It has since become what Colby calls “a kind of hybrid family office,” which covers insurance and similar financial matters for the immediate family, but not for the wider Richardson clan.


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"What many family offices do have in common, is that at least part of their purpose is to preserve wealth for future generations"

Ammar Amdani, meanwhile, says he comes from a culture, which originally sprang from the province of Sindh in Pakistan, where every individual is expected to go out and make his own fortune. He is the second generation of a family of individual entrepreneurs, who left the country, and starting in Hong Kong and Japan, created a sprawling international conglomerate, GK Global. The family tries to find synergies and learn from each other. There is no formal family office structure, but there is a centralised pool, with an investment committee and a board, which Ammar and his brother or cousins can dip into for resources. Yet he also has a lot of autonomy to work on business interests of his own, making early-stage investments, through his own firm, Adapt Ventures, in projects not specifically of importance to the family. 

What many family offices do have in common, is that at least part of their purpose is to preserve wealth for future generations. How they do so will also depend, for example, on the type of business that created that wealth in the first place, whether the original family business is still operating and in the family’s hands, how many generations have passed in family ownership and, perhaps crucially, whether the founder is still in the driving seat. Not all entrepreneurs are great managers, and some – like Logan Roy in the TV series Succession – may be egomaniacs, whose controlling instincts damage family unity and set potential heirs in competition with each other. 

Nevertheless, the time may come where a new approach to wealth management is needed. Perhaps the sale of the family business has left a pot of cash to be invested; or the business is providing dividends that could be better deployed elsewhere.

Says former Schroders Family Office Service chairman Alex Scott, there comes a “tipping point” when “the scale and scope of assets not associated with the family company require some control and oversight.”

Alex sold his family’s Provincial Insurance Company in 1994. He says the family had realised that all its wealth was wrapped up in a single company, which had been around for over 90 years and was in a sector that was already heavily disrupted. “The risks we were carrying… were inconsistent with our state of evolution as a family,” says the fourth-generation Scott-family scion, in a video on the Schroders website. He set up the Sandaire multi-family office before selling the business to Schroders in 2020.

Many business people whose wealth is much more recent are also looking at ways to benefit their children. That’s particularly the case nowadays, when start-ups are often built to be sold, rather than held through multiple generations.

“I’m transitioning from an entrepreneurial mindset to a more wealth preservation mindset,” explains one newly-minted multimillionaire, who has attended our recent Family Office Conference at the London Business School. “My children are still young, and maybe I’ll put some of my cash towards seeding other ventures as an angel investor first. But by coming here I’m getting a feel for how it’s done.”

Clare Anderson, global head of Schroders Family Office Service, which has sponsored the conference, tells Think that, while not all founders have descendants and not all want their descendants to have the wealth they have created, many do want to encourage business interest in their children.

“They may not necessarily want to give them an introduction into the family business, but an interest in business per se, and to encourage entrepreneurial thought and activity,” she says. 

"The idea of providing for one’s heirs through a formal business structure certainly isn’t new."

Clare says that while the Family Office is a “buzzword” at the moment, other set-ups may be more suitable. ‘Family Enterprise’, she says “can house the family business and some family office activities and can often be the precursor to a standalone family office. We encourage our clients not to rush in until they have really thought about what the new structure should look like.”

And London Business School guest lecturer Heinz-Peter Elstrodt, whose area of research has focused more on older, established firms, says that while a family business may be much more complicated to manage than a family office, it can also provide more of an opportunity to keep the family together. 

“Many of these families have been around for a long time,” he says, “and they have a very strong sense of values and purpose. They know what they stand for, why they are doing something. But if you have a family office, it’s much more difficult. it’s just a bunch of money, so what is exactly the purpose?

The idea of providing for one’s heirs through a formal business structure certainly isn’t new. One very early family office is England’s ancient Duchy of Cornwall, created in 1337, by King Edward III for his son, the Prince of Wales. The founding charter ruled that each future Duke of Cornwall, a title now held by Prince William, would be the eldest surviving son of the monarch and heir to the throne. He – and it would always be a he; the late Queen Elizabeth II was not considered eligible – would be entitled to the annual income generated by the Duchy’s assets. However, the Duke would not have access to the proceeds or profits on the sale of those assets. This surprisingly modern restriction, unchanged for the past 700 years. ensured that a particularly greedy or reckless Crown Prince could not squander the inheritance and leave his own heirs with nothing.

Since 1702, a similar rule has applied to the even older Duchy of Lancaster, the monarch’s private estate, which Charles III took on when he became King in 2022. 

There are good reasons why the Royal Family’s succession model of “primogeniture,” or inheritance by the oldest son, is out of fashion today.

“That’s a pretty disastrous way to do a succession, actually,” says former McKinsey consultant Heinz-Peter Elstrodt, “because the oldest son is often not the best qualified. There’s too much pressure on him, too much expectation; and the younger siblings – and it doesn’t have to be a son, either – are often better prepared.”

It is often said that families that insist on passing an inheritance on to the first-born son tend to lose that wealth by the third generation, although Heinz-Peter argues it would be hard to say exactly what percentage really does fail to pass that threshold. “If a family business is no longer in the hands of the founding family, but they’ve sold it for a lot of money,” he asks, “does that mean it’s failed? And if you compare it to publicly owned companies, are they any more likely to last over several generations? It’s extremely difficult to measure longevity that way.”

Nevertheless, research does show that family businesses that are prepared to bring in external managers, or bring back into the fold family members who have garnered management experience from outside the group, perform better on average than those with more rigid inheritance rules.

That is not to say that family businesses cannot last for many generations. Germany’s Haniel Group was initially established in 1756, then built up and expanded in the 1770s by the founder’s daughter Aletta Haniel and her youngest son, Franz. Today, it still prides itself on being “enkelfaehig” – literally grandson-capable – or well positioned for passing the baton to future generations. As early as 1917 it appointed its first non-family manager, Johann Wilhelm Welker, and has continued to hire external managers ever since, with a family member acting as chairman of the supervisory board. The former mining, heavy industry and shipping conglomerate calls itself a holding group rather than a family office, but it still keeps 100% ownership within the family and today has more than 700 shareholders, who may only sell their shares to other family members. 

Aletta Haniel recently sold its flagship German cash and carry supermarket chain, Metro, and has gradually shifted towards greener and more socially responsible investments, on the assumption that future generations will prefer sustainable businesses. That, too, is a theme that other family offices may pick up. If the next generation is more interested in impact investing and sustainability than accruing ever-greater wealth, then a canny succession plan will position the family accordingly.