You want to get to the top of a snowy mountain range by helicopter. The only pilot that can take you has never flown a helicopter but has been flying commercial airplanes for 30 years. Flying a commercial jet and a helicopter both require skill and responsibility, but they involve different instruments, controls and training. What do you do?
That might seem an unlikely scenario in practice, but the uncomfortable reality is that many Canadian family offices may be piloting their capital into turbulent skies without truly understanding how to maneuver their wealth across generations.
A shift few are prepared for
Canada is facing the largest transfer of wealth and ownership in history, as an estimated 60 per cent of family enterprises change hands over the next decade.
In some cases, “changing hands” means the business is transferred to a family member. But ownership succession is difficult, and many families are not ready: two-thirds have no plan. When done well, it can take 10 years or more to properly prepare and support successors for their roles — as well as to prepare and support the predecessors for their lives after exiting business control. For those without a sustainable succession plan or no succession option, the decision often becomes to sell. The most viable businesses will find a buyer. The sale triggers a liquidity event for the owning family — and often, the origin of a family office.
If you successfully owned a business for decades and negotiated a lucrative sale, congratulations. These are difficult feats and should not be underestimated. Yet, even with this experience intact, successfully stewarding the proceeds of that business across multiple generations now requires a different set of navigation skills.
Different journeys: operating and stewarding capital
Running a business and overseeing a family office are related, but they are not the same discipline.
An operating business focuses on delivering services or products within a defined structure. It has clear leadership and reporting lines, external accountability to owners, potential investors, lenders and regulators, typically (and in best practice) supported by institutionalized governance processes.
A family office, by contrast, views the family as a client and oversees their capital investments across multiple domains — public markets, private equity, real estate, and philanthropy — in addition to providing additional services to support their family clients, from risk management over estate planning to concierge services, among others. In general, in a family office as compared to a family business, it is easier for family members to liquidate investment positions and find another service provider when needs aren’t being met. To avoid this, and ensure greater long-term stability, a family office setup often requires more effort from the family clients than an operative business. This includes putting in the time to reach agreement on family members’ shared vision, strategy and objectives, finding the right staff to pursue these strategies and objectives, and setting up the governance processes that ensure effective intergenerational decision-making and staff oversight.
In the transition from operating business to family office, however, the lines between the two can become muddled. Just like the conundrum we started this article with, the helicopter becomes piloted with the experience of a commercial airplane. You might reach your destination in one piece, but it might be a bumpy ride — especially if the weather turns.
Clear skies hide structural issues
For much of the last decade, markets have been relatively stable. The S&P 500 returned over 200 per cent, the Dow Jones 159 per cent, and the Nasdaq 336 per cent. With the exception of a few years, interest rates have been historically low. And the AI boom, which some view as a bubble, has helped lift portfolios even higher. For those who started their family office journey during this period, the skies have appeared clear, with a strong tailwind.
In many newly formed family offices, less formal structures might appear to work. Perhaps a small group of trusted allies — a former CFO, a longtime accountant, a faithful advisor, a son or daughter with an MBA — manage the day-to-day. This might work fine at the moment, but it may come at the expense of taking the time to develop clear role descriptions and pursue more professional hiring processes to ensure the right people end up in the right roles. It’s not uncommon for roles between owners and managers to blur, for the family office’s purpose and values to remain implicit rather than institutionalized, and for succession lines to be undefined. This works well when markets are forgiving and relationships harmonious, but under stress it becomes more complicated.
Volatility — in the form of geopolitical uncertainty, regulatory changes, interest rate shifts, speculative bubbles or recession risk, to name a few—can expose underlying vulnerabilities in a family office that earlier appeared benign. If everything in the family office is rather informal and based on the hope that everything will be fine, how can it withstand instability? Do different generations align on long-term purpose when the return is negative in a given year? Does the family office function as its own entity, or just as an extension of a key family member? What holds it together once family clients have diverging needs and wants in times of crisis and volatility? And how will key family office staff members fare in crises if their education and experience do not fully meet the common role expectations of peers at other family offices?
Looking meaningfully at questions like these and identifying the gap between the “we have” and the “we need” — before a major shock — can help move a family office towards more resilience and maturity, and the family clients towards more peace of mind and unity.
A gap in ownership preparation
None of this is to suggest that family offices are inherently fragile. Many are highly effective and disciplined. But as the sector grows, and more transitions from operating business to family office happen, a larger cohort of owners and their family members will need preparation for their new roles.
Unfortunately, there is currently a structural gap in applied ownership education in Canada and, indeed, globally. Although it does exist in certain pockets around the world, there is not yet a coherent ecosystem for holistically educating those who are — and will be — piloting their family’s wealth across generations.
To be clear, every family owner should at least understand how to pilot the family office so they can understand what the pilot does and ensure that the helicopter not only flies safely but also take them where they want to go — even if they are just a passenger. Beyond courses in finance, leadership or philanthropy, what is missing in family office education is the integration of evidence-informed training in areas such as effective governance processes, managing complex family dynamics, family office staffing and roles, resilience in uncertain times, and preparation for intergenerational continuity.
Our institute has offered such training to individual owner groups — and we are working towards a more widely available version of this program, for any family-owner group in Canada and beyond. However, without a broader ecosystem of educational infrastructure, research and institutional support, responsible owner preparation could remain fragmented and unable to reach many of the families who would benefit.
Preparing for a different kind of flight
The shift from operating owner to wealth steward is not automatic. Recognizing that shift, and preparing for it, is a central step in the continued professionalization of family owner groups, especially those that have set up or plan to set up a family office. Business owners who built successful companies are accustomed to navigating through uncertainty. The question is whether those family offices that are created in the wake of operating businesses’ sale are equipped for a different kind of flight.
Without more pathways for responsible owner preparation, too many families will continue to assume that experience in one aircraft seamlessly translates to another. But as family offices play an increasingly influential role in Canada’s financial, economic and philanthropic landscape, it will matter not only to the individual families, but also to the broader ecosystem in Canada, that those stewarding such significant and diverse wealth — consisting of financial, human, social and cultural capital — are prepared for the conditions ahead.
Without a doubt, the more united a family can stay, and the more productively their wealth can be used, the more they will be able to make a difference to their family, the economy, and society at large.