Q&A: Carolyn Gelling, discusses Trustee Considerations for Investment of Next Generation Wealth

Investing next-generation wealth as a trustee involves a nuanced approach that goes beyond traditional wealth management. While traditional fiduciary responsibilities remain paramount, the focus extends beyond financial returns to encompass the evolving priorities, values and long-term goals of future beneficiaries. Trustees must navigate shifting investment landscapes, sustainability considerations, and technological advancements, ensuring that wealth is not only preserved but also aligned with the aspirations of the next generation. Carolyn Gelling, Director, Equiom Isle of Man, and lead for Equiom Isle of Man’s Investment Oversight and Selection process, discusses what trustees must consider when managing the investment of Next Generation Wealth. 

What role does a family charter play in shaping investment decisions for next-gen wealth? 

A robust family charter can guide and support the Trustees in both their decision-making process and the formation of Investment Policy Statements. However, there is much valuable underlying work that ought to be carried out with the ‘next-gen’ members to ensure that objectives are thoroughly considered, and all parties are working towards common and agreed future outcomes.  

What initial questions should trustees ask beneficiaries before implementing an investment strategy? 

Trustees take the time to ensure that they have clarity in their understanding and interpretation of the beneficiaries’ needs and future goals. In doing so, they recognise that there may be differences in the criteria of individual beneficiaries, within a wider family or otherwise connected group, and consider how that aligns or can be incorporated into the wider investment strategy.  

To gain this understanding and clarity, Trustees will engage with the beneficiaries individually, taking the time to discuss their circumstances and requirements through an ongoing and regular dialogue around financial goals, risk tolerance, and values. Not surprisingly, the provision of financial education is an essential and continual part of the process to ensure that individual beneficiaries are informed about investment principles and particularly, the importance of preserving wealth.   

How can trustees balance the differing needs and investment priorities of multiple beneficiaries?   

Often, there are competing needs of individual beneficiaries, particularly where more senior family members might be focused upon longer term growth, whereas younger family members may wish to see funds allocated towards meeting their specific ESG considerations for example. Trustees navigate these points and consider how asset allocation can seek to incorporate competing priorities and preferences, whilst maintaining a close focus on the wider and the longer term objectives.   

What are the key investment considerations for trustees managing long term, multi-generational wealth?   

Trustees consider the longer time horizon associated with the needs of multi-generational beneficiary structures. There may be periods that afford for more aggressive investment strategies, with greater emphasis placed upon growth orientated investments that compound over time in the earlier years.  Whereas income generating and lower volatility assets may become more appropriate in draw-down phases, depending upon the unique requirements of the beneficiaries, when considered both collectively and independently.   

Coupled with this is a focus upon diversification and risk management to develop an overall portfolio that balances growth and risk and aligns to risk appetite and tolerance in respect of future needs. Coordination with estate planning considerations then bears further relevance as the Trustee will seek to align the trust’s investments with broader and future planning and succession objectives and include any elements of philanthropic activity that may present both immediately or in the future.    

How do trustees incorporate ESG and impact investing into next-gen wealth strategies? 

There is certainly a greater focus placed upon ‘ESG factors’ from both Trustees and next-gen beneficiaries nowadays. With ethical and sustainable investing being a much discussed requirement in terms of integrating environmental, social, and governance (ESG) criteria into investment decisions. Next-gen beneficiaries often prioritise sustainability, with impact investing as a key theme. They are increasingly attuned to investments that not only provide financial returns but also generate positive social and environmental outcomes.  

Many beneficiaries call for a portion of the Trust portfolio to be allocated to innovative sectors likely to drive future economic growth, while Trustees must ensure that these allocations align with broader investment objectives. 

What are the challenges trustees face in navigating technological advancements like digital assets?   

Trustees are also adapting to technological advances, particularly in relation to Fintech and Digital Assets. Staying informed about technological advancements in finance, including digital assets like cryptocurrencies and blockchain technologies, is essential. Across these areas, the application of a Trustees’ governance skills is imperative in carrying out relevant due diligence in specialist areas and by collaborating with other professionals engaged in these specific fields.   

How does investment governance ensure trust assets are managed effectively over time?   

A professional trustee will be akin to ensuring compliance with current legal and regulatory standards governing trust investments and stays updated on changes in laws and regulations that may impact investment strategies and trust administration. Trustees will engage the services of expert professional investment advisors, financial planners, and other specialists to assist with managing the trust’s assets. Investment governance by the Trustee includes monitoring those advisors and their investment activity, with regular reviews of the investment strategy and performance, making adjustments as necessary to respond to changing conditions and evolving beneficiaries’ needs.  

What are the benefits of professional trusteeship in managing next-gen wealth?   

A professional Trustee brings the skills, resources, experience, and network of trusted experts needed to navigate the complexities of investing multi-generational wealth while seeking to ensure wealth preservation for future generations. With the evolving needs and priorities of the next generation, there is clearly a lot to consider, and trustees must strike a balance between tradition and innovation, aligning wealth strategies with beneficiaries' values, adapting to market shifts, and staying ahead of regulatory changes.  

By providing expert guidance and accessibility, a trustee plays a crucial role in safeguarding wealth while fostering a legacy that remains relevant and resilient across generations. To learn more about how a professional trustee can support your wealth management goals, contact Carolyn Gelling. 

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations, and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.    

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