Melina Spadone joins host Joel Simon to discuss trends in family offices and the unexpected challenges and opportunities brought on by the pandemic, including incorporating social issues into investment platforms and succession planning.

(Editor’s note: transcript edited for clarity.)

Hi, and welcome to Pillsbury’s Industry Insights podcast where we discuss current legal and practical issues in finance and related sectors. I’m Joel Simon, a partner at the international law firm Pillsbury Winthrop Shaw Pittman. To our listeners, from wherever you are tuning in, welcome, and thank you for your continuing interest in our podcast series. Today, I’m pleased to introduce Melina Spadone. Melina is a transactional attorney who advises ultra-high-net-worth individuals and family offices on a wide range of legal issues. Melina previously served as general counsel and chief of staff for several family offices and closely held businesses, ranging in size from $1 billion to $4 billion, whose assets include, commercial real estate, publishing and media, investment entities, and family foundations. She’s overseen and coordinated legal, business, investment, philanthropic, real estate, litigation, staffing and political activities. In each case, Melina provides tailored legal solutions to address the complex mix of a client’s family and business dynamics. Welcome to our podcast, Melina.

Melina Spadone: Hi, Joel. Thank you so much for inviting me here today.

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Joel Simon: Melina, you work across a fascinating spectrum of clients and issues, so there are a lot of topics to choose from. If you’re up for it, I’d like to hear your perspective on different trends that you’re seeing in family offices as more baby boomers are turning over the reins, either willingly or unwillingly, to millennials. Add in the pandemic, and other risks that are not specific to the business or particular investments, and you have a whole new set of unexpected challenges, but also exciting opportunities.

Spadone: That’s absolutely true, Joel. The pandemic has created an environment of both chaos and opportunity, and we’ve seen the next generation be much more active during this forced pause with their families. Generation 1, the wealth creators, had their way of doing things, and may be directly tied to how they created their wealth. The next gen is either doing business the same way the first generation has, or creating new businesses from the wealth that was created by the first generation. Specifically, in recent times, there have been a lot of social issues that have come to the forefront within family businesses. Whether it’s the riots, social change, or just the time with your family at dinner, the next generation is having a stronger voice during the pandemic. They’ve actually responded by action, and not just by words by joining protests, making large donations to charitable movements that they have a belief in, and influencing their first-generation parents with their own values. The other thing that we’ve seen is that this time of the pandemic has created an opportunity for families to focus on not just business as usual, but on things that they’re going to do differently. It’s forced them to do audits of their businesses, talk about succession planning, and take active steps when business is not running as usual.

Simon: Let’s start with the social justice question. Whether through protest movements or reform movements, or charitable donations, is the younger generation actually incorporating those issues, and how to resolve them, into their investment platforms?

Spadone: What I’ve seen is sort of an immediate response to the social issues. That means that they have not been formalized into any kind of business plan or action. It’s been much more reactive and immediate. That’s one of the luxuries that family offices have—there isn’t that much structure necessarily around family decision making, so people can write checks, make movements happen on the spur of the moment. There has been some change also in the more formal processes. Family offices look at investments for philanthropic reasons, and there has been change in how they view these impact investing decisions that they’re making to toggle to the new needs of the second generation.

Simon: Do family offices have things like diversity officers or corporate responsibility guidelines the way large corporations and other organizations do?

Spadone: These decisions have not necessarily been made into a corporate responsibility mandate—a lot of the actions on the family side are already sort of known and understood among the family members, and don’t require a formal document. Of course, there are families that are privately held that have larger businesses where these policies would already be in place, or may be changed or expanded during this time.

Simon: It sounds like the younger generation is having the same or similar impact on family offices as they are across a wide spectrum of businesses, other organizations, schools, the news—it’s really fascinating to watch it play out in all of these different contexts. Turning to succession planning, as an outside advisor, do you need to push your clients to do a succession plan, or do they tend to get there on their own?

Spadone: For the most part, the clients I work with have already gotten there on their own, but they get to step one of a multistep, multiyear process. There was a research report that was done by Camden and UBS that only 32 percent of private wealth families had formal plans, and of those, only 24 percent had them documented, almost 50 percent had no plans in place. As you can see this could be a big challenge. The other issue is that families, as well as individuals, think that succession planning is a document that you write down, and then you put it in a drawer and you’re done, but the best succession plans are continuity plans that have been put into place and talked about at family meetings, at dinner tables for multiple years. These are plans that have to be living with a sense of the purpose and the goal in mind, and then ever-changing and evolving as they go. Of course, there’s always a place for formal documents, but really, a true succession plan is an ongoing, living thing.

Simon: This has been an information-packed discussion on some great issues, Melina. You really have to be on your toes advising on all of these complex matters.

Spadone: Yes, you do, but it’s also fascinating because I never know what each day will bring. These situations with families are as diverse as the families themselves. It can be tax planning, trust and estate, philanthropy, next generation education, and formal financial education for them. I’m never bored, and I never know what’s coming next.

Simon: It’s been great chatting with you, thanks so much for joining me today.

Spadone: It’s been my absolute pleasure, thank you for having me.