Emotional intelligence in an artificially intelligent world

21 Jul 2023

Relationships are changing. Whether considering relationships between family members or between clients and their service providers, the impact of advancing technologies is simultaneously facilitating closer connections between global networks, while pushing those near and dear further apart.

An intergenerational gap has always existed; each generation has always had differing world views, based on what was considered acceptable in society at different times. For example, the “Boomer” generation lived in a culture where smoking was fashionable and permitted in buildings and on airplanes. By the “Millennial” generation, smoking inside was criminalised and cigarette packets contain warnings that smoking causes serious illness and, ultimately, death. In New Zealand, the next generation (Generations ‘Z’ and ‘Alpha’) will never be able to legally purchase cigarettes.

When considering a high-net-worth family who generated their wealth from the tobacco industry, it is easy to see where differing ideologies between each generation may result in polarising views when it comes to the family wealth.

Added to this the fact that, today, our newsfeeds increasingly influence our perceptions of the world. Sophisticated algorithms present an augmented reality (AR) for each user, not only for the purposes of advertising, but also tailoring the news we see and the information we have access to. Where individuals used to receive the same information and draw their own conclusions, we are now, for the most part, receiving information that is tailored to reinforce our existing world view, rather than challenge it.

The different ways in which we each experience the world is now not just a reflection of socio-economic factors and cultural differences.  By virtue of the fact that we no longer share the same media as one another, our experience can be vastly different to those of our family and close friends.

Whatever the trigger, it is clear that the increasing gulf between the mindsets of diverse family members has escalated the need for trustees to encourage clients to introduce a family governance process and put a family charter in place. This exercise creates a framework where all family members can share their views of the world and work together to develop a road map for the family wealth that everyone is comfortable with.

While experienced trustees will already be adept in facilitating family governance considerations, the evolution of ultra-high-net-worth, business-owning families means service providers need to be more connected. In the past, a trustee communicated almost exclusively with the wealth generator, usually the patriarch or matriarch of the family, with little interaction at all with the next generations.

Today, the next generations of a family are playing a more active role in the family office. A recent international study found that 87% of 134 family professionals reported seeing “more involvement from the next generation in developing and reviewing the investment strategy for the family office”.

The study reaffirmed what proactive trustees had already established; we have to be actively talking, listening to, and understanding the next generation.

On average, family businesses begin to fail by the third generation, particularly where the older generations have not passed on a comprehensive understanding of the business. Although it seems clear from the data that families want to break down traditional barriers, they may not know how to do this in practice.  A family governance process can help to support the continued operation and wealth generation of a family business, by ensuring each generation understands – and engages with – the mission and objectives of the business.

Despite the rapid evolution of artificially intelligent (AI) technology, which could be set to replace transactional processes in some industries, something which AI cannot replicate is emotional intelligence (EQ), an increasingly important factor for family office trustees.

AI technology is only as effective as the data it is “trained” on. AI cannot yet problem solve or act with foresight to prevent risk. It is hard to imagine that it will ever be able to read human emotion and act with authentic sensitivity or share the experiences of successes or challenges in the way a human can.

Trustees who facilitate family governance will develop an understanding of what the family members, individually and collectively, envisage for the future of the family business or wealth. They will also be able to identify areas of potential contention between them. And, while it is not the role of a trustee to be a counsellor in these circumstances, they can help families to reach compromises and solutions, drawing on decades of experience and wide networks to connect family members with the right mediators and counsellors to receive the exact support they need.

The human factor of a family office should never be overlooked or undervalued. The relationships between each member of the family are, arguably, the most important asset in a family office, as the establishment, management and longevity of wealth structures are hinged on communication, compromise, and continuity.

The risk of contention between family members is nothing new but has, undoubtedly, been exacerbated by technological advancements which have added fuel to the fire of polarising views. Trustees hold an important role in mitigating this risk through governance processes and by picking up the “EQ shortfall” created by AI.

This article was first published in PCD Group Magazine – Issue 34