What are the most common investment mistakes made by family offices?

What are the most common investment mistakes made by family offices?

by Richard C. Wilson & Family Offices Group Association Team

Question: What are the most common investment mistakes made by family offices?

Answer: In our interviews with family offices and based on our experience working with family offices, we have seen some common investment mistakes made by family offices.  To help you avoid making these mistakes, here are some common family office investment mistakes:

  1. Focusing too much on tax efficiency:  Tax efficiency is, of course, an important consideration for any family office, especially those family offices with clients living and working around the world with complex investments and assets that require a careful eye toward tax efficiency.  However, we have seen some multi-family offices get bogged down too much in tax efficiency to the point that they risk losing the principle of their investments by making their investment decisions too centered on taxes.
  2. Not assessing family values and missions: It’s hard to run any business if you don’t have a clear idea of what your values are and what your mission is.  You can avoid this pitfall by setting up a meeting to decide exactly what your family values and missions are before making investments.
  3. Not having investment committee meetings: we are always speaking to family offices about the value of having regular investment committee meetings to discuss your current investments and evaluate prospective investments.  An investment committee meeting can involve only a couple key members like the CEO and Chief Investment Officer or most of your family office team.
  4. Not closely monitoring current investments:  It’s easy to lose sight of your current investments as you focus on serving your client’s other needs, evaluating other parts of the portfolio and doing the day-to-day work involved in managing a family office.  However, this mistake can be very costly in terms of your reputation as a full-time wealth management professional and in how your investments perform in a constantly changing market.  Avoid this investment mistake.
  5.  Not spending the time to visit fund managers on-site:  Many top family offices we’ve spoke with mention the value of making on-site visits to fund managers.  These family office executives, or at least someone on their team, will make a visit to the fund during the due diligence process and some family offices even visit regularly after the capital is committed to keep up with the manager and understand how the fund is performing and what factors are affecting the investment.

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