Risk Assessment and Investment Planning Could Resolve Disputes More Efficiently
WALNUT CREEK, CA — September 30, 2016, /Marketwired/ – Pillar Wealth Management, LLC has published a new article that reveals why a family’s unique Investment Policy Statement should focus on unifying family direction.
Pillar Wealth Management, LLC is a private wealth management firm for affluent families, including some that have attained wealth reaching $400 million,
The new article, which is available on the Pillar Wealth Management website and is based on insights from the firm’s recently-published book The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million, highlights that the Investment Policy Statement, in addition to concerning itself with net returns after taxes, expenses, fees and inflation, should also outline mutually acceptable approaches and philosophies regarding several “hard” issues.
These issues, which differ from “soft” issues such as values and vision, include: procedures, volatility, risk, liquidity, taxes, spending and unique circumstances. Furthermore, the Investment Policy Statement should direct the investment path of various professional advisors, so they can align their counsel to serve the best interests of their mutual client.
Defining Risk Tolerance
“Essentially, the Investment Policy Statement defines each family’s risk tolerance, and helps distinguish the kinds of investment-related decisions that are permitted and those that are not,” comments the firm’s co-founder Haitham “Hutch” Ashoo. “With this in mind, the Investment Policy Statement cannot stop disagreements from arising. However, if it is properly developed and regularly updated, then it can provide valuable guidance on resolving issues effectively and intelligently, and in a way that maintains family unity.”
Adds the firm’s co-founder Chris Snyder: “While the Investment Policy Statement should be detailed and robust, it must also be flexible and allow for a diverse interpretation, so that family members are empowered to offer new perspectives and ideas. Ultimately, a solid Investment Policy Statement helps families understand that investing is a discipline, and it gives them the framework to guide their evolving portfolio management approach and philosophy for the long-term.”
Excerpts from the article
Focusing on “Hard” Investment Issues
As discussed in our recently published book “The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families Worth $25 Million to $500 Million”, the Investment Policy Statement also looks at what can be called “hard” investment issues at the family level, compared to “soft” issues (these are typically captured by a family constitution, which seeks solidarity of values and vision).
In the context of unifying families and aligning them as a cohesive investment group vs. a disparate set of individual investors, the Investment Policy Statement outlines mutually acceptable approaches and philosophies regarding:
Procedures
- Volatility
- Risk
- Liquidity
- Taxes
- Spending
- Unique Circumstances
Defining Risk Tolerance
In essence, the Investment Policy Statement defines the kind of investment-related decisions that are permitted, and those that are not. Naturally, much of this depends on each family’s risk tolerance. For example, there may be provisions that:
- Advise against short selling
- Exclude ultra-aggressive investments (e.g. commodities, puts and calls, etc.)
- Refrain from touching hedge funds
- Are open to exploring venture capital or angel investing
- Encourage “green” investments
With this in mind, in any family there are differences of opinion and varying agendas. As we all know, sometimes these viewpoints are not based on objective information or investment strategy best practices. For example, one family member may want to invest in a particular hedge fund because the child of a business partner or close friend works there.
Obviously, the Investment Policy Statement is not a magic wand, and there is no way to prevent these types of issues from arising. However, if the document is properly developed and regularly updated, then it can provide valuable guidance on how to resolve issues effectively and intelligently, and in a manner that maintains family unity.
The full text of Pillar Wealth Management’s new article is available here.
About Pillar Wealth Management, LLC
Haitham “Hutch” Ashoo and Christopher Snyder are privileged to have worked with ultra-high net worth families, some of whom attained wealth reaching $400 million, helping them achieve a positive change in their lives and finances. They cofounded Pillar Wealth Management, LLC, an independent, fee based, private wealth management firm. As their clients’ go-to advisors, they are brought in to help with investment management, strategic planning, asset allocation, risk control, and tracking of their clients’ progress towards life-goals. Their services are provided to a limited number of clients. They only accept a new client when they have determined that there is mutual admiration and respect and only if they can add substantial value to the client’s financial life. Learn more here.
