The aspiration to build multigenerational wealth remains a central objective for Family Offices. To achieve this goal, the establishment of key investment priorities is of paramount importance. These priorities serve as a strategic compass, steering Family Offices toward wealth management choices that align with the family’s long-term objectives and core values.

From wealth preservation to intergenerational wealth transfer, or risk mitigation, identifying investment goals can help Family Offices optimise their asset allocation strategies and ensures that resources are channelled into opportunities that best reflect the family’s vision and long-term goals.

We sat down with Leonardo Drago, Head of Investments, Singapore at AlTi Tiedemann Global, and a financial veteran with experience spanning over three decades. His journey towards financial mastery dates back to a pivotal moment in his early years—an age when most were just learning to navigate pocket money.

“I remember when I was just 10 years old, instead of giving me an allowance, my dad gave me a small sum to manage, with the condition that I could take the profits as spending money, but not touch the original capital,” says the investment leader.

“Of course, that being my first foray into investing, I made a significant loss,” he jokes. “But I will never forget the lesson my father was trying to teach, which is the importance of early financial education.”

This anecdote underscores the influence of such an education in shaping his long-term wealth management strategies. Just as a solid foundation serves as the bedrock of success, the importance of cultivating financial understanding from a young age cannot be overstated. Leonardo’s experience exemplifies that this groundwork forms the cornerstone of enduring multigenerational prosperity in the ever-evolving landscape of finance.

Leonardo advises that the best way to start is to find out what they want to achieve and emphasise, “There is no one size fits all solution. You have to understand the family’s values and goals before helping them to lay out and organise their priorities.”

Another pertinent factor for success is understanding investment priorities in Family Offices and how it is essential for tailoring wealth management strategies to the needs and aspirations of the family. These priorities encompass a variety of objectives, including capital preservation, sustainable growth, social impact, and alignment with the family’s values.

By delving into these priorities, Family Offices can allocate resources strategically, optimise risk management, and capitalise on opportunities that resonate with their overarching mission. This nuanced approach not only ensures prudent financial decision-making but also strengthens family cohesion as shared goals are pursued, contributing to the long-term prosperity and continuity of the family’s legacy.

Leonardo speaks on this point and mentions that while a financial portfolio should ideally be viewed as a safety net, most people do not see it that way. He further elaborates: “Financial portfolios are often viewed as a source of returns, but when the wealth that has already been created will last for multiple generation, is it better to risk losing it to make more, or to manage it in a sustainable way to benefit future heirs, and potentially be used for tackling some of humanity’s pressing issues to contribute to a better world? Significant wealth is created by concentrating one’s efforts and assets in one venture, but it can only endure through generations with a focus on diversification and sustainability. Family offices that are not set up with this end in mind will not survive multiple generations.”

With this in mind, how then can family offices best establish their priorities to ensure their longevity? Here are 5 tips that can be useful when determining a family office’s key priorities:

Tip 1: Defining long-term financial objectives for multigenerational wealth preservation

Understanding and establishing long-term objectives is imperative for Family Offices as it can serve as a guiding beacon for investment decisions, steering strategies in accordance to the Family Office’s values, risk assessment and intergenerational aspirations.

According to Deloitte, a common trend for Family Office investing focuses more on wealth preservation rather than growth. In the report, Deloitte highlighted the factors that Family Offices should consider to protect their interests and wealth to achieve their long-term objectives. These factors include operational considerations, including talent, cost structure, technology and governance as well as management considerations including risk management and controls.

Connecting family values to these considerations would allow Family Offices to survive through multiple generations and retain their wealth.

Viewing the financial portfolio as a safety net rather than just a source of returns aligns with the goal of multigenerational wealth preservation. In this vein, Leonardo speaks of an “antifragile” approach, in which a financial strategy thrives amidst uncertainties.

He says, “When you have an ‘antifragile’ mindset, your structure actually becomes stronger. When a Family Office has a long-term plan, this strengthens the structure to support multigenerational wealth planning.”

Tip 2: Gauging risk tolerance  

Drawing upon 40 years of experience, Leonardo gives perspective on risk management and assessment.

“In the realm of wealth management and investing, the prevalent tendency to embrace excessive risk becomes evident with crisis.”

Conducting a thorough risk assessment is a critical cornerstone of effective financial management for Family Offices. Establishing a risk management process within the family office structure is essential to formalising strategies to address risks associated with the family’s wealth, according to a white paper released by Credit Suisse.

The process starts with a risk review, followed by risk identification, risk measurement, risk reporting, and lastly risk mitigation. It involves a thorough examination of various factors, both internal and external, including market volatility, shifts in regulations, geopolitical occurrences, and even family dynamics.

Leonardo explains that mitigating risks is dependent on what the particular Family Office is looking to achieve. He says, “If the goal is sustainable multigenerational wealth, it is important to not make critical mistakes. For example, should a business be located in only one location? Will this be detrimental in terms of their long term sustainability strategy?. Similarly, should a family office be only in one location?”

Managing risks not only safeguards the family’s wealth and assets but also fosters a resilient and adaptive financial framework that can weather uncertainties and capitalise on opportunities, ensuring the preservation and growth of wealth for current and future generations.

Tip 3: Evaluating investment opportunities based on alignment with goals and values

The process of evaluating investment opportunities has a distinct significance if it aligns with the Family Offices core goals and values, going beyond mere financial metrics.

“The next generation of successful business owners might have different visions, such as setting up a charitable foundation, giving back to the society or making a positive impact in general. But how can they go about doing this? They have different options they can consider, such as purely investing, setting up a foundation or going through a completely new tailored approach.”

This is also backed by Forbes, explaining that purpose-driven investments including sustainable and impact opportunities have enabled investors to make profits while aligning their values and giving back to the society.

An alignment-driven investment strategy not only strengthens the family’s commitment to their values but also contributes to a purpose-driven investment strategy, solidifying the foundation for enduring success and generational continuity.

Tip 4: Using a ‘Macro-Allocation’ Approach

With expertise in managing diversified portfolios of global investments, macro-economic strategies, derivatives, foreign exchange trading, stock-picking models and multiple asset classes, Leonardo also highlights the importance of macro-allocation.

“A good big picture macro-allocator is a critical need for a Family Office. Macro-Allocation helps to identify risks in different asset classes, including stocks, bonds, commodities, currencies, and real estate. Diversifying assets using a macro-based approach to asset allocation will help to create a portfolio that can withstand market volatility and fluctuations driven by macroeconomic events.”

By spreading investments across a range of asset classes, sectors, and geographical regions, Family Offices can effectively mitigate risks and enhance the potential for long-term returns. Diversification generally helps to reduce the vulnerability of the investment portfolio, promoting stability during market volatility.

Tip 5: Regularly reviewing and adjusting investment priorities

In a rapid evolving financial landscape, regularly reviewing and tweaking investment priorities allows Family Offices to stay aligned with their values, goals, risk tolerance and overarching mission.

Emerging opportunities can be grasped in a timely manner and underperforming investments can be phased out as well. This process reflects an adaptive and responsive stance, enabling family offices to navigate uncertainties, capitalise on favourable conditions, and maintain a resilient financial trajectory that advances their long-term prosperity.

Within the context of the constantly evolving financial landscape, Leonardo says, “The demand for global macro asset allocation professionals has been on the rise, surpassing that of stock pickers, given the escalating challenges in stock selection since 2007. Additionally, there has been a discernible shift towards passive investments over active ones.”

Wealth Management Institute’s (WMI) Certificate for Family Office Practitioner – Family Office Investments programme is developed to cover a myriad of topics to equip family principals and advisors with the knowledge and skillsets to structure a Family Office, tailoring investment strategies, asset allocation and more.

Acquire the necessary skill sets to lead investment decisions for Family Offices, achieving success through WMI’s Certificate for Family Office Practitioner – Family Office Investments.

Learn How to Lead Family Office Success with Mastered Investment Decision Skills