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Family Office Use of Wealth Manager Predictions

As part of my role on the investment committee for various family offices, I regularly interact with wealth managers. These interactions range from routine monthly meetings to more spontaneous discussions, often centred around specific investments. Many family offices lean on the expertise of these wealth managers, particularly for insights into capital market trends, to help guide their overall portfolio strategies.


The role of capital market expectations has become increasingly significant. In times past, surpassing a CPI +  benchmark was a relatively straightforward goal. However, in the current climate of heightened inflation, some managers are revising their benchmarks to more accurately mirror various risk profiles, including balanced, growth, and high growth portfolios.


In determining expected returns, I've noticed a trend among managers to first choose a risk profile, then construct the portfolio to match this risk level, often prioritizing it over total return. The cornerstone of this approach is strategic asset allocation (SAA), which is based on anticipated returns from assets over the long term.


This leads to an important question: how can we effectively utilise these well-researched, yet not always accurate, predictions to refine our internal investment strategies?


1)      Diversity of Perspective – external portfolio managers and researchers can provide the internal team with much needed diversification in perspectives, as often the bubble of the investment office requires a devil’s advocate that challenges the group’s thinking. This can provide economic, geopolitical, and sector-specific insights, can lead to more informed decision-making.


2)      Depth – it’s rare that a family office will have one wealth manager. When looing at incumbents and potential new managers, one of the biggest drawcards is the transfer of IP and how much they are willing to share. The best are confident in their ability to provide value in the long term.


3)      Range of Expertise – a significant advantage of working with wealth managers is their access to a broad spectrum of asset managers, each bringing unique insights to the management of family assets. The most effective approach I've observed is when wealth managers not only update us about different asset managers but also provide their own analysis on how these options align with our management priorities. Merely forwarding information is not enough; meaningful engagement and tailored insights are essential for effective relationship management.


4)      Risk management – wealth managers who oversee a diverse portfolio across various client types and investments generally have a more comprehensive understanding of where risks are concentrated. Family office advisors can offer an overarching view of risk, a perspective that an internal team, which may have a narrower focus, might lack. This broader view is invaluable in developing robust risk management strategies.


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“Hall Road Investments Pty Ltd is a Corporate Authorised Representative (CAR No. 001279456) of Non Correlated Capital Pty Ltd (AFSL No. 499882). Shaun Parkin is an Authorised Representative (AR No 001279458) of Hall Road Investments Pty Ltd (CAR No. 001279456) and is authorised to provide general advice to wholesale investors”


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