The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Chapter 7

Making Family Investment Decisions

When you come to a fork in the road, take it.

—Yogi Berra

In some families one family member—usually the patriarch or matriarch—makes all the investment decisions. This is simplicity itself—until it's time to pass the torch to the next decision maker, which is when things get very sticky. At the opposite extreme, some families involve practically every family member in the decision-making process. This is highly inclusive, but tends to result in very slow decision making, or often none at all.

In the long run, human capital is far more important than financial capital, for the simple reason that if the former is frittered away the latter will soon disappear. As long as the family's human capital flourishes—through the education of family members and their deepening experience managing wealth in a serious fashion—the stewardship of the family's wealth will be in sound hands.

If it were simply a matter of forming a family investment committee and then letting it take its course, every family would have one and every family would maintain its wealth indefinitely. It is unfortunately the case, however, that all too often investment committees become part of the problem, not part of the solution. In the next section of this chapter we will examine why it is that investment committees so often fail to accomplish their missions, and what might be done about it. I will then take a look at the costs of slow decision making (opportunity costs), ...