The Best Risk Management Strategies for Family Offices

April 2, 2024

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The primary goal of family offices is to safeguard wealth and ensure client happiness and loyalty. Whilst growing wealth is important, a recent survey by Ernst and Young reveals that family office executives cite wealth preservation as the top investment priority.

Mitigating risk is a key way to preserve wealth, and thereby keep your clients happy.

Incorporating alternative assets can be an effective way to manage risk, and it’s being increasingly adopted by family offices across the US. The blog will explore how alternative assets can help you protect and grow your client’s wealth, along with other risk mitigation tactics.

How do alternative assets help manage risk?

Alternative assets have become a popular way to manage risk, and for good reason. Including alternative assets in your portfolio – like small business finance investment notes or private equity – can protect wealth because alternative assets don’t always follow the same ups and downs as traditional markets.

Imagine a family office that invests heavily in stocks and bonds. When the market dips, they could lose huge portions of their capital. But a family office that invests in alternative assets as well as stocks can remain more stable despite market fluctuations.

Learn more about different alternative assets and how they can improve your portfolio here.

Incorporating our small business finance notes can be an attractive way to both mitigate risk, and grow wealth – as our small business finance investment notes have met 100% of their target returns.


What other strategies can I use to manage risk?

Managing risk can go beyond asset allocation, and include operational measures too:

  •   Technology

According to RSM’s 2024 Family Office Survey, family offices are increasingly digitizing their workflows and adopting new technologies like AI and cloud computing as a way of managing risk.

The digital transformation in family offices is underpinned by AI and computer processing’s superior ability to analyze extensive datasets. This means they can uncover patterns and provide insights that enhance risk mitigation strategies.


Click here to learn more about how incorporating technology can help mitigate risk.

  • Succession Planning

Succession planning is about making sure there’s always someone ready to step in, both in family offices and within the families they support.

For family offices, it means having a plan for when key people leave or retire. This ensures that there’s always someone knowledgeable and prepared to take over, keeping things running smoothly and preventing any financial losses during the transition.

On the family side, it’s equally important. When the head of a family that’s being looked after by a family office passes away, having a clear plan is crucial. Knowing who will take charge and how the family’s money and investments will be managed is important to avoid loss of capital.

As a key goal of family offices is to protect wealth for future generations, making sure that wealth is protected during these transitory times is a core part of the service you provide.


How do I know which strategies I should use to mitigate risk?

When it comes to managing assets, one size doesn’t fit all. The key is to align investment strategies with each client’s risk comfort level.

To better understand which risk strategies to use, try asking your clients questions like these:

●      What’s your biggest worry about your investments?

●      How do you feel about short-term losses for long-term gains?

●      How important is the liquidity of your investments to you?

These conversations aren’t just good practice, they’re essential to make sure you can deliver what your clients really want.

Interior, two people chat in a cafe over a laptop, for “The Best Risk Management Strategies for Family Offices”


When you’re having these conversations with clients, our educational tools can be helpful. They break down complex topics into bite-sized pieces, making it easier for your clients to understand different assets and how they work.

Using these resources can help you and your client gain a better understanding of how to mitigate risk and protect wealth.

What can I do now to manage risk?

Think about incorporating these risk management strategies into your family office: alternative assets, leveraging technology and creating succession plans.

To learn more about how alternative assets can be used to diversify and manage risk, sign up today for our free, no-obligation investor account.

Click here to explore the potential of alternative assets for your portfolio.


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