Why a Comprehensive Wealth Strategy is Crucial

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10/2024

When we talk to new clients about their wealth, the conversation often starts with a discussion of individual investments — which ones have performed well, and which have turned out to be disappointments. While these reflections can be helpful, without a clear strategy and objectives from the outset, it is difficult to measure long-term investment success.

In our experience, working with a clear, overarching strategy is more effective than focusing on individual assets. This approach offers several key advantages:

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  1. ‍Systematic Measurement of Results: A strategy allows for consistent evaluation of performance against established goals
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  2. Clear Mandate and Professional Execution: It provides a framework for a clear mandate and enables professional implementation by experienced investment experts.
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  3. Facilitates Family Discussions and Reduces Conflicts: A shared wealth strategy makes discussions within the family easier and reduces the risk of conflict if results fall short of expectations.
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  4. Reduces Emotional and Unsystematic Decisions: It helps minimize emotional reactions and impulsive, unsystematic investments, often referred to as “cocktail-party trades”, which tend to disappoint and tie up capital unnecessarily, leading to high opportunity costs.
     

Opportunistic behaviour can occasionally pay off, particularly with illiquid assets like private equity investments or real estate. However, this is only true if approached with the necessary experience and thorough due diligence. Investing without a plan can quickly lead to a portfolio with mismatched assets that do not align with personal goals, liquidity needs, or risk preferences.

A clear wealth strategy, tailored to individual goals, is therefore acrucial prerequisite for long-term investment success. It is not only about the suitability of the strategy but also its completeness. Often, when people talk about investment strategy, the focus is limited to the allocation of assets among liquid investments like stocks, bonds, and liquid alternative assets.

However, wealthy individuals typically also own significant illiquid assets, such as stakes in businesses, private equity fund holdings, or real estate. These investments generally offer higher return potential compared to liquid assets, but they also carry higher risks and tie up capital for several years. Not only do these investments lock up liquidity, but they also require it over time—for example, when private equity funds call for capital or when a business demands recapitalization. Additionally, personal needs, changes in life circumstances, and philanthropic commitments also require liquidity. Therefore, comprehensive and long-term planning is necessary to manage liquidity efficiently.

This, however, requires that the wealth strategy be developed holistically. It must consider liquid financial assets, illiquid investments, personal goals, wealth transfer to the next generation, and philanthropic activities. A complete reporting, encompassing all mandates, assets, and accounts, is essential in this process.

As an experienced multi-family office, we have both the expertise and technological infrastructure to support our clients in the development, implementation, and monitoring of a comprehensive wealth strategy.

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Lukas Dörig

Head Client Relationship Management, Managing Partner
About MFO
Marcuard Family Office was founded in Zurich in 1998 and is an independent, partner-led multi-family office.
Why?
As a family office, we take care of all relevant wealth issues, leaving you time for other things.
When?
Whether you are selling your business, restructuring the current situation, or overcoming difficult family circumstances, the associated challenges can be overwhelming. As experienced advisors, we professionally guide you through transition phases as well as through calmer periods.
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