Wharton@Work

February 2025 | 

Family Wealth Management: Three Investment Insights

Family Wealth Management: Three Investment Insights

The family-office sector is booming. Driven by the increasing complexity of managing substantial, multigenerational wealth and the continued rise of the global population of ultra-high-net-worth (UHNW) individuals, the demand for specialized services that go beyond traditional wealth management is surging. In fact, the number of family offices worldwide has grown by more than 31 percent since pre-pandemic levels, according to Deloitte’s latest report in its Family Office Insights series. As those numbers increase, investment managers are taking note and moving into the family-office space.

But as many of these UHNW families and their advisors discover, running a family office takes much more than investment expertise. As Wharton’s Raphael (“Raffi”) Amit notes, “transitioning from traditional investment management to family-office services requires a dramatic shift in mindset. You are no longer focused solely on preserving and growing financial wealth, but must also navigate complex family dynamics, intergenerational transfer of wealth and estate planning, taxes, insurance, governance, and philanthropy, among other activities that complement investment management.”

Building a Foundation for Family-Office Success

Professor Amit says even highly experienced portfolio managers rarely possess the knowledge and skills required: “Family wealth management is complicated, which is one reason for Wharton’s long tradition of pioneering research on family offices.” In addition to founding and chairing the Wharton Global Family Alliance (WGFA), a unique academic-family business partnership that brings together influential global families to share thought leadership, Professor Amit was recently named the top Family Enterprise Academic in the world by UK-based Family Capital. The publication dedicated to family enterprise and private capital trends called him “a worthy winner. … Not only is he respected for his research into family businesses, but he is also a pioneer in family-office studies, which he realized was a vital part of the family enterprise world way before many of his contemporaries.”

Professor Amit continues to bridge the gap between academic research and practical advice by designing and leading two new programs with Wharton Private Equity professor Bilge Yilmaz: Family Wealth Management: Advanced Financial Strategies, and the Wharton Family Office Program: Balancing Family Harmony and Financial Prosperity. Both programs address the real-world challenges faced by family offices, offering actionable frameworks for issues such as governance structures, succession planning, and wealth preservation, as well as the latest trends in family-office investing.

Three Investment Insights

Erick Walsh, the managing director of a family office and participant in the inaugural running of the Family Wealth Management program, says the investment in attending comes with a quick payoff. He immediately began applying lessons learned, sharing summary outlines of each day’s sessions in emails to his team. “I asked them to digest it, and then we discussed where we go from here in terms of our investments. We are also starting to address family-related issues, such as having a family constitution, creating unity within the family, and planning for transferring knowledge and wealth from one generation to the next.”

He singles out three specific investment insights that he says offer a quick ROI. The first is running correlations between “asset classes, industries, and sectors. Straight out of the program, the first thing I did was run correlations across all of our asset classes and see which ones were correlated to our concentrated stock position. I am now crafting our revised investment policy based on what sectors we should be investing in that are not correlated with the concentrated stock.”

Walsh’s second takeaway concerns diversification within asset classes. “On the private equity side,” he explains, “we weren't as diversified as we thought we were within the asset class. We mostly invested in either two or three fund managers across their multiple funds, but now we are looking for other managers with funds in other jurisdictions.”

Finally, Walsh cites the powerful lessons revealed in sessions with the University of Pennsylvania’s endowment managers. Participants learned firsthand how the endowment model preserves and grows Penn’s endowment over the long term. That model allocates assets across diverse, high-return investments, while limiting annual distributions to a fixed percentage (approximately five percent), ensuring sustainability across generations. “We want to limit the distributions to the family that can be taken out of the portfolio, similar to the endowment model,” Walsh says. “I learned how to reverse engineer our target return with that distribution target, shifting the focus from a traditional portfolio into more of an endowment-style portfolio. It’s something that I am starting to implement.”

The Power of Diverse Perspectives

In addition to learning the latest trends in family-office investing, participants in Family Wealth Management agree that the range of experience in the classroom creates a unique opportunity for peer-to-peer learning. Discussions among family members, family-office directors, and those looking to transition into family-office investing offered every participant a diversity of perspectives. “Observing both advisors and principals within the room was very useful to get both points of view and understand how each thinks,” says Walsh. “The ways traditional advisors (there were a couple of people who work at the private banks) think of things is not necessarily the same as the way a principal does, in terms of priorities, knowledge, and investment focus. It was very valuable having both sides in the same room, hearing the type of questions they asked the faculty and speakers.”

Ben South, CEO of a multi-generational family office, gained a deeper understanding of “what other families are experiencing, what they're thinking about, and what's important to them.” He says when “listening to the professor or when someone asks a question or makes a comment, you realize, ‘That's it. That's what I need to complete a thought or kickstart a project.’ Some of the academic content was already familiar to me, but the conversation around it from all those other minds is where I get a lot of value. Generally, family offices operate with a level of discretion and secrecy, [so] there's a really cool dynamic when you get actual family members and investment executives in the same room together.”

It's providing that holistic view that Amit says drives his research and his teaching. “Family wealth management is about navigating a delicate balance between often conflicting goals,” he explains. “When hiring for a family office, mindset is everything. It’s not just about investment expertise — it’s about having the emotional intelligence to understand family dynamics and integrate them into the investment process.”