The concept of wealth management has been around for generations and most often it comes down to not only investing in opportunities that could produce returns in the future but also mitigating risk. And how do you effectively achieve all of your goals?
First and foremost, it’s imperative to establish your goals from the beginning and if you’re looking to deploy $500M in capital you gotta think about the asymmetry of the risk/reward profile, including fat tail scenarios and the risk of ruin that are oftentimes totally outside of your control. For example, your family office has a big stake in company X and a geopolitical crisis triggers a market panic and financial calamity which can potentially equate to a big loss for you.
Secondly, mitigating risk in the wealth management space also ties back to the types of investments you make and not only analyzing the competitors/opportunities but also the future: What is the risk adjusted probability of a favorable outcome?
Additionally, it’s imperative to do a homework assignment where key execs sit down and brainstorm potential risks, how to prevent issues from happening in the first place, and if they do how to respond. And when playing with big money this can mean the difference between life and death.
The Practical Contrarian is turning things upside down and looking forward to announcing new solutions. Stay tuned.