Maintaining wealth for generations is no simple task. However, there are resources available for affluent families hoping to achieve long-term wealth. One of these tools is a non-legal agreement called an investment policy statement.
An investment policy statement is a document that details the financial needs of families to help them stay on track toward their goals. It is not a legal document but rather an essential tool that outlines how a family’s wealth is to be managed. To help families and family offices begin creating and implementing their investment policy statements, U.S. News & World Report spoke with WE Family Offices Managing Partner Michael Zeuner for insight.
According to Zeuner, when a family office helps a family create an investment policy statement, it is crucial to not rush through it. Instead, they should take their time on preparing and compiling them. “If it’s just a check-the-box exercise, you really miss the nuance and the importance of the conversations,” he explains.
Throughout these early discussions, family offices also should learn what the family hopes to accomplish, the amount of income they need to maintain their standard of living and how important it is to transfer their wealth to future generations. Furthermore, Zeuner believes these conversations should go a step further by asking questions related to behavioral finance, specifically the family’s understanding of positive and negative investing experiences. By digging a little deeper, Zeuner is able to not only understand the quantitative and qualitative factors that define them as investors but also map out their vision of success.
Once it is time to implement and maintain the investment policy statement, making proper adjustments when aspects of a family’s financial life is an important, ongoing step.
“I think it’s incumbent on the advisor to look at what they’re seeing in real life with the family. Is it aligned with what we thought, or is it different?” says Zeuner. “And then, how do I amend the investment policy statement as a result of what I’m actually seeing as the behavior of the client?”
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