Risk Mitigation's Crucial, Complex Role for Wealthy Families


Affluent investors should carefully consider their liquidity needs, privacy concerns and diversification strategy.

Along with identifying your goals and time horizon, assessing risk is a key part of building a holistic financial plan. And while affluent investors generally have higher risk tolerances, determining their individual risk profiles isn’t straightforward.

For those with large and varied investment portfolios, it can be difficult to visualize how a major market decline or sudden interest rate shift would impact your overall financial situation. And if you’re more easily able to absorb losses, it’s not always simple to distinguish what level of volatility in your investments’ value would be tolerable versus intolerable.

Despite these challenges, it’s crucial for wealthy families and individuals to actively assess their risk profile. They may have exposure to additional forms of risk than other investors, and they also may have heightened concerns about preserving their financial legacy for future generations and their preferred charitable causes.

The renowned American economist Benjamin Graham once said, “The essence of investment management is the management or risks, not the management of returns.” Let’s take a look at a few risk topics that may be of particular relevance for affluent families.