Recently, I was reflecting on how uncertainty impacts our lives. For instance, modern technology provided ample warning (aka “certainty”) to the East Coast ahead of January’s once-in-a-lifetime blizzard and yet, tragically, some people found themselves unprepared. This is in contrast to the life experiences of many Midwesterners, who over time have learned how to prepare for and coexist with winter storms. I carried this theme of uncertainty into my ritual reading of the weekend newspapers, and through this lens, I was collectively left with the realization that I had no idea of what is going to happen this year in the stock market, Federal Reserve rates, or the presidential race.
So, building off of this theme, how do family offices deal with uncertainty? From my observations, some families simply ignore uncertainty by assuming it does not exist (i.e., “Our product will always be in high demand,” or “The children will always get along.”) Other family offices are frozen in place with the lack of clear guidance (i.e., “We will sit on cash until the economy recovers,” or “We cannot begin estate planning until the children are older.”) Finally, other family offices embrace uncertainty and incorporate this reality into their family mission. It is these families who strive to incorporate best in class operations and internal controls into the family office structure and try to identify the families’ financial and personal risks. These families are open to change and recognize the difference between an uncertain outcome and lack of experience or expertise.
My takeaway: networking with other family offices, seeking expert advisors, outsourcing certain family office functions, and being open to new ideas can help family offices deal with uncertainty.
