In some families the grown-up children come to take an interest in the portfolio investments of their parents, knowing they will be inheriting them in due course. It can become a multi-generational discussion of how the wealth should be invested and managed, where the insights of the family can help the original wealth compiler.
Today, there are active family discussions about what the aims of holding shares and bonds in a savings fund should be. Of course, there is usually still a prior wish to preserve and increase the value of the capital over time. The family may face special demands – and will want reassurance that the wealth is increasing at least in line with potential calls on it.
They may need some of it in an accessible form in case of sudden emergencies. No wealth owner can avoid the discussion with an adviser, or with themselves, over how much risk of loss they are prepared to run – and how high a return they would like to achieve, knowing that one is linked to the other. In a world of low (or no) interest rates on safe deposits and bonds, a saver has to take more risk if they are seeking a better return.
The arrival of ESG-sensitive investing has added a new set of questions, which often causes family members some concern. Do the companies they invest in through shares and bonds reflect their values and wishes for their family and the future of the wider world? Do the companies treat their employees well, and ensure their suppliers pay fairly and observe high standards? Do they avoid fraud, tax cheating and other corporate crimes? What are they doing to protect and enhance the environment? If a local charity or trust is involved, the trustees need to be especially careful that the portfolio reflects the attitudes and purposes of the founding deed.
The good news is that families can now ask a reputable investment adviser to help guide them through these difficult issues. Some families have a strong and united view that they do not wish to finance gambling or weapons of mass destruction or mining and burning coal. They can ask their managers to avoid such investments in companies that mainly do these things.
Some have a wish that their portfolio should contribute to positive change in favour of a low carbon future or in support of higher standards of corporate behaviour. Advisers can recommend shares and sectors that do the most to further these aims.
There is no perfect portfolio to reflect a single political or world view, as the world of company investment and trading is very integrated. A good retailer may sell cigarettes that investors think should be banned. A well-run bank may lend a bit of money to a coal company the investor does not like. A digital giant, which is helping the transition to a greener world will have some old fossil fuel economy companies as clients.
The good news
Taking reasonable account of the growing wish to invest in companies that are trying to do good can also be a successful investment strategy. Many of the activities which are growing and generating more profit are the very activities that power the green and digital revolutions that underlie many of these preferences.
There is no substitute for talking. The aim of family wealth is to improve the lives of family members. The wealth holder will often stay in charge and ensure the hard-earned money is well protected and likely to grow from a good investment. Other family members who will benefit may have insights to share that can help construct a portfolio which earns good returns and makes the family feel they are doing some good with the money.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.