In an era where wealth preservation and family governance are more complex than ever, insights from Europe’s dynastic families, with their centuries-old legacy, are invaluable. These families, adept at navigating change and maintaining wealth over generations, offer lessons that are increasingly relevant.
Angelo Robles, Founder of SFO Continuity, flew to Austria to attend “The Royal Gathering for Family Offices.” Hosted by Dr. Thomas Schröck, Founder and CEO of The Natural Gem and a leading expert in naturally colored and untreated gemstones, the gathering celebrated a 750-year legacy of wealth continuity and preparedness. In my discussion with Angelo, he shared some of the unique insights into the time-honored practices of Europe’s oldest families.
Family Office continuity
During the gathering in Vienna, Angelo immersed himself in discussions with prominent individuals, including Dr. Thomas Schröck and members of the Habsburg-Lothringen family. His conversations centered around understanding the intricate family dynamics and the importance of long-term strategic planning in managing and preserving wealth.
A particularly enlightening moment came during Angelo’s conversation with Octavian Pilati, who shared his personal experience within a historic family lineage, noting, “the family is both a potential threat and the greatest asset to its legacy.”
Adapting to change for wealth preservation
European dynastic families exemplify wealth preservation through a blend of long-term vision, dynamic governance, and flexibility. Having endured numerous economic and geopolitical shifts, these families demonstrate remarkable resilience and foresight. Key insights include:
- Unified Strategy: A synthesis of long-term outlook and adaptability underpins their approach, ensuring relevance and effectiveness in legacy preservation.
- Learning from History: Insights from family histories enrich decision-making, showcasing the importance of adaptability in their strategies.
- Diversification as a Pillar: Emphasizing diversified portfolios, including tangible assets like land, gold, art, and gemstones, showcases their strategy to mitigate risks associated with market volatility.
- Family Governance and Continuity: Insights from these families reveal the significance of evolving family governance. Charters and constitutions focus on inclusive decision-making and synchronization.
Contrary to traditional norms, governance often involves selecting the most qualified member for leadership, regardless of age or gender, as noted by one family member. This approach underscores the family’s dual role as a strength and a potential threat to its wealth.
Asset diversification: Merging tradition with innovation
Europe’s oldest families have long recognized the importance of diversifying their investments to preserve and grow their wealth over centuries. This balance is crucial in today’s rapidly evolving financial landscape, where:
- Historical Assets: Despite their enduring value, assets like art and natural-colored gemstones often remain underrepresented in contemporary wealth management discussions. These families, however, recognize their significance and integrate them into their portfolios for stability and value retention.
- Innovative Approaches: These families act as both custodians of their historical wealth and pioneers, adept at foreseeing and adapting to future trends. Their strategies blend time-honored practices with a keen eye for innovation.
- The importance of real assets: Land, gold, art, and gems have consistently featured in these families’ portfolios, offering stability and value retention across generations.
This intricate balance of high-value, less liquid assets like art and gemstones, along with more traditional assets such as gold and real estate, illustrates the sophisticated approach to asset diversification that has sustained the wealth of Europe’s oldest families through centuries.
Delving into the realm of traditional assets reveals their enduring significance and strategic role in the portfolios of Europe’s dynastic families. These assets, often overshadowed by more modern investments, continue to play a pivotal part in wealth preservation:
- The global real estate markets have generally shown strong performance, with the 2023 Knight Frank Global Residential Index reporting average annual returns around 5-7%.
- Among the traditional assets, gold has played a significant role. According to Forbes Advisor, gold prices have historically shown a low correlation with traditional markets, around 0.25 versus global equities, making it a strategic choice for portfolio diversification.
- The art market, known for its complexity and illiquidity, presents challenges in tracking precise returns. Blue-chip art has shown significant appreciation, sometimes outperforming traditional investments.
- The gemstone market, while highly specialized, offers unique investment opportunities. Certain rare diamonds and emeralds, for instance, have witnessed significant price increases. However, investors must navigate the limited liquidity of these assets.
While traditional assets have been the mainstay of wealth preservation for centuries, modern investment strategies also play a crucial role in the portfolios of Europe’s dynastic families.
These families demonstrate a balanced approach to diversification, employing both traditional assets for stability and modern strategies for growth. This dynamic blend ensures wealth preservation across generations in today’s evolving financial landscape.
Bank ownership: Risk mitigation and global exposure
The wealthiest families have historically owned and controlled banks, using them as safe havens and financial management tools.
- Bank ownership as a safe haven: The world’s wealthiest families have historically created, owned, and controlled banks. Owning a bank is not just about financial returns; it’s a strategic move for risk mitigation. Owning one’s own bank means controlling risk policies, making it a haven for family wealth.
- Global diversification and risk management:S. families should think more globally regarding diversification and risk mitigation. International banks, especially in jurisdictions like Switzerland, play a crucial role in this strategy. They offer insights into global financial flows and early indicators of market movements and consumer sentiments.
- Access to international payment systems: Owning a bank provides unparalleled access to domestic and international payment systems, allowing for efficient and controlled movement of money worldwide.
Applying dynastic insights to modern wealth management
Harnessing the legacy of Europe’s dynastic families reveals a timeless framework for wealth management that transcends centuries: resilience through adaptability, the wisdom of diversified legacies, and the strength of cohesive family governance. These pillars, rooted in the past, are profoundly relevant in sculpting the future of wealth preservation.
In today’s rapidly evolving financial landscape, these dynastic insights offer a beacon for navigating uncertainty, ensuring that the art of wealth preservation continues to evolve, not as a mere strategy, but as a living legacy passed through generations.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.