At a time of year when people take stock and set goals, it seems appropriate to tell you about an outstanding investment, and one you can make too.
Key features:
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- Asset class highly illiquid and not fungible
- Very accessible; no need for intermediaries
- Returns are off the scale though exact measurement is hard
How tantalising is that?
What is it? we took our married children and their children away on a family holiday.
“Investment?” you say. Surely “non-discretionary expenditure” is a more appropriate categorisation? No.
What is the most important work of a family office?
Some might respond with some variation of “capital preservation” or “building assets for the future” (that was my late father’s favourite).
The answer comes from Dr John Trainer (misattributed to CS Lewis): “Children are not a distraction from more important work. They are the most important work.”
What differentiates a family office from any other investment house is the F-word: family.
Trainer claimed that the quote was “repurposed … from a cheesy old nugget in customer service.” That “cheesy old nugget” was from Kenneth B. Elliott, sales VP at Studebaker, who said in 1941 that “the customer is not an interruption of our work—he is the purpose of it”
In business, we sometimes joke: “if only those pesky customers would leave us alone and let us work”. In family business, sometimes we think about our children in the same way. But that has things the wrong way around.
There are two lessons for family offices here.
Firstly, to start with ‘why’ – purpose. What is the family office for? To serve the needs of the family. Therefore, an essential part of planning and building out a family office is to understand the needs and goals of the family.
Families don’t need investment policy statements, and capital allocation. They need the things that all people – and all families – need: health and wellbeing, connectedness, growth and development, and purpose.
These are encapsulated in the Jay Hughes’ forms of family capital: human, intellectual, social and spiritual.
The fifth form – financial capital – is important only because it is the engine that pays for the current and ongoing needs of the family. The investment policy statement and capital allocation strategy are the means to the core family goals, not goals themselves.
“Preserving family capital” is almost as heartless as “maximising shareholder value”.
With that in mind, the second lesson is to reframe family expenditure. Paying for education is using the family’s financial capital to build intellectual capital. Coaching and mentoring develop human capital. Family philanthropy fosters spiritual capital, and can also be a great way to build social capital.
And my best investment for the year – that family holiday – generates social capital. The feeling of connection and togetherness that comes from sharing positive experiences together is what keeps families together.
The ROI from seeing our children and grandchildren enjoy each other’s company and have fun together is off the scale – it’s priceless.
Because no matter how much financial capital anyone has, our most valuable asset is our time. Ten years from now, our kids and grandkids may not remember the gifts we purchased for them, but they will remember going to feed the elephants, having breakfast together and playing in the pool, and chanting “you can do it” as the taxi struggled up the steep hill to get to our rental house.
The ‘asset class’ of family social capital is one we can always invest in, and usually delivers stellar returns.
(disclaimer: This article does not constitute financial advice)
Conversation Starters:
- How often does your family go away together?
- How do you go about planning these?
- What memories do you have of family holidays?
- What was your best investment for 2025?
Further Reading:
How to gift your wealth in 2019: Gail Kelly reveals how her family gifts money
Taxes, kid issues and more: Rich families’ biggest blunders
The Rich Kid Revolutionaries
Wanted, a generous wife
Voices 3 ways COVID-19 changed wealth management for UHNW families
Keeping it in the family: Planning for the vacation home
