How Do Family Offices Approach Asset Management?

taliTali Soroker is a Financial Analyst at I Know First.



How Do Family Offices Approach Asset Management?

  • What are family offices and what services do they provide?
  • Investment approaces from 6 established family offices
  • Integrating I Know First’s predictive algorithmic system into existing asset management approaches

No two families have the same financial needs, and thus, no two family offices are the same. Some offices service just one family, some service a few families, and some service up to a hundred families. With no regulation as to what constitutes a family office and with the needs of each family ranging from very similar to one another to entirely different from every other family, these types of wealth management firms are difficult to define.

According to Todd Ganos, a contributor for Forbes, “the simplest definition of a family office is an organization that assumes the day-to-day administration and management of a family’s affairs.” The most centralized function of a family office is standard wealth management, this could include managing the family’s investments, tax planning, and estate planning. Aside from these functions, family offices in some cases will also manage other areas of family life such as recordkeeping services, expense management, insurance and wealth transfer services, family member financial education, family support services, and family governance.

Furthermore, when looking specifically at the management of family investments, each office has its own approach, its own practice for optimizing the returns from the family’s portfolio. We have asked six established family offices to outline their firm’s investment approach and how the approach is customizable to each family that they are servicing, below are their responses. Additionally, we have outlined how I Know First’s machine-learning algorithm can be integrated with each approach from these different firms.


Asset Management

Elliot B. Herman, CFP®, CPA is the Chief Investment Officer for PRW Wealth Management in Quincy, MA.

“Core to our approach is a healthy allocation to passive investments globally – get on base inexpensively. The core will look similar across client profiles but it varying percentage allocations after accounting for risk tolerance and time horizon. The use of long/short and managed volatility strategies helps to reduce the bandwidth of returns which in turn helps manage behavior in difficult periods. High quality and lower quality fixed income is used to balance off the risks in the bond market and to provide return potential. For more tax sensitive clients, we use municipal bonds and a tax-loss harvesting manager on the equity side. Diversification is intended to hedge against and uncertain future and requires the use of asset classes that truly have non-correlation when building our portfolios. Clients in retirement cannot afford to go backward in a big way. As such, we seek to maintain assets geared toward capital preservation, income, and growth in varying degrees to cover short, medium, and long-term goals- sometimes done as a bucket approach.”

Asset Management

Eric Pucciarelli is the Vice President of oXYGen Financial, a company that is built to serve generations X&Y.

“We find that clients who have more money are actually more nervous in retirement than those that might not have accumulated as much. To help manage some of the emotions that clients experience, we have a philosophy that we call a GPS system which breaks down as follows:

* G = Growth. These assets are structured in such a way that they are positioned for growth over the long term and do not necessarily need to be touched. The approach here is to be part static with core ETF’s and the other part looking for opportunity in sectors that might be undervalued

* P = Paycheck. One common issue consumers often face at the beginning of retirement is which part of my portfolio should I get income from? This portion of the pie is designed to help recreate a paycheck through dividend paying instruments ranging from higher dividend funds to alternative investments

* S = Security. Market volatility is often a concern of a lot of clients. The purpose of the security section is to provide protection or certain guarantees against a decline in the stock market.”

Asset Management

Ian Foster is a principal and portfolio manager at Seckel Capital Advisors and is responsible for ETF strategy development and research.

“There are two major pillars to our investment strategies, momentum and diversification.

Momentum informs us as to what asset classes are performing best in the current market environment and should continue to outperform over the near term. We then use a tactical form of mean variance optimization to diversify the assets that have passed our momentum screen. Finally, we manage the overall volatility at the portfolio level to meet the needs and preferences of each client based on their risk profile.

The clients we serve are interested in a consistent risk and return profile which we can deliver with this process. By tactically allocating amongst various asset classes we can help control the risk in the portfolio over time instead of exposing our clients to the dramatic swings that traditional buy and hold portfolios are subject to.“


Asset Management

Frederick Myers is the managing director for Northwood Investment Partners, LLC.

“We look for undervalued companies to invest in the common stock, and, where deemed appropriate, options or warrants. We rely on fundamental analysis to determine intrinsic value and then buy shares in companies for less. Our strategy also seeks out investment opportunities in “special situations” or corporate actions. These opportunities are generally identified as mergers and acquisitions, bankruptcy proceedings, or companies spinning off divisions. Much of our investing style is influenced by Warren Buffett’s early partnership days and the work of Joel Greenblatt. We manage separate accounts for clients as one way to manage risk and increase transparency. They have the ability to log in and monitor their account at any time. The portfolios are roughly 80% in value type stocks and the remaining 20% is reserved for special situations investing, which is where we will make use of options and/or warrants. The portfolios target to hold between 20 and 30 positions and this fluctuates largely based on the special situations opportunities available. The diversification in the portfolios is one way to manage risk. The more traditional value positions we tend to hold for greater than one year with an eye towards tax efficiency while the special situations investments are shorter term in nature and held for less than one year.”

Asset Management

Daniel Grote is a partner with Latitude Financial Group and a financial advisor with more than 13 years of experience in the financial services industry.

“I have been practicing in the financial planning profession for over 14 years helping individuals and families to construct, rebuild, and renovate their wealth management strategy.  We do this in three steps.

  1. Discovery- Gaining an in-depth understanding of the accumulation and distribution period objectives: length of accumulation and distribution period, liquidity needs throughout accumulation and distribution, risk tolerance throughout accumulation and distribution, preferences and needs for guarantees during both time periods.  Also understanding the funding resources.
  2. Strategy development- Based upon above conditions we construct a portfolio with a strategic blend of asset classes including stocks, bonds, cash, real estate, and alternatives.  Portfolios are delivered through singular or plural vehicle(s) for delivery including exchange traded funds, mutual funds, unit investment trusts, annuities (fixed, variable and/or indexed) and/or other investments/insurance solutions.  Investment management may be exclusively active, passive or likely a hybrid that utilizes active asset management that attempts to arbitrage inefficiencies in markets, tactical asset management that seeks to participate in market upswings and spectate during market corrections, and passive management that achieves results through broadly diversifying within an industry and eliminates the costly expense of professional management and trading.
  3. Implementation- Utilizing the best fit account mechanism to achieve the objective most efficiently for taxes and expenses.  Possibilities include but are not restricted to the use of non-qualified accounts, joint accounts, qualified accounts, and trust accounts.  Our access to a broad and diverse marketplace and investment research is extensive.”

Asset Management

Troy Shaver is the CEO of Dividend Assets Capital, LLC, a Registered Investment Adviser under the Securities and Exchange Commission Investment Advisers Act of 1940.

“We look for solid growth companies with predictable, sustainable earnings and dividend-paying records. For us it’s simple: earnings equal dividend growth. Sustainable dividend growth equals good total return for long-term performers. We suggest buying companies with betas of less than 1 trading slightly below the S&P 500, as stocks in this category have more sensitivity to overall market movements. Our research concentrates on good balance sheets with sound historic debt-to-equity ratios of around 25%. A stock’s price/earnings to growth (PEG) ratio is a great indicator for future growth. We believe a forward-looking PEG of less than 1 provides a window for future earnings potential.

Other important factors to consider when picking long-term opportunities are sustainable dividend payout ratios and the potential use of corporate cash. We look for companies with products and business development plans that can successfully support year-over-year dividend increases. Strategic stock buy-back plans and successful mergers and acquisitions are keys to many companies utilizing cash efficiently while adding to better pricing and future markets. Return on invested capital also gives the investor a sense of a company’s efficiency in allocating its capital resources to generate returns.”


Asset Management

I Know First’s Predictive Algorithm Integrated into Different Investment Strategies

At I Know First we have developed a number of forward-looking forecasting algorithms that help in decision making in wealth management. Our products are suitable for different investment styles and levels of risk, from solid conservative to aggressive. The market prediction system can be fully customized to fit our clients’ selected markets of interest and existing strategies. Algorithmic signals can be produced according to desired variables, rules, and conditions with almost no limits on parameters. Furthermore, it is possible to base them on a variety of other factors such as liquidity, geographic location, market cap, volatility, dividends and more.

The international clients have a choice of investing in the top local stocks, which they know best, or in the international or multinational stocks for global return stability. Our By-Industry and By-Country products allow us to quickly focus on industries and countries with the best growth potential. Then, looking deeper into each industry and country stock forecast tables, one can pick the stocks with best growth potential. With the ability to customize algorithmic solutions for family offices, I Know First’s Family Office solution is able to service many firms regardless of their established trading strategy and the interests of their clients.

Asset Management