Better supporting clients with behavioural finance #4: the case of Multi Family Offices
Multi Family Offices are independent and experienced professionals who play a key role in the wealth management industry, supporting several wealthy families with complex and diverse issues. Behavioral finance is fully aligned with the comprehensive and tailored value proposition delivered by the private banking teams dedicated to these strategic partners.
Three questions for... Valérie Bokobza, Head of Multi Family Offices Europe at Société Générale Private Banking, interviewed by Edouard Camblain, Behavioral Finance Expert and Investment Advisor.
Why is behavioral finance particularly relevant to this profession?
Multi Family Officers cover a broad range of topics, including family governance, estate and tax planning, financial asset management, risk management, and other complex wealth-related matters. This requires not only technical expertise but also essential interpersonal skills to understand the family dynamics at play. Their role involves grasping relationship challenges, differing views within a family, and the sensitivities of each generation, particularly regarding money, risk, and environmental and social values.
Awareness of cognitive biases is essential in this context. Even the most skilled technical expert may miss what truly matters if they fail to take this relational dimension into account when supporting families.
Regardless of a Family Officer’s level of expertise in this area, behavioral finance provides a framework for this human-centered approach, helping to identify cognitive and emotional biases and propose appropriate solutions. It also enables more targeted and effective educational support. This is a major advantage, especially when dealing with differing—or even opposing—behavioral biases within the same family, which can complicate collective decision-making.
Which behavioral biases are most commonly observed?
Within the same family, attitudes toward financial risk can vary considerably depending on age, experience, and financial knowledge. The intergenerational dimension is often the most challenging: the priorities of older family members do not necessarily align with those of younger generations, making it essential to bring everyone together around a shared vision.
For example, some family members may display strong risk aversion and favor capital preservation, while others may wish to invest heavily in more volatile assets such as cryptocurrencies or innovative start-ups.
What other biases arise from the diversity of family profiles?
Differences in age, background, and objectives create a wide range of perceptions and priorities among members of the same family. The Family Officer’s role is therefore to reconcile these diverse perspectives while taking a step back from emotional considerations in order to promote a rational and balanced approach. In this context, two biases are frequently encountered: groupthink and escalation of commitment.
In the case of groupthink, the family seeks to reach a broad consensus, sometimes at the expense of a rigorous assessment of opportunities and risks. This bias may result in resistance to changing an asset allocation strategy or adopting innovative investments, for fear of challenging the views of previous generations or creating conflict.
Escalation of commitment occurs when, once a collective decision has been made, it becomes difficult for the family to reverse course, even when the decision proves detrimental. A typical example is the prolonged ownership of an underperforming real estate asset acquired by the founder of the family business, where emotional attachment outweighs economic analysis.
While the alignment sought by the Family Officer may sometimes happen naturally, tensions can also arise, making professional guidance and the implementation of a structured family governance framework essential. Behavioral finance therefore plays a fundamental role by helping identify and articulate these often unconscious cognitive and emotional biases. Through an appropriate educational approach, it helps highlight inconsistencies, foster dialogue within families, and support the development of more effective and harmonious governance. At Société Générale Private Banking, we position ourselves as a key partner in this process, providing our expertise to navigate these complex dynamics, optimize collective decision-making, and strengthen family cohesion.
Read the first article of the series: Better supporting clients with behavioral finance #1: wealth planning
Read the second article of the series: Better Supporting Clients with Behavioral Finance #2: Investment Advisory
Read the third article of the series: Better supporting clients with behavioural finance #3: the role of the private banker