In over 20 years of working with wealthy families, I’ve learned this: wealth doesn’t just vanish from one bad investment. More often, it fades, piece by piece, through slow drifts in investment priorities, illiquidity, over-concentration, and lifestyle creep.

Without a clear capital allocation policy, even the most successful families can find themselves rich on paper yet strained for cash, overexposed to a single bet, or divided over spending decisions.

A Capital Allocation Charter is the antidote. It’s the family office equivalent of a company’s strategy document, a written agreement on how wealth is deployed, preserved, and grown. It replaces reactive decisions with disciplined, principles-based allocation.

Over the years, I’ve refined a simple framework to help families anchor their decisions. The ALLOCATE framework distills this into eight key levers every family should define.

Let's take a look:

A – Aims

Define the mission for the capital
Is the family’s primary goal wealth preservation, steady growth, philanthropy, or entrepreneurial risk-taking? Often it’s a blend. Without a stated mission, investment decisions can feel inconsistent, with each new opportunity judged in isolation.
Example: A family says “we’re growth-oriented,” but when markets drop, they panic-sell to raise cash for lifestyle spending. The real aim was stability, but it was never documented.

L – Liquidity

Set your financial runway
How many years of operating expenses, both personal and investment, should be in safe, liquid assets? What cash flow coverage is non-negotiable?
Families without liquidity buffers often end up selling prized assets at the worst possible time. Your charter should specify runway length and acceptable liquidity instruments.

L – Legacy

Preserve a minimum corpus for at least 100 years
The “legacy” allocation is the untouchable heart of the family’s wealth, invested for perpetual endurance. It ensures that even in the face of setbacks, the family’s core capital survives.
Think of it as the endowment that underwrites your future generations’ freedom and purpose.

O – Opportunity

Budget for high-risk, high-reward bets
This is where the entrepreneurial spirit lives. By ringfencing a fixed allocation for venture capital, private deals, or innovative projects, you can pursue asymmetric upside returns without endangering the whole portfolio.
Without boundaries, families often overcommit to a single promising deal and end up concentrated in a failure.

C – Concentration

Set maximum exposure limits
Define caps per issuer, general partner, sector, or buckets. Concentration risk isn’t just about markets and asset classes, it’s also about who holds decision-making influence over your capital.
Your charter should state the limits and the monitoring process to enforce them.

A – Active vs passive

Decide your management mix
Will you lean on index funds and automated strategies, or will you hire managers and pursue direct investments? This could be in-house or outsourced. Both approaches have merits, but a clear split avoids creeping fees and mismatched expectations.

T – Timing

Schedule rebalancing and reviews
How often will you reassess allocations? Quarterly? Annually? Market conditions change, but without a set cadence, rebalancing can slip, and risks can quietly build.

E – Exception protocol

Define who can override the rules, and how
Even the best framework needs flexibility in extraordinary circumstances. Document the authority and process for making exceptions, so decisions are swift yet accountable.

Turning rules into results

Wealth without a strategy is like a ship without a compass, it will drift, and the destination will be luck, not design. The ALLOCATE framework gives families a clear, disciplined way to align capital with purpose.

Write your Capital Allocation Charter now, before you need it. The conversations it sparks may be uncomfortable, but the clarity it brings will be priceless when decisions matter most.

P.S.- Later this year, I'm launching an AI-powered family office operating system, not just software, but a complete family office stack. Think: world-class infrastructure plus on-demand access to top-tier global experts without the complexity, cost, or heavy overhead of a traditional setup.

If you want to run a lean, next-gen private wealth office powered by AI, get on the waitlist now, before it closes: https://lnkd.in/gxQyXv3M.