Concentration risk is the quiet exception in many otherwise diversified portfolios. A single holding, often the company that created the family's success, comes to dominate the balance sheet, and the conversation. On a spreadsheet the answer looks obvious: diversify. In a family, it almost never is.
The reason is that a concentrated position is rarely just an asset. It is a story, a source of identity, sometimes a continuing income, and frequently a tangle of tax and legal constraints. Treating it as a pure investment problem, and being surprised when the family resists the obvious trade, is one of the more common mistakes an adviser can make.
Three forces, not one
Reducing a concentrated position pulls against three forces at once. There is tax: a low cost basis can mean a large, immediate bill on any sale, which has to be weighed against the risk of holding on. There is liquidity: the holding may be restricted, thinly traded, or private, so it cannot simply be sold at will. And there is sentiment: the emotional weight of selling the thing that built the family's wealth, which no model captures but every adviser feels in the room.
A plan that ignores any of the three tends to stall. The investment case for diversifying may be airtight and still go nowhere, because the tax cost was never addressed or the family's attachment was never acknowledged. Progress comes from engaging all three honestly, not from winning the argument on returns alone.
The goal is not to be right about the stock. It is to ensure that one position can never undo a generation of careful work.
A staged, written plan
The workable approach is almost always gradual and written down. Rather than a single decision to sell, the family agrees a plan with thresholds and a schedule: a target weight to move toward over a defined period, a pace of sales that manages the tax impact, and a set of triggers that prompt action. Because the plan is written and endorsed in advance, it survives the next rally, when selling feels foolish, and the next dip, when it feels urgent.
Tools that ease the path
Several tools can soften the trade-offs. Where an outright sale is premature, hedging can reduce the downside of a concentrated holding without realising a gain, buying time and protection at a cost. Charitable giving of appreciated shares can address both philanthropy and concentration at once. Staged gifting to the next generation can move risk off the balance sheet while serving succession. None of these is a silver bullet, and each carries its own rules, but together they give a family more ways to act than a binary hold-or-sell.
What matters most is that the decision is made deliberately, in advance, and as part of the family's policy, rather than in the heat of a price move. A concentrated position managed to a written plan is a manageable risk. The same position left to drift, because the conversation was too difficult to have, is how families that did everything else right still come undone.
How fast, and on what triggers
A common question is how quickly to reduce a concentrated position. There is no universal answer, because the right pace depends on the size of the concentration, the tax cost of selling, the liquidity of the holding and the family's tolerance for the risk of waiting. What can be said generally is that a pre-agreed schedule beats a series of ad-hoc decisions. A family that has decided, in advance and in writing, to move toward a target weight over a defined number of years removes the single most destructive factor in these situations: the temptation to do nothing, because every individual moment feels like the wrong one to sell.
Triggers help convert intention into action. A plan might specify that sales accelerate if the position exceeds a certain share of the portfolio, or that a fixed portion is sold each year regardless of the price, on the principle that a disciplined, unemotional reduction will usually beat trying to time the stock. The exact rules matter less than the fact that they exist, and were agreed when heads were cool.
This is, in the end, where the investment policy earns its keep. By recording the family's intentions for the concentrated position as an explicit constraint, with a target, a pace and a set of triggers, the policy takes the decision out of the heat of the moment and places it in the calm of a considered plan. The holding stops being a recurring argument and becomes a managed risk like any other.
It is worth saying plainly that doing nothing is itself a decision, and usually the most dangerous one. A family that postpones the conversation, year after year, is implicitly betting that a single company will keep compounding without interruption, a bet that has ruined more fortunes than any market crash. The purpose of a written plan is not to predict the future but to ensure the family acts on its own considered judgement rather than on inertia dressed up as patience.
The aim, in the end, is modest and decisive: not to call the top in a single stock, but to make sure that no one holding, however beloved, can ever put the whole family enterprise at risk.