A family office can show a nine-figure balance sheet and still find itself short on cash when it matters most. That isn’t a contradiction—it’s the nature of illiquid wealth.
As family offices commit more capital to private equity, private credit, real estate, and closely held businesses, a structural gap widens: net worth measures what the family owns. Liquidity determines what the family can actually do.
A strong portfolio isn’t the same as a strong plan
A typical balance sheet might include an operating business, private fund commitments, real estate, concentrated stock, trusts, and insurance—with a thin cash cushion underneath. Each holding may be sound on its own. Together, they can leave a family long on paper wealth and short on optionality.
A portfolio statement shows value. It doesn’t show when capital comes back, how much more is owed, or which holdings can be tapped without taxes, discounts, or restrictions. Those are planning questions, not investment questions—and they get missed when the portfolio and the plan are run as separate exercises.
Unfunded commitments are real obligations
For example, a family with $20 million invested in private funds may also carry $8 million in unfunded commitments. That’s not a line-item liability, but it is a claim on future cash. A durable plan holds invested capital, unfunded commitments, expected distributions, and upcoming tax obligations in one model—and it has to work even if distributions slow while capital calls continue.
Start with the family’s goals, not the deal
Every private opportunity gets evaluated on return, manager quality, or thematic appeal. Fewer get evaluated on fit: How long can this capital stay invested? What’s already committed elsewhere? Could the family tolerate zero distributions for several years? An attractive investment can still be the wrong one if it erodes flexibility past a comfortable threshold.
The real risk is a team working in silos
Family offices typically retain excellent specialists—investment managers, tax advisors, estate attorneys, bankers. Each gives sound advice within their own lane. The risk is that no one is looking across every lane at once.
A new private commitment can quietly reduce liquidity earmarked for an estate transaction. A gifting strategy can leave the parents thin under a delayed-distribution scenario. A credit line can look flexible until markets fall and collateral value with it. Each recommendation can be individually correct and collectively unworkable.
This is where a family office’s greatest advantage—and its greatest exposure—sits: coordination. Without one team synthesizing the investment, tax, estate, and credit picture into a single model, decisions get made in isolation, and cumulative risk goes unseen until it’s a problem.
Stress-test the plan
A single baseline projection isn’t enough for a family with significant illiquid holdings. A rigorous plan should be run through delayed distributions, simultaneous capital calls, a market decline, and a major tax event—including several compounding at once. The goal isn’t to predict which scenario occurs; it’s to confirm the plan holds when more than one assumption breaks at the same time.
Not all liquidity is equal
Cash is the most reliable source, but its value is stability, not yield. Public securities are liquid but can be worth the least exactly when needed the most. Credit lines shrink as collateral values fall. Fund distributions arrive on the manager’s timeline, not the family’s. A sound plan distinguishes liquidity that is available, expected, and merely possible—a distinction that matters most when markets are under stress.
A practical framework
Six questions anchor the planning process:
- What is the family ultimately trying to accomplish?
- What must be funded in the next several years?
- What might need to be funded—health, opportunity, transition?
- Which assets are genuinely accessible today?
- How much capital is already spoken for?
- Does the plan hold up under stress?
These aren’t one-time questions. Commitments get funded, priorities shift, and the plan has to move with them.
The bottom line
Illiquid assets aren’t the problem—sophistication requires them. The risk is treating investment selection and financial planning as separate exercises and treating each advisor’s recommendation as complete on its own.
A family office’s real edge isn’t access to opportunity; most already have that. The edge is a single team—investment, tax, estate, and credit expertise—working from one coordinated model of the family’s complete financial life, so every decision is evaluated for its effect on all the others.
Net worth measures what a family has built. Coordinated planning determines what that wealth can actually do. For more information, visit our practice page or call 312-715-3814.
Cerity Partners, LLC (“Cerity Partners”) is an SEC-registered investment adviser with offices across the United States. Registration as an investment adviser does not imply any level of skill or training. The information provided is not intended as personalized investment, tax, or legal advice. There is no guarantee that any opinions, projections, or views expressed will materialize. You should consult a qualified professional before making financial decisions. Information is subject to change without notice and is believed to be reliable but is not guaranteed. For Cerity Partners’ registration status, please visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov. For additional details about our services, fees, or potential conflicts of interest, please request our disclosure statement, including Form CRS and ADV Part 2, using the contact information provided.
Please read important disclosures here.
