Common Investment Mistakes High-Net-Worth Families Make (And How to Avoid Them)

When your wealth reaches a certain level, your financial life becomes more connected and more complicated. You may have an operating company, a holding company, multiple properties, trusts, and investment accounts at different institutions. A decision in one area can easily affect another: your personal cash flow, the business, and what your family will have to work with in the future.

In that environment, investment “mistakes” are rarely about choosing the wrong fund. More often, they show up in how things are structured, when decisions are made, how advisors work together, and how the family talks about money. The encouraging part is that these patterns are common, and with some planning, they can usually be managed.

In our work with high-net-worth Canadian families, we see the same issues appearing again and again. This article highlights five of the most common investment mistakes and offers some practical ways to reduce the risk of each.

Why Investment Decisions Feel Different When You Have Significant Wealth

As wealth grows, so does complexity. A family that owns an operating company, a holding company, a family trust, and several properties is dealing with a very different reality than someone with a single RRSP and a mortgage.

We often meet clients whose assets are spread across corporate investment accounts, personal non-registered portfolios, registered accounts such as RRSPs, RRIFs, TFSAs and RESPs, trusts created for estate or succession purposes, and real estate which can be in more than one province or even country. Each of these situations has its own tax rules, reporting obligations, and role in the overall plan. Decisions made in one area can ripple through to others.

For example, allowing a large pool of passive investments to build up inside an operating company can reduce access to the small business deduction and, if not reviewed before a sale, may also affect the ability of the shareholder to claim the lifetime capital gains exemption on the eventual sale of the shares. Owning real estate or businesses in more than one province, especially Quebec, can bring in different legal and succession rules and usually requires coordination between advisors in each jurisdiction.

The emotional stakes are also higher. Our clients often ask these questions:

• How much can we spend now while still protecting our future financial security?
• How can we treat our children fairly when some are in the business, and others are not?
• How do we support a child who needs more help, without creating resentment from the other siblings?

These questions go far beyond portfolio construction. They touch on values, relationships, and family communication. Against this backdrop, it is understandable how investment decisions can feel heavy or even paralyzing. It is also why the most costly “investment mistakes” for high-net-worth families tend to fall into a few recurring patterns.

Mistake #1 – Treating Tax as an Afterthought

The mistake: Making investment and business decisions first and only asking about the tax impact later.

For many high-net-worth families, tax is one of the largest recurring expenses. Yet investment choices are sometimes made without fully considering how they interact with the tax system. Common examples include:

• Making investment decisions in a corporation, trust, and personal account without viewing them as one connected system.
• Beginning planning for capital gains on the sale of a business, cottage, or rental property only when the transaction is already in motion.
• Holding the wrong types of investments in the wrong type of account, which can lead to higher annual tax than necessary.

A classic case is a business owner who plans to sell in a few years but has not looked carefully at the structure of the corporation, the adjusted cost base of the shares, or the way proceeds will flow to the family. The opportunity to manage tax more effectively is highest well before a sale, yet planning often starts very late.

A more deliberate, tax-aware approach does not mean chasing every possible idea. It means deciding which investments belong in registered plans, corporations, or personal accounts based on their tax characteristics and your time horizon. It can include using income-splitting and prescribed-rate strategies where appropriate and permitted, and integrating charitable giving into the plan, for example by donating appreciated securities rather than cash. Most missed opportunities arise not because they are complex, but because no one is looking at the full picture.

Mistake #2 – Assuming You Are Diversified When You Are Not

The mistake: Believing you are well diversified because you hold many investments, when your overall wealth is still tied to the same sectors, regions, or types of assets.

Many successful families quite naturally have a large portion of their wealth tied to the source of their success, such as the operating company, a specific industry, or real estate. On paper, they may appear diversified because they hold several mutual funds or ETFs. In practice, their total exposure may still lean heavily toward one sector, one geography, or one type of risk. An entrepreneur whose business is in Canadian real estate development, whose personal portfolio is tilted to Canadian banks, and whose rental properties are in the same region is highly exposed to a part of the Canadian economy.

Overconcentration is not always wrong. It should, however, be deliberate, measured, and monitored. It becomes even more important as families encounter private or alternative opportunities such as funds, real estate partnerships, or direct deals. These can play a useful role, but only if they are assessed within a total-portfolio framework.

Helpful questions to consider:

• How easily can we access this capital if we need it, and does that line up with our expected cash needs?
• What percentage of our net worth will this represent if things do not go as planned?
• How does this investment exposure overlap with our operating company, and other holdings?

The best outcomes occur when all of your investments are subject to the same discipline: clear criteria, thoughtful due diligence, and a defined role in your overall strategy.

Mistake #3 – Separating Investment Decisions from Generational Wealth Planning

The mistake: Managing investments in isolation from how your wealth will eventually be transferred, governed, and used by the next generation.

Investment decisions sit within a broader context of family dynamics and long-term intent. Parents may be comfortable with a certain level of risk because they remember building the wealth. Children, who have only known financial security, may feel differently. Some family members may be more interested in entrepreneurship, others in security or philanthropy.

Without a forum to talk about these differences, assumptions fill the gaps. Adult children may not understand why capital is being preserved rather than distributed. Parents may worry that children are not ready to handle responsibility. These tensions can influence investment choices in subtle ways, for example by avoiding needed changes or, at the other extreme, making gifts without a clear framework.

Legal structures also carry messages. Trusts, shareholders’ agreements, and gifting strategies signal how the family intends wealth to be managed and shared. Delaying this planning can lead to unclear decision-making authority if a parent becomes incapacitated, there is confusion about ownership and control of a family business, and tax outcomes that are less favourable than they could have been had there been earlier planning.

Equally important is preparing the next generation to work with whatever structures have been put in place. This might mean sharing information gradually, involving them in family philanthropy, or giving them responsibility for a portion of assets with clear guidance and support. Over time, practical experience and conversations often matter as much as the legal tools themselves.

Mistake #4 – Relying on Disconnected Advice Instead of a Coordinated Team

The mistake: Expecting individual advisors to do excellent work in their own lane, without ensuring that someone is responsible for connecting the dots.

Most high-net-worth families already work with capable professionals. Typically, it includes an accountant, a lawyer, and one or more investment managers. The issue is rarely the quality of each person. It’s the lack of connection between them.

An accountant may focus on annual filings, a lawyer on specific transactions, and an investment manager on portfolio performance. Without someone everything, important questions can fall in the gaps. A new holding company might be created without revisiting the investment strategy, or a portfolio change might be made without considering its impact on future estate plans. Cross-provincial situations, particularly where Quebec is involved, can highlight these gaps.

It is unrealistic to expect one person to cover all disciplines at a high level. A more realistic objective is to ensure that the right people are in the room when major decisions are made and that they are working from a shared understanding of the family’s structure and goals.

At the very high end, some families build a dedicated single-family office. For many others, a boutique firm with core capabilities under one roof is more practical. At Kerr Financial, we provide financial planning, investment oversight, tax and accounting, estate planning support and execution, as well as family governance work. We then coordinate with external lawyers and other specialists as needed. For families with more complex situations, we can act as their central hub, helping all advisors work from a shared plan and revisiting that plan over time. The focus is on structure, communication, and process, not on replacing existing relationships.

Mistake #5 – Letting Emotions Override a Thoughtful Plan

The mistake: Allowing short-term fear, excitement, or peer pressure to drive decisions that are not anchored to a long-term strategy.

Even experienced investors can sometimes be influenced by short-term noise. Market volatility, geopolitical events, or conversations with friends can trigger strong reactions. Common patterns include selling quality assets during a downturn, holding on to a familiar investment long after its role has changed, or chasing a new idea that does not fit the plan.

These responses are human. The question is not whether emotions arise, but whether there are guardrails to prevent them from driving the entire strategy. One of the most effective guardrails is a written Investment Policy Statement (IPS). An IPS sets out objectives, target asset mix, risk parameters, liquidity needs, and roles and responsibilities.

For families with multiple accounts and entities, an IPS can be created at the overall family level and then adapted for each structure. When markets are unsettled or circumstances change, the IPS becomes a reference point. It helps keep discussions focused on whether the strategy is still appropriate, rather than on the feeling of the moment.

How High-Net-Worth Families Can Reduce These Risks

Taken together, these five mistakes have a common thread: they tend to arise when no one is holding the whole picture.

Reducing them starts with building a trusted, coordinated advisory team. A typical team might include tax and accounting advisors who understand private corporations and trusts; legal counsel with estate and corporate experience, and cross-border expertise where needed; investment professionals who can work across entities and asset classes; and a planning or family office advisor who helps align the pieces and facilitate communication.

Equally important is treating your plan as a living document. Tax rules change, and businesses are sold, expanded, or wound down. Families experience marriages, births, health issues, and other life events. A regular review creates space to confirm that investment strategy, estate plans, and corporate structures still support your goals, to identify new risks or opportunities, and to revisit assumptions about spending, gifting, and legacy.

Final Reflections: The Most Experienced Investors Keep Learning

Families who manage wealth successfully over generations tend to share a few traits. They are curious. They seek out informed perspectives. They are willing to adjust when circumstances change, while staying anchored to clear principles.

No plan can eliminate uncertainty. However, by being thoughtful about tax, diversification, family dynamics, advisor coordination, and emotional decision-making, you can reduce avoidable mistakes and make decisions with greater clarity.

If, as you reflect on your own situation, you recognize some of these patterns, it can be useful to raise them with your existing advisory team. A candid conversation is often the first step toward a structure that better supports your family, your business, and the legacy you want to build.