Shaping Risk, Building Legacy

Written by Ron Manning, Portfolio Manager, First Bank Wealth Management
Originally published in the Orange County Business Journal on July 28, 2025

For high-net-worth investors, risk isn’t just about market swings, it’s about aligning your portfolio with your priorities.

Whether you’re focused on sustaining your lifestyle, leaving a legacy, or funding philanthropic efforts, managing risk is essential to long-term success.

Most discussions of risk focus on volatility, measured by price fluctuations. While useful, volatility does not define investment risk. A broader, more practical definition includes the possibility of falling short of your goals or experiencing a permanent loss of capital. These are risks that truly matter when wealth preservation and multigenerational planning are your benchmarks.

Risk types that merit attention:

• Market Risk: Broad market declines caused by economic or geopolitical events.
• Inflation Risk: The erosion of purchasing power.
• Interest Rate & Reinvestment Risk: Rising rates can reduce the value of bonds; falling rates make it harder to reinvest income at attractive yields.
• Credit Risk: The chance that a bond issuer defaults is important for corporate and municipal bond allocations.
• Liquidity Risk: Certain assets, like private investments, may be difficult to sell without accepting a discount.
• Political & Currency Risk: Globally diversified portfolios, regulatory changes, or currency fluctuations can meaningfully impact returns.

Each risk should be weighed as part of your portfolio strategy.

Time horizon plays a pivotal role in shaping appropriate risk exposure. A long-term investor with significant capital can weather short-term volatility, especially if liquidity needs are limited. In fact, assets with greater variability may yield superior results over time due to the power of compounding.

However, if you anticipate liquidity needs soon, such as large purchases, tax obligations, or gifting, a more stable asset allocation may help avoid the risk of selling during a downturn.

Risk Tolerance
Risk tolerance includes two distinct components:

1. Emotional: How much fluctuation you’re comfortable experiencing.
2. Financial: How much risk you can afford, based on your wealth, goals, and income.

With the right balance, affluent investors may be able to prudently take more risk in their pursuit of higher returns. A well-diversified portfolio remains one of the most powerful tools to manage risk. This means more than holding multiple funds, it involves allocating across asset classes and liquidity types. Alternatives such as private credit, real assets, and hedge strategies can reduce correlation and increase portfolio resilience.

Risk is not something to be feared but rather to be understood and shaped. For high-net-worth investors, the goal isn’t avoiding risk but using it strategically. With proper planning, risk becomes a tool, not a threat, in the pursuit of long-term wealth preservation.

Ron Manning
Portfolio Manager
First Bank Wealth Management
(925) 746-2800
[email protected]

Ronald Manning, Portfolio Manager for First Bank Wealth Management, serves clients throughout California. Possessing over 20 years of financial services experience, he has a deep knowledge of investment analysis, portfolio management, and risk assessment. You may reach him at (925) 746-2800 or via email at [email protected].