Before the Investment Vote: Make Every Decision Maker’s Reference Point Visible

1. Identify the frame before arguing about the answer

Stommel and colleagues study reference points through an experiment with 108 managers from family and nonfamily firms [1]. Participants evaluate price sequences in an investment scenario; the study examines purchase price, current price, average price and volatility. The authors find that organizational context matters and that the same information can produce different reference points. They do not establish a trading strategy or show that one group consistently earns superior returns.

For a family investment committee, disagreement may begin before the proposed action. One person may judge a position relative to its purchase price, another relative to a recent peak, and another relative to the cash needed for a future obligation. Making those frames explicit can improve the quality of discussion without assuming that an expert should eliminate all differences in purpose.

2. Collect independent statements before the meeting

Ask each voting participant to record the comparison they consider relevant, the information used and the obligation they are trying to protect. Do this before a dominant speaker presents a recommendation. The record should be short enough to complete honestly. It is not a psychological diagnosis or a test of whether a family member is sufficiently rational.

Distinguish a descriptive reference point from a decision criterion. A participant may feel a loss relative to a historic price while recognizing that the current decision must consider future alternatives. Record both rather than forcing them into a single number. Confidential personal circumstances should be handled through appropriate governance channels, not exposed unnecessarily in a general investment meeting.

3. Present consistent information across alternatives

Prepare a common evidence pack with dates, sources, valuation limitations and comparable scenarios. Avoid changing the chart horizon or emphasizing a favorable starting point for one alternative. If different prices reflect different rights, liquidity or transaction conditions, explain the differences instead of implying that they are interchangeable market observations.

Have an analyst identify which facts could reasonably change the decision and which are merely salient. A historical purchase price may matter for reporting or a particular professional analysis, but its emotional prominence does not automatically make it the correct economic benchmark. Qualified advisers should address tax, legal and suitability questions; this framework does not provide a personal recommendation to buy, sell or hold.

4. Reconcile purpose without erasing dissent

The chair should summarize the different frames and ask participants to explain the obligation behind each. A family seeking current distributions may evaluate a commitment differently from a permanent-capital vehicle. Clarify which mandate governs the decision. If mandates conflict, resolve the governance issue before pretending that a better forecast can settle it.

Then ask participants to reconsider the alternatives using the agreed mandate and common evidence. Preserve both changed and unchanged judgments. A participant who revises a view after seeing an omitted dependency demonstrates useful learning; one who maintains a reasoned dissent may identify a risk the majority has not adequately addressed. The record should explain the decision without demanding unanimous emotional comfort.

5. Test sensitivity to framing

Use one bounded exercise: present the same substantive information with a different but legitimate comparison period or ask what would be decided if the position were not already owned. The purpose is to discover whether presentation changes the judgment while underlying obligations remain the same. Do not use the exercise to manipulate participants toward a predetermined recommendation.

Escalate when a decision depends on a disputed valuation, an unclear liquidity requirement or a material fact that cannot be verified. Pause if the committee cannot agree on the mandate it is serving. The remedy is clarification and evidence, not a confidence score generated from the number of people willing to vote.

6. Review judgment after outcomes arrive

Preserve the initial reference-point statements, the decision rationale and the information available at the time. At review, compare the reasons with what actually changed. Avoid judging the process solely by whether prices subsequently rose. A favorable outcome can accompany weak reasoning, while an unfavorable one can follow a well-supported decision under uncertainty.

The study has a small manager sample, a low response rate and an experimental scenario that cannot reproduce every consequence of actual family wealth decisions. Its findings do not establish the effectiveness of the proposed process. The practical contribution is an inspectable account of the frames used by decision makers, helping a family distinguish market uncertainty from disagreement about what its capital is meant to accomplish.

Source, attribution and limits

[1] Evelyn Stommel; Nicole Gottschalck; Andreas Hack; Kimberly A. Eddleston; Franz Kellermanns; Nils Kraiczy. What is Your Reference Point? How Price Volatility and Organizational Context Affect the Reference Points of Family and Nonfamily Managers. Small Business Economics (2024-02-22). https://doi.org/10.1007/s11187-024-00880-9. CC BY 4.0.

Small selected manager sample with low response rate. Experimental investment scenario differs from actual portfolio decisions and incentives. No evidence of superior realized returns or a validated investment intervention.

Prepared by the Family Office Private Wealth Journal editorial research desk with AI assistance at the direction of Dr. Freedom Cheteni. Original research authors retain full credit and are not authors or endorsers of this companion. This proposed process has not been evaluated in a new empirical study; no independent peer-review acceptance is claimed. This is educational analysis, not individualized investment, legal or tax advice.

Implementation record

Open the cited sources

1. [1] Evelyn Stommel; Nicole Gottschalck; Andreas Hack; Kimberly A. Eddleston; Franz Kellermanns; Nils Kraiczy. What is Your Reference Point? How Price Volatility and Organizational Context Affect the Reference Points of Family and Nonfamily Managers. Small Business Economics (2024-02-22). ↗