Advising the Wealthy Client
A Handbook for Working with the Ultra Wealthy
This comprehensive new handbook, featuring contributions by leading private client advisers, includes chapters on choosing a country of residence, buying substantial properties, risk and reputation management and an evaluation of the wealth infrastructure, the philanthropic framework and the future of global investing.
This comprehensive new handbook, featuring contributions by leading private client advisers, includes chapters on topics including:
•the importance of having a detailed, organised balance sheet;
•buying very substantial properties;
•choosing a country of residence;
•managing cross-border taxes;
•protecting assets from marital claims;
•understanding trust documents;
•creating a private trust company; and
•setting up a family office.
In addition, this book explores risk and reputation management, addresses diminished capacity and provides an evaluation of the wealth infrastructure, the philanthropic framework and the future of global investing.
Edited by Barbara Hauser, Editor of The International Family Offices Journal and the new edition of Family Offices: The STEP Handbook for Advisers, this new handbook will provide essential reading for all private client advisers, wherever they are based.
Table of Contents
|Table of contents||3|
|An overview of the global situation for private wealth||9|
|2. The slow death of privacy?||11|
|3. Tax policy becomes an invasive tool||13|
|4. Some disturbing new rules||14|
|5. Privacy and cyber security||14|
|6. What are families doing?||15|
|7. A few conclusions||16|
|7.1 Younger generations involved in the management and preservation of wealth||17|
|7.2 Discreet ownership||17|
|7.3 Taxation and patrimony||17|
|7.4 Planning for the future||18|
|Organising a consolidated balance sheet for the wealthy||19|
|2. The dilemma||19|
|3. So, what is the wealthy client going to do about it?||20|
|4. The ball is now in the CFO’s court||21|
|5. The CFO’s toolkit||23|
|Purchase of substantial properties||29|
|2. The question I am asked the most||30|
|3. The easiest way to negotiate a price reduction||32|
|3.1 Have the finances in place||33|
|3.2 Seek tax advice||33|
|3.3 Instruct a solicitor||34|
|3.4 Be available||34|
|4. How can you find the best opportunities?||35|
|5. Brief tips on viewing properties||36|
|5.1 Do not dismiss a property before you have viewed it||37|
|5.2 Check the curtains||37|
|5.3 Don’t judge a book by its contents||37|
|6. The most expensive mistake you can make and how to avoid it||38|
|6.1 Points to consider when making your valuation||39|
|7. Six ways to negotiate significant price reductions||40|
|7.1 Work out your walk-away price and terms before you start the negotiation||40|
|7.2 You will not succeed with logic||41|
|7.3 You want them to reduce their price before you even make an offer||41|
|7.4 Beware anchors||42|
|7.5 If you have to offer first you can give them a range||42|
|7.6 Massaging the sellers’ and estate agent’s ego||42|
|Risk assessment and strategic insurance planning||45|
|2. Personal risk management||46|
|3. The family risk map||46|
|4. Risk mitigation measures||47|
|5. Reviewing insurance||48|
|6. Review ownership entities as reflected within an insurance structure||49|
|7. A strategic personal risk management programme||50|
|8. Annual client and adviser meeting||50|
|Evaluating general risks: the prepared mind||51|
|2. Political risks||52|
|3. Reputational risks||52|
|4. The implications of political and reputational risk||53|
|4.1 Scenario – background||54|
|2. What is reputation management?||58|
|3. Why is reputation management important?||58|
|4. The rise of the reputation management sector||59|
|5. The communications crisis||62|
|6. Protecting your client’s reputation in the digital age||63|
|7. Fake news?||65|
|8. Be prepared||68|
|Protection from marital claims||69|
|3.1 Trust assets as available resources||74|
|3.2 Variation of ‘nuptial settlements’||76|
|4. Advising the wealthy||78|
|Choice of residence||79|
|2. Criteria for choosing a country of residence||81|
|3. The emigration/immigration checklist||82|
|3.1 Tax issues||82|
|3.2 Other issues||87|
|4. Concluding remarks||88|
|3. Income tax||90|
|4. Estate and gift taxes||90|
|5. Transfer taxes||90|
|6. Tax relief||91|
|8. Tax mitigation||92|
|9. Tax shelters||94|
|11. Charitable exemptions||96|
|12. Family office or outsource||96|
|13. Information disclosures||97|
|14. Tax advice||98|
|Reviewing the trust agreement||101|
|2. Identifying parties to the trust||102|
|3. Trust dispositive provisions – understand the grantor’s intent||102|
|4. Understanding the assets funding the trust||105|
|6. Governing law||108|
|7. Income taxes||110|
|Annex 1: Document review checklist||114|
|Consider creating a private trust company||117|
|1. Understanding the options for trusteeship||117|
|1.1 Individual trustees||117|
|1.2 Commercial institutional trustees||119|
|1.3 Private trust companies||120|
|2. A private trust company’s strengths||120|
|2.1 Maximising family control||121|
|2.2 Implementing a structure for holding complex assets||122|
|2.3 Addressing trustee succession||123|
|2.4 Complementing family governance||124|
|2.5 Insulating individuals from liability||124|
|3. A private trust company’s weaknesses||124|
|3.1 Echoing family disharmony||125|
|3.2 Incurring costs||125|
|3.3 Internalising responsibilities||127|
|3.4 Inviting regulatory supervision||127|
|3.5 Playing to vanity||128|
|4. Alternative structures||128|
|5. Situs selection||131|
|5.1 Geographic convenience||131|
|5.2 Favourable private trust company laws||131|
|5.3 Favourable trust laws||132|
|5.4 Favourable tax laws||133|
|5.5 Good regulatory environment||133|
|5.6 Good courts||133|
|5.7 Good lawyers||133|
|5.8 Political and regulatory stability||134|
|6. Ownership structure||135|
|6.1 Single-trust structure||135|
|6.2 Dual-trust structure||135|
|6.3 Purpose trust||136|
|7. Governance and administration||138|
|7.1 US tax considerations||141|
|Consider a family office||145|
|1. What is a family office?||145|
|2. What services will the family office provide?||148|
|3. What are some alternatives?||151|
|4. Where should it be located?||152|
|5. Hiring the right people for the family office||153|
|6. Managing the office||154|
|7. Life cycle of a family office||154|
|Managing declining capacity||157|
|2. The extent of the problem||160|
|3. The impact on financial decision making and the rise of elder abuse||161|
|4. Planning and managing the impact of declining capacity||162|
|5. Advisory relationship management in cases of declining capacity||162|
|6. The role of the family office||164|
|7. Identification, recognition and monitoring of health and well-being||166|
|8. Developing decision making – substitute versus supported decision making||171|
|9. Concluding comments||174|
|The philanthropy framework||175|
|2. Genesis of the philanthropy framework||176|
|3. Elements of the philanthropy framework||178|
|4.1 Founding legacy as origin story||179|
|4.2 Charter continuum||180|
|4.3 Charter parameters||181|
|5. Social compact||182|
|5.4 Direction of influence on society||185|
|5.5 Independence/ interdependence||185|
|5.6 Approach to risk||186|
|6. Operating model||186|
|6.1 Operating approaches||187|
|6.2 Operating capabilities||192|
|The essential infrastructure for wealth preservation||195|
|3. Infrastructure example: consolidated investment reporting||200|
|4. Consequences of deficient infrastructure||201|
|5. Is an SFO necessary for Wealth Preservation InfrastructureTM?||202|
|6. Is an SFO sufficient for Wealth Preservation InfrastructureTM?||203|
|7. Benefits of strong infrastructure||203|
|8. What is the minimum infrastructure required for wealth preservation?||203|
|9. How can advisers motivate clients to create or improve their infrastructure?||204|
|10. How to build infrastructure: the seven-step plan||208|
|10.1 Step 1: identify the areas that require infrastructure improvement||208|
|10.2 Step 2: prioritise on a five- point scale||210|
|10.3 Step 3: quantify current resource allocation and document current processes||210|
|10.4 Step 4: identify the infrastructure gap and score by ease of implementation||210|
|10.5 Step 5: create a plan and obtain agreement from stakeholders||210|
|10.6 Step 6: implementation (hint: this is the hardest step!)||210|
|10.7 Step 7: ongoing monitoring, measurement and accountability||211|
|11. Example: SFO infrastructure improvement||211|
|12. Case study||213|
|The future of finance||215|
|2. Introducing Private Wealth Systems||216|
|3. Family fortune||217|
|4. Family offices, expertise matters||218|
|5. A new system||219|
|6. What sets Private Wealth Systems apart||221|
|7. The trillion dollar question||222|
|About the authors||223|
|About Globe Law and Business||229|
Advising the Wealthy Client covers many of the crucial areas for advisors to know about and implement in their work. It is a welcome addition at a time when both family wealth and the world are becoming ever more complex.
James Grubman PhD
Jeremy Arnold is a consultant at Withers LLP which is a global law firm acting for successful people and their businesses. Mr Arnold has over 30 years’ experience in the wealth advisory business working as a solicitor in private practice in the UK, as a managing director in a major international bank and as general counsel in a leading family office. This experience enables him to provide a commercial and strategic perspective when advising clients.
Chief operating officer, Digitalis
Digitalis is a technology company that specialises in online reputation management, crisis communications and digital privacy and risk. Charlie Bain has 25 years’ experience within the sectors of risk consulting, communications and journalism.
He is widely recognised as a leading expert in advising clients on their digital footprint and the effect this has on their reputation. During his career, he has helped a number of leading families, global corporates and prominent individuals understand the nascent field of internet risk and digital crisis communications.
Following a career in journalism for several UK newspapers covering crime and foreign news, including the war in Afghanistan in 2001 and the 9/ 11 attacks on New York, Mr Bain was appointed deputy chief executive at risk management firm G3 Good Governance Group.
Mr Bain is on the advisory board of VALUEworks, a multi- family office based in Zurich and a senior adviser to Dallington Associates, a company that offers pastoral care to foreign students in the UK.
President and CEO, Rockefeller Philanthropy Advisors, Inc
Melissa Berman is the founding president and CEO of Rockefeller Philanthropy Advisors, Inc, an innovative non- profit philanthropy service launched by the Rockefeller family in 2002, whose mission is to help donors create thoughtful, effective philanthropy throughout the world. Rockefeller Philanthropy Advisors provides services in planning, research, foundation management, donor collaboratives, regranting and fiscal sponsorship. Rockefeller Philanthropy Advisors also publishes, convenes and speaks about innovations in thoughtful, effective philanthropy.
Ms Berman has led Rockefeller Philanthropy Advisors since its inception, building it into one of the world’s leading philanthropy services. An adjunct professor at Columbia University’s Business School, she is also a director/ trustee of Rockefeller Philanthropy Advisors, the Adrian Brinkerhoff Foundation and Candid, formerly the Foundation Center and Guidestar. She serves on the advisory boards of the Marshall Center for Philanthropy and Social Entrepreneurship at the London School of Economics and the Tamer Center for Social Enterprise at Columbia University. Ms Berman holds a BA from Harvard University and a PhD from Stanford University.
Director, Family Enterprise Risk Practice Crystal, Alliant Private Client
Linda Bourn leads the Family Enterprise Risk Practice. She is a recognised expert in advising family enterprise boards, directors, officers and trustees on enterprise risk management for their organisations and guiding generational families on aligning risks with insurance strategy.
She specialises in working alongside wealthy families and their advisers to help them evaluate family risk exposures using holistic assessment tools and to help them develop customised strategies to manage risk. Ms Bourn is a fellow of the Family Firm Institute (FFI) and serves on the Babson College Board of Advisors of the Institute for Family Entrepreneurship. She holds an MBA and a BA and the Advanced Certificate in Family Business Advising from FFI Global Education Network.
Gail E Cohen
Chair and general trust counsel, Fiduciary Trust Company International
Gail E Cohen has over 40 years of experience in the area of trusts and estates. Before joining Fiduciary Trust in 1994, Ms Cohen was a trusts and estates associate at the law firm of Debevoise & Plimpton. She is a former chair of the New York Bankers Association and has the distinction of having served as its first woman chair. Ms Cohen is a fellow of the American College of Trust and Estate Counsel (ACTEC), has also been elected into the NAEPC Estate Planning Hall of Fame and holds that association’s distinguished accredited estate planner designation. Ms Cohen chairs the fiduciary professions editorial committee of Trusts and Estates Magazine. She is a former member of the New York City Bar Association’s committee on estate and gift tax, which she chaired from 1998 to 2001. Ms Cohen has served as an adjunct professor of law at Brooklyn Law School. She received her BA from Mount Holyoke College and her JD, summa cum laude, from Brooklyn Law School.
John Deverell, CBE, works with family clients on issues of governance, leadership and risk mitigation. His company – www.thepreparedmind.net – provides internationally recognised bespoke crisis management plans and checks existing plans; and it writes and runs scenariobased workshops for family offices and other clients. Mr Deverell used his experience over four decades of crisis resolution and risk mitigation as a basis for establishing this company for the benefit of clients. He has appeared many times on TV and radio, advising on risk, security and strategy.
Director, Drewery Consulting
Keith Drewery has been an adviser inside professional services firms and the wealth management industry for over 35 years. Latterly, his work has included being part of KPMG’s family office services team in Sydney. Mr Drewery’s focus of work is to help manage the transition of ownership of family capital and how to consider the allocation of their resources including through the use of a family office.
Mr Drewery’s work has involved the development of governance models to help families make decisions around the ownership of family capital and helping families develop policies and procedures. He is engaged by wealth owners, family offices and professional service firms, all keen to understand the dynamics of wealth, its effect on family relationships and how other families have dealt with these challenges.
Mr Drewery is a contributing editor to The International Family Offices Journal and co- author of the Special Report Setting Up a Family Office, both published by Globe Law and Business.
Joseph A Field
Senior counsel, Pillsbury Winthrop Shaw Pittman LLP
Joseph A Field has worked with international families for over 40 years. His specialty is dealing with tax and structuring issues when families or family offices invest, migrate or send children to different countries. He is active with a number of international planning groups and, of late, has been fascinated by the crossover between issues relating to families and a plethora of new legislation which would seek to destroy their privacy and make their information public; it is possible that the acts of these families, and indeed their advisers, may give rise to criminal sanctions. In addition, Mr Field has an interest in the concerns of these families in regard to the unwelcome gathering of information by cyber attackers and how they can best protect their most intimate and personal data.
Barbara R Hauser
Independent family adviser
Barbara R Hauser has worked with wealthy clients for more than 40 years in a number of countries. A private client lawyer based in the United States, she had the honour of clerking at the US Supreme Court. She is the author of International Estate Planning and International Family Governance and the consulting editor for Family Offices: The STEP Handbook for Advisers and Trusts in Prime Jurisdictions. She is the editor- inchief of The International Family Offices Journal. Ms Hauser has been named on the Spears 500 list.
Gerard F Joyce
Managing director, deputy general trust counsel and national head of trusts & estates, Fiduciary Trust Company International
Gerard F Joyce is responsible for trust and estates planning and administration at Fiduciary Trust Company International. Mr Joyce works closely with domestic and international clients to develop customised trust and estates strategies. Prior to joining Fiduciary Trust Company International, he was at HSBC Private Bank. He is a member of the New York City and New York State Bar Associations. He has been involved with STEP and has experience in international estate planning, especially cross- border families passing a legacy to US family members. Mr Joyce is on the board of the Samuel Waxman Cancer Research Foundation. He has lectured on family and closely held business planning, international estate and fiduciary investments. He received a BS in finance from Lehigh University and his JD degree from Fordham University School of Law, where he was on the editorial board of Fordham Law Review.
Todd D Mayo
Executive director, senior wealth strategist, UBS
Todd D Mayo is an executive director, senior wealth strategist, at UBS. Mr Mayo works with ultra- high net worth families, helping them to design and implement wealth strategies that reflect their values and goals. He helps families and individuals to create multi- generational structures for managing their wealth, fulfilling their philanthropic visions and optimising tax effects. Mr Mayo is the consulting editor of Private Trust Companies: A Handbook for Advisers published by Globe Law and Business. He was a principal author of the New Hampshire Family Trust Company Act (which governs private trust companies) and the New Hampshire Foundation Act (which was the first act recognising civil law- type foundations in the US).
Founder, Mercury Homesearch
Jeremy McGivern is the leading expert on acquiring residential property in prime central London having inspected over 20,000 properties and seen the details of over 153,400 more. He founded Mercury Homesearch in 2001 because he was frustrated by the advice he was receiving from estate agents. He has featured on Bloomberg Television, CNBC, Reuters, Forbes India, The Financial Times, The Sunday Times, MoneyWeek and BusinessWeek, among others. He is also an internationally recognised speaker having given talks for firms of solicitors, accountants, private banks and multi- family offices in London, India and the UAE.
Mr McGivern has helped many of the world’s most successful families and businesspeople find their ideal homes and investments while negotiating prices that they had not thought possible through his knowledge of the market and negotiation techniques.
Mr McGivern was educated at Eton College. He is married with two children and still plays football and golf and runs marathons for charity.
Chief investment officer, AlTouq Group
Asher Noor is the chief investment officer for AlTouq Group, a Saudi Arabian single family office. He previously worked for PricewaterhouseCoopers and Banque Saudi Fransi. His last position was chief financial officer for Morgan Stanley in Saudi Arabia.
His role includes managing the investment portfolio of the family, which is allocated in the traditional and alternative asset classes globally. He also sits on the boards of several companies. His achievements include taking a company public, executing the first equity swap on the Saudi stock exchange and several M&A transactions and exits.
He is a well- known speaker and is on the board of the Family Firm Institute (FFI) and the editorial board of the Society of Trusts and Estate Practitioners (STEP) Journal. He holds an MBA from EDHEC Business School, France. Mr Noor is a qualified trust and estate practitioner and a fellow chartered accountant. He chaired the STEP global special interest group on business families in 2018 and was profiled as a top 30 global family office investor by Trusted Insight.
CEO and founder, Aston Pearl
Natasha Pearl founded Aston Pearl in 2003, providing highly objective and confidential consulting services to single family offices and families. Areas of focus include single family office structure and residential operations. The firm has developed a proprietary approach and significant intellectual capital in Wealth Preservation Infrastructure™.
Aston Pearl was awarded “Best Family Office Consulting Firm” in 2014 by Private Asset Management, the family office industry publication, and was “Highly Commended” in 2019. In 2015, Private Asset Management named Ms Pearl one of “The 50 Most Influential Women in Private Wealth”. Ms Pearl’s expertise has been cited in numerous articles, including “Battling for Billionaires”, Bloomberg Markets and “The Billionaire Service Industry”, The Atlantic. Prior to founding Aston Pearl, Ms Pearl served as a senior vice president and worldwide director at Sotheby’s, and as a principal at Mercer Management Consulting (now Oliver Wyman). She received her undergraduate and MBA degrees from Harvard University.
CEO, Private Wealth Systems
Craig Pearson, CEO, co- founded Private Wealth Systems 45 days after restructuring and selling a leading investment reporting company. With the backing of three prominent family offices, Mr Pearson started Private Wealth Systems intent on solving the structural industry challenges that continue to plague legacy software systems and the global financial services industry in terms of data capture, data processing and data presentation. Beginning his career as an investment banker and later transitioning into financial technology, he has held leading positions at several of the largest fintech companies with direct experience in trade order management, multi- asset portfolio management, compliance and reporting. Private Wealth Systems is now the industry leader in delivering multi- asset, multimanager, multi- currency consolidated financial intelligence to family offices across four continents. Mr Pearson is a chartered financial analyst (CFA) and holds a master’s degree in finance.
Counsel, Farrer & Co
Amy Radnor qualified as a family lawyer in 2008. She has extensive experience advising clients on all aspects of relationship breakdown and wealth protection, including financial claims on divorce, international and jurisdictional issues, and issues relating to children. She has a particular interest and expertise in drafting and negotiating prenuptial and postnuptial agreements and in cross- border children work.
Partner, Maisto e Associati
Nicola Saccardo is a partner at Maisto e Associati. He graduated from the Bocconi University in Milan and holds an LLM in International Taxation from the University of Leiden in the Netherlands. He is admitted to the Italian Bar and is also qualified as an Italian chartered accountant.
Mr Saccardo is a member of the International Academy of Estate and Trust Law, as well as its vice president for Europe and chair of its tax committee. He is an international fellow of the American College of Trust and Estate Counsel (ACTEC) and is also a member of STEP and some of its global committees, such as the international client global SIG steering committee and the EU public policy committee. He leads the EU tax law course of the LLM at King’s College in London, has authored many publications on Italian tax matters and is a frequent speaker at conferences. His areas of expertise include taxation of trusts, estates and high net worth individuals; estate planning in general; and international and EU tax law.
Senior associate, Farrer & Co
Rose Spencer- Longhurst enjoys working on a broad range of private family law matters, both contentious and non- contentious, including resolving complex financial issues further to a marital or relationship breakdown, disputes relating to children, prenuptial and postnuptial agreements and cohabitation. Ms Spencer- Longhurst has experience of working for a wide range of clients including entrepreneurs, bankers and other professionals, and homemakers and wealthy international couples – and for both mothers and fathers in children- related matters – and draws on her background in commercial law to inform and guide her approach in the family law arena. Many of her cases involve an international element. Ms Spencer- Longhurst is a member of Resolution and of the International Bar Association.