Foundations

The Rise of the Professional Multi-Family Office


By Richard Joynt and Ian Slack, Bedell Family Office, Jersey (01/08/2013)


Leading international finance centres have evolved over the last 10-15 years and now have developed into centres of excellence for professional services.

In our case what we have developed is a multi-disciplinary, professional services family office offering.  This has been in response to client need, demonstrating that as the world has become more complex, clients required their service providers to have deep skills across a wide variety of disciplines to service those needs.

Leading IFCs have talented individuals with deep skills and credentials, which, when combined with a passion for delivering excellent client service, is a powerful combination.

The Building Blocks of Family Office

The following section looks at the various levels of complexity of the Family Office offering, starting with the foundations and adding complexity as we build on these essentials.

The Foundations: Getting the Essentials in Place

Clients expect that the ‘basics’ will be taken care of without error or omission.  These consist of the following:

Administration of trusts and companies contained in the client structure

Cash management, maximising interest income and bill paying

Supervision of external investments (eg, discretionary investment portfolios)

Tax compliance and ensuring regulatory reporting requirements are followed

Responding to client requests for distributions from trusts or changes to structure

Accounting for activities and complying with external accounting reporting requirements

These are similar to some of the duties which are required of many trust companies, both ‘onshoreand offshoreThese are the types of services that clients expect will go smoothly and they are usually only up for discussion if something has gone wrong.  In a Family Office environment, where clients are paying to have dedicated professionals, there must be no errors in these foundation areas.

Adding Complexity – the Investment Process and Managing Personal Assets

The ‘foundations’ stage assume that the overall financial needs of the client and his or her family have been assessed by an external party and that we are executing their resulting recommendations and liaising with other professionals who perform services for the family.  However, in a Family Office setting where you are seeking to add real value there should be more than just the foundations in place.  The following areas are therefore ‘layered’ on top:

Managing direct and indirect private equity investments*

Managing property investments and property developments

Managing personal assets (homes, aircraft, yachts, cars) and managing employees of those assets

Managing requests for charitable requests and responses to such requests


Administration of trusts and companies contained in the client structure

Cash management, maximising interest income and bill paying

Supervision of external investments (eg discretionary investment portfolios)

Tax compliance and ensuring regulatory reporting requirements are followed

Responding to client requests for distributions from trusts or changes to structure

Accounting for activities and complying with external accounting reporting requirements

* This may in some cases be the cornerstone family asset – often the family wealth is heavily linked to a family business which may represent a large proportion of the wealth

The work being undertaken at this level goes well beyond what a regular trustee or administrator would offer.  These require deep skills in the areas of work to be undertaken as they are specialist in nature.  The following table highlights the service level offering which is demanded by such clients:

 

Managing direct and indirect private equity investments

- Managing the acquisition process

- Being actively involved in the investee company post-completion – sometimes this involves a member of our team taking an executive role within the business

- Managing the disposal process

Managing property investments and property developments

- Investment appraisal and managing the acquisition

- Arranging bank finance

- Obtaining planning consents

- Overseeing the development team

- Reviewing tenant terms and conducting lease negotiations

- Managing the disposal

Managing personal assets (homes, aircraft, yachts, cars) and managing employees of those assets

- Managing all aspects of the acquisition, on-going management and ultimate sale of high value business jets

Being an independent specialist marine agent managing the acquisition, registration, operation and sale of high value yachts

- Managing classic car collections and jewellery collections

- Management of personal homes

- Management and supervision of all staff operating on aircraft, yachts and homes

- Arranging insurance across all personal assets and risk

Managing requests for charitable requests and responses to such requests

- Monitoring the charity’s financial position and assessment of long-term sustainability

- Value for money assessments and “payback” calculations

- Attendance at charity trustee meetings

Adding Personal Service – Understanding and Commitment


Thus far the services described, whilst at times deep and complex in nature, still allow for a fairly de-personalised relationship as essentially it is still ‘all about business’.  As we in the Family Office arena add on another level of service which is essentially more personal, we are able to demonstrate commitment to the family’s values and aims, and to show that we understand what is really important to them and shape our services accordingly.  The highest layer is shown in the following table:

Overall financial planning and control relating to overall family wealth

Wealth transfer planning and involvement of the next generation

Personal lifestyle management and concierge services


Managing direct and indirect private equity investments*

Managing property investments and property developments

Managing personal assets (homes, aircraft, yachts, cars) and managing employees of those assets

Managing requests for charitable requests and responses to such requests


Administration of trusts and companies contained in the client structure

Cash management, maximising interest income and bill paying

Supervision of external investments (eg, discretionary investment portfolios)

Tax compliance and ensuring regulatory reporting requirements are followed

Responding to client requests for distributions from trusts or changes to structure

Accounting for activities and complying with external accounting reporting requirements

The addition of these services allows the Family Office professionals to see the overall family position from the same viewpoint as the client.  The resulting demands on the office are highlighted below:

Overall financial planning and control relating to overall family wealth

- Providing management information to enable the client to make - strategic decisions on asset allocation

- Monitoring of investment performance to assess risk and return

- Bespoke consolidated asset reporting

- Cash flow forecasting to ensure expected investment performance is keeping pace with expenditure

- Monthly reviews of income and expenditure against the forecast and adjusting strategy accordingly

Wealth transfer planning and involvement of the next generation

- Understanding family history, current members and inter-relationships

- Dealing with the complex outcome of divorce and separation within the family

- Assessing tax risks and forced heirship risks and putting appropriate structures in place to mitigate such risks

- Developing strategies to help the next generation cope with the expected wealth they will inherit and involving them at the appropriate level in family businesses and interests

Personal lifestyle management and concierge services

- Dealing with personal service providers (e.g. doctors) in a sensitive manner

- Private travel arrangements, including private jet travel, car transfers and catering requirements

- Negotiation for hotel and leisure bookings to give the family access to world-class leisure facilities at the best rates

Dealing with detailed arrangements for family members’ private hobbies and pursuits

The Relationship with the Client Family

The reader should note that each layer of the service requires a closer relationship with the client family, both from the perspective of the level of trust between client and professional, but also the time that the client and the Family Office will spend communicating to one another.  One simply cannot operate a full-service multi-disciplinary professional family office without having a close relationship with the family.

The Importance of the ‘Offshore’ Element

The reader should also note that the level of services offered which rely on the tax location of the professionals and their office is extremely limited.  Put another way, offering these Family Office services from Jersey or any other ‘offshore’ key finance centre is simply not the main requirement.

This is evidenced by the fact that our Family Office offering at Bedell is an international offering – our services are provided from multiple locations in our network, both ‘onshore’ and ‘offshore’.  The choice of the key finance centre to be used is largely driven by the skills of the professionals in those locations, and NOT primarily their tax residency.

To refer to our services as simply ‘offshore’ services would also ignore the fact that the ‘onshore’ relationships which we need to have in place to provide excellent service to our client families must be very strong.  Very often the client family’s key business asset is a large company doing business in, and paying taxes in, an onshore location.  Our clients tend to be entrepreneurial by nature and this means that they tend to continually invest in a variety of onshore assets whether that be private businesses, listed exchange instruments or real estate assets.  This will mean that a necessary part of our Multi-Family Office is liaising with specialist advisers across a number of different asset classes – many of these relationships are onshore. 

We have numerous experiences of working in cross-border situations where a variety of different professionals from both onshore and offshore practices must come together in a true ‘partnership’ context in order to deliver a client solution.  Consider a transaction where a client family is considering selling a US-manufactured business jet, held in a Jersey company, to a Russian individual, and the asset is expected to be delivered to the new owner in London.  This involves professionals from a number of different disciplines, from aviation experts to inspection agencies, from US, UK and Jersey lawyers to Russian translators.  Only be working effectively in a multi-disciplinary environment can we expect to deliver the whole solution to the client – which is this instance is a swiftly and efficiently executed sales transaction.

Conclusion

The purpose of this case study has been to show that there are examples of broad and deep service offerings  which show that IFCs are Centres of Excellence.  What we do in Bedell Family Office is not ‘tax-driven’, but is a response to our clients’ complex financial and personal needs.

None of the individual services that we provide are brand new – in fact they have been offered by lawyers, accountants, trustees and investment professionals for many years to some degree or other.

What is unique is that we are consolidating these skills and services in one, multi-disciplinary environment so that the client has a single team who understand their affairs and can offer holistic solutions to issues with all the facts at their fingertips.  The fact that this is all occurring in an IFC setting simply demonstrates the high level of skilled professionals and service available in such key finance centres today.

About the Authors:

Richard Joynt and Ian Slack, co-authors, are Directors of Bedell Family Office Services, a Professional Multi Family Office based in Jersey.  Their client families include those of first, second and third generation wealth.  Each family has the need for bespoke and highly personalized services due to their individual complex needs.  Prior to joining Bedell, Richard, Ian and their team managed a Single Family Office for 10 years.