The concept of Family Offices traces its roots back to the late 19th century when prominent American families like the Rockefellers and the Morgan family (of the J.P. Morgan dynasty), established offices with the sole purpose of managing the family's assets. In Europe, banks such as Julius Baer and Bank Rothschild began life managing the wealth of Europe's wealthiest families.
Fast-forward to today, and we're seeing this setup roll out and explode in emerging markets such as Asia and Latin America. Asia has seen a remarkable increase in family office establishment and growth since 2017. Rather than reinventing the wheel, these new family offices are drawing on the education and experience of their more mature counterparts, making a modern sophisticated family office setup both cost-effective and relatively straightforward.
Campden Research estimates there are 7,300 single family offices worldwide. Adding in multifamily-offices and hybrid models (those which cater to more than one UHNW family or who engage outside help from professionals), family offices are thought to manage assets in excess of US$5.9 trillion.
Hybrid and multi-family offices, although less common than single family offices, are increasingly sought after by the new breed of UHNW individuals as they seek more agile ways of managing their fortunes and preserving their wealth and assets. Today, many Latin American families, for example, are moving into the family office space and establishing proprietary single-family offices or becoming part of a larger multifamily office network.
From a regional perspective, South Florida has seen explosive growth over the past decade, with many Latin American families abandoning the model which saw banks manage all (or nearly all) of a family's assets. Private banks were perceived to present an inherent conflict of interest, given they tended to promote proprietary products and service wealthy clients with a one-size-fits-all approach. For their part, wealthy families were becoming more sophisticated, and they wanted a refined and tailor-made wealth management solution that addressed their individual needs, rather than 'pre-packaged' services that supported efficiencies for the bank. The equity drawdowns after the 2008 financial crisis also led to a sense of mistrust and concern with traditional investment management models. Families looked more closely at passive investing through ETFs, and more allocations to alternative asset classes.
For families wishing to establish family offices with a trust structure, the most important decision they can make is identifying an independent professional trustee they wish to work with. An independent trustee enables an objective selection of investment managers, asset allocation, and supports the management and resolving of any (potential) conflict. The trustee can also promote overall good family governance and guide families with their ESG aspirations and objectives. If family members wish to input on the actions of trustees, this can be easily achieved. Protector or investment committees can be set up or delivered by joining the board of a specifically established Private Trust Company's, subject, of course, to appropriate advice.
The Covid-19 pandemic has had a devastating consequence, particularly on economies in much of Latin America. The wealth management industry's focus has since been on creating an ecosystem that families can lean on in times of need. Hybrid family offices (a combination of in-house and out-sourced professionals) allow for an agile model. Hybrid family offices cater to the needs of the modern UHNW family and have been particularly popular given cost efficiency and ease of set up.
Hard-hit countries (most notably, Brazil, Peru, and Mexico) have suffered structural damage as a result of the pandemic and their tax revenues have dropped consequently. The pandemic and the likely taxation aftermath have increased the interest of wealthy Latin American families in the concept of family offices and generational wealth planning. Post-pandemic trends have so far focused on asset preservation/protection and succession planning. There has also been an equally strong narrative around ESG and impact investing following the success of The Strüngmann brothers and BioNTech and many families are looking to diversify their investments away from the 'traditional' asset classes.
Turks and Caicos is an interesting British Overseas territory from a wealth planning perspective. The country has no direct taxation, is a $US economy, and has a relatively low international profile as a financial services location, hence the number of ultra-wealthy who choose to live and visit. A new (2016) Trusts statute based on the Jersey and Cayman laws with special purpose, VISTRA, Private Trust Company options and a New Company and Insolvency law (2017) based on the BVI equivalent prove that Turks and Caicos is a highly regulated, robust jurisdiction.
Coriats has been advising sophisticated UHNW families, in conjunction with their domestic advisors, for over 40 years. We are a regulated and licensed Trust Company, holding Trustee License Number One (1) in the Turks and Caicos Islands. Founded in 1978, Coriats has committed to providing long term, strategic counsel to wealthy, international families and businesses and their trusted advisors. With strong relationships with investment advisers, international banks, law firms, accountants and realtors globally, Coriats is well positioned to help those they serve to achieve their aims. Since 2016, Coriats has been part of the G&P group, one of the largest professional services teams in the Turks and Caicos Islands comprising of lawyers, company managers and trust services in separate, but allied teams. Coriats currently manage assets approaching US$1Billion in value, including property, investment portfolios, businesses, aircraft, yachts and other assets.
(The above article is not legal advice, and no responsibility is taken for the general commentary contained therein: each case is different, and proper advice should be taken from a qualified professional before any tax structuring).
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