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A SPECIFIC STRUCTURE FOR EVERY FAMILY

​The service is individually designed around the requirements and preferences of your family. Whilst no two families are alike, the family’s history, size and location, the nature of the principal assets and the aptitudes of senior family members will all be key factors in defining your requirements.

All families have one thing in common: the need to plan the practicalities of passing the baton from one generation to the next and laying the foundations for an enduring legacy. This, perhaps above all, is the common theme which helps define our approach.

 

STRATEGIC ADVICE AND KEY ADVISER

​Your key adviser is there to act on behalf of the whole family, as required, and to proactively help the family plan for significant decisions which may have a long-term impact.

The key adviser will share the benefits of his or her extensive practical experience of working with other families.​

SPECIALIST ADVICE

We routinely work closely with your family’s other trusted advisers. Where necessary, we procure and coordinate specialist advice on behalf of clients, either from our internal experts or from our wide network of professional contacts around the globe.​

We identify the need, together with the family, and we select and brief the adviser; we apply the advice given to the totality of the situation and we make clear recommendations to the client.

SUCCESSION AND GOVERNANCE

​We manage the family governance framework to ensure both routine and strategic decisions are consistent with agreed objectives and that they adhere to the agreed decision-making processes.

​We support families in the development of their plans for succession. We frequently chair and facilitate family meetings.

REPORTING AND TRANSACTION SUPPORT

​Our Family Office provides a full range of high quality administration services. These ensure everything is correctly processed and documented and that all the necessary information is available in the form you want it - to help make sound decisions on a day-to-day basis.

We run bank accounts, operate companies and trust structures, and manage properties, art collections, aircraft, boats and philanthropic foundations.

We support clients in all transactions, including buying or selling businesses, investments, properties, art or leisure assets.

 

Specialist Family Office Services

Independent Wealth Management and the Role of the Trustee

It is therefore a prerequisite that the trustee must be independent in all respects and act only in accordance with the needs of beneficiaries, with regard to the objectives defined in the trust deed.

‘Independence’, of course is a word commonly used in financial services to help define the relationship between adviser and client, with various regulatory regimes designed to ensure the adviser does not prefer his own interests. For a trustee, there is an extra and vital dimension to independence, which means being independent between all trust beneficiaries, not allowing himself or herself to be excessively influenced by one or more family members, at the expense of others.

RESPONSIBILITY OF TRUSTEES

The duty of a trustee is to act as a ‘prudent man of business’ in managing assets on behalf of beneficiaries. This applies, of course, not merely to investment portfolios, but to all assets held in trust, such as family businesses, directly held investments and ventures, property, art, leisure assets and many others.

He must exercise his responsibilities in accordance with the terms of the relevant trust deed, having regard to the interests of all the beneficiaries. Indeed he may often have to balance the conflicting interests of different beneficiaries and to reconcile sharply differing views. It goes without saying that trusteeship can demand an exceptionally broad range of knowledge, experience and skills, in order to make the right decisions, whilst maintaining family harmony.

The prudent man of business will seek advice where required, but will take the ultimate decision as required by the trust deed. The question hence arises as to how much expertise a trustee needs in respect of the assets under their control, how they use that expertise and how they get paid for it.

Nearly all trustees, for example, have some understanding of investments, which they use to select and brief external advisers and to interpret and act upon their recommendations. Indeed it is very clear that even where investment management is fully outsourced, key investment decisions, especially asset allocation, are strongly influenced by the views of the trustees and rightly so. It is entirely possible that the influence of the trustees will have far more impact on the investment performance and risks than decisions taken by the professional investment managers.

More controversially, the trustee responsible for a family business may have to reconcile the continuing ownership of that business with the duty to consider the case for diversifying the risk of a single line holding. It implies a need for continual monitoring of the business and having the knowledge, skill and courage to call for a major review which may well be highly unpopular with family leaders.

The same applies to other assets, such as direct investments, property and art. The trustee can always call in specialist advice, but needs the basic understanding and experience to know when such advice is needed. He needs to find and brief the right specialists, and to use the advice correctly in coming to a decision, often in discussion and perhaps negotiation with the client family members.

Just how knowledgeable does a trustee need to be to discharge these responsibilities, as a ‘prudent man of business’ and how does he or she apply that knowledge? Where he has expertise, should he allow his own views to be overridden by external advisers, or should he merely take account of such advice in reaching a decision?

Recognising the need for investment expertise, some larger trust companies have established specialist units to help with asset allocation decisions and to help select and monitor the best third party investment managers. Some have gone even further in hiring specialists to support clients in direct investment and corporate transactions, in property and art management. Many trustees also have significant in-house legal expertise.

The question is where to draw the line and at what point is it essential for trustee independence that the advice required is outsourced to a third party, even if suitable expertise exists in-house?

KEY FACTORS IN DECIDING WHETHER TO OUTSOURCE

The assumption must be that, in deciding whether external advice is required, for whatever purpose, the interests of the trust beneficiaries will be paramount. The following check list may be helpful:

  1. Do the trustees genuinely have independent expertise ‘in-house’ to contribute to the decision and can it be demonstrated that it compares with external specialists?
  2. Does understanding of the wider perspective put them in a better position than other external advisers?
  3. Are issues of convenience, cost efficiency or privacy sufficiently important to be a factor?
  4. Is a deep and trusting relationship with the trust settlor and beneficiaries a legitimate factor, if they have more confidence in their trustees than an external adviser or asset manager?
  5. Are there other respects in which the views of the settlor and beneficiaries should be considered and if so why – for example if the family has expertise in a particular field?
  6. What is the materiality of the decision in terms of risk and range of possible outcomes?

In theory, for example, the case for outsourcing management of an investment portfolio of short-term government bonds, or even of blue chip equities (especially if they track the indices quite closely) is much less powerful than the case for outsourcing the management of a portfolio of hedge funds or private equity, where so much more depends on the judgment and skill of the manager. Equally, it is much easier to justify keeping asset allocation and manager selection in-house, than using specific in-house investment funds or products.

SELECTING AN EXTERNAL ADVISER

Firstly, it is necessary to define the scope of the advice required. Are the trustees looking for specific advice on a particular matter requiring very specialist knowledge, or is it a more general, long-term relationship? If the latter, is it wealth management covering the whole spectrum of the trust assets or is it simply the management of a portfolio of quoted investments and funds?

The trustees will also wish to ensure the adviser is motivated and competent to act in the client’s best interests, and to understand the broader picture, rather than having their judgments distorted by other factors, including their own remuneration, ambition or entrenched professional practices.

  1. What is the reputation and standing of the advisers, how well do the trustees know them and have they come with good recommendations from other clients in similar situations?
  2. Do they ‘connect’ with the underlying clients, in terms of understanding their issues and addressing their concerns, rather than delivering a standard ‘sales pitch’ or solution?
  3. Do they demonstrate competence in all the relevant areas of expertise, without bias towards their own areas of specialism?
  4. Is their business model aligned to serving the long-term interests of the clients, rather than the short-term remuneration of the individuals providing the advice?

THE CASE FOR A HOLISTIC APPROACH

Many clients and trust beneficiaries seek a holistic approach to the management of their wealth, which means ensuring that the clients’ financial affairs are managed through a single individual or team, with a deep understanding of each client family, their wealth and other circumstances. This individual or team must have the knowledge and experience to cover all aspects of their affairs, with access to information and views from relevant specialists where required.

The word co-ordinator is often used, but this word grossly underestimates the role played by a holistic wealth manager, particularly one who handles complex clients with multiple interests across a variety of jurisdictions, often holding disparate assets through a number of different structures.

The job of the ‘holistic’ wealth manager is not so much to introduce clients to the experts, but to lead and manage the team and drive the decision making process. His or her role includes the following:

  • Standing in the shoes of the clients, by developing a deep understanding of their family circumstances, their attitudes and concerns, as well as their financial and business affairs.
  • To help the clients develop and outline a strategy, purpose and objectives for their wealth, ensuring it serves a useful purpose for successor generations.
  • To identify key issues and key decisions which need to be taken and areas where specialist advice may be required.
  • To identify the best and most appropriate specialists, brief them, and work with them to reach conclusions which fit the overall context.
  • To integrate the advice into a wider decision making framework, which may include advice from a variety of other specialists, some of which may be conflicting.
  • To manage day to day execution and reporting, in accordance with the agreed strategy and objectives.

It will be apparent that the more complex the clients’ affairs, the greater the demands on the experience and judgment of the wealth manager, who needs sufficient understanding of all relevant areas. He or she will also need significant experience of similar clients, so that he can draw on all those practical experiences, covering family issues as well as technical input. This experience comes not just from the number of clients they have served, but from the breadth and depth of their involvement.

Those who advocate the holistic approach would argue that the wealth manager needs supporting specialists in-house, with whom he or she has day to day contact, working together as a ‘team’. This more seamless approach is a better experience for the client, reducing the need to engage with multiplicity of different advisers.

The best solution for the client is not the theoretical independence of a totally outsourced model, but finding the right balance between in-house and external advice. This will include consideration of the viability of the provider’s business model.

A further advantage of the holistic approach is that the provider has both the expert knowledge and experience to identify the right external specialists, when required, and sufficient business to allocate that they are in regular contact with most of the specialists they may wish to draw upon.

All these considerations are highly relevant to the trustee, both in selecting external advisers and in considering the extent of expertise he or she needs within their own team.

CONCLUSION

Because of their special status, trustees have a particular responsibility to preserve their independence and to manage any conflicts of interest. This will include finding the right balance between in-house and outsourced advice and services, to serve the best interests of their beneficiaries.

It is unquestionably right to outsource where external providers can clearly better meet the needs of the trust, but there are many circumstances where an in-house solution is preferable. It is the job of trustees to make judgments and take big decisions, and they should be expected to have the expertise, experience and capability to fulfil their responsibilities without excessive reliance on third party advisers.

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Family offices: much more than private investment businesses – Roelof Botha

Our industry is beset with a general lack of understanding around the role of a family office, according to Roelof Botha, Stonehage Fleming’s Head of Family Office in London. “The common misconception is that a family office is a private investment business that does other things on the side,” he told guests of at a recent lunch, co-hosted by Invest Africa and Charles Russell Speechlys, to discuss the evolving role of the family office.

While investment management will always be a crucial aspect of managing a family’s assets, the job of a family office in the future will be increasingly to blend the financial and the non-financial objectives of the family, he explained. “For us, our role is much broader. We sit at the top table with a family and are part of the big decisions they face”.

Roelof’s team in London works with a wide range of clients, mostly international families, with a nexus in the UK. Their approach involves much more than the common misconception would suggest, said Roelof. “We assist families in managing proactively the risks they will face down the line.”

Of today’s unpredictable landscape, Roelof is measured. “Right now many of the families we look after in the UK face an interesting political landscape. While we are not in the business of making any predictions, we are able to advise our clients on some practical steps they can take to prepare for the potential changes in environment.”

Looking forward, Roelof predicts the future of the family office to be an evolution of the broader approach he describes. “As trusted advisers, in a sense we share ownership. We take an active role in deciding the direction that the family embraces and empower them with making decisions.”

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Return of the Homme d’Affaires

​Thirty years ago the term ‘Homme d’Affaires’ was well understood, describing a true adviser with real wisdom drawn from deep and broad experience of the world. The trend towards specialisation has caused us to forget the supreme importance of an individual who is able to look at the whole picture and pull together the advice of all the specialists.

Wealthy families are rediscovering the need for such individuals and in an increasingly complex world, they are not always easy to find.​

It is not quite clear why the English had to borrow an expression from French to describe the role of a trusted adviser to the wealthy, but until thirty years ago, the term ‘Homme d’Affaires’ was well understood and in common usage. It is strange that there was no equivalent in the English language the closest being the Italian word Consilieri. ​

​The essence was that such a person was a true adviser with real wisdom drawn from deep and broad experience of the world, including business, investment, families, the law and even philanthropy. The Homme d’Affaires was thus a reliable and impartial sounding board for nearly every major decision his client had to take. This might range from business acquisitions and investment to succession and inheritance, from personal relationships to dealing with awkward situations such as divorces within the family, where the parties involved are directors and shareholders in family businesses.

This does not mean that he would advise on the technical detail of every issue, but he would know enough to apply his experience, wisdom and common sense to ensure the decisions made were not only based on sound technical advice and on a proper understanding of the overall context.​

Over the last 30 years, the term Homme d’Affaires has pretty well disappeared from our vocabulary, as the remorseless trend towards specialisation has caused us to overlook the generalist. This generalist is someone who pulls it all together, is able to look across all aspects of a situation and make judgments and recommendations which bring together the advice of all the specialists.​

​It can indeed be argued that the focus of the specialists has become so narrow that they are less able to appreciate the broader context in which they operate or the relevance of their advice to the overall picture. By their nature, specialists tend to complicate their own fields of activity to the point where they create barriers to entry for newcomers, thus increasing their own market value. This makes it more and more difficult for their advice or their contribution to be evaluated by others.

It is therefore argued that the trend to specialisation has gone far enough. In the words of the late Kenneth Williams specialists “know more and more about less and less and eventually someone will earn their living from knowing everything about nothing!”​

This is indeed one of the many lessons of the banking crisis, where the boards of great banking groups have allowed armies of specialists to develop huge areas of business which are far beyond the understanding and control of the board itself. In the past, the boards of banks had some direct understanding and appreciation of ALL the major risks to their business, but this can never be the case again.​

​To some extent, the same applies to wealthy individuals and families. Their affairs are complex by nature, because they frequently mix the highly sensitive issue of family relationships, succession and inheritance with the ownership of one or more businesses, the management of investment portfolios, property and leisure assets, all overlaid with tax planning and efficient holding structures.

​Complexity is increasing as tax authorities become more aggressive and we live in an increasingly regulated and litigious society. The cost of professional advisers is thus rising at a rate which is simply unsustainable. The complexity of risk means all major decisions are inter-related and it is almost impossible to give sensible advice about one part of a client’s assets, without considering the knock on impact elsewhere.

​In other words, it is now not just desirable, but increasingly essential that all advice on major issues is channelled through someone who really understands the whole picture. Not only is this essential for proper coordination and risk management, it can also help reduce costs as the sophisticated generalist can much better commission, coordinate and evaluate the more detailed advice required from specialists.

​Take, for example, the case of a family which owns a substantial family business, where the cash flow has been under pressure and bank finance hard to come by during the recent crisis. Do they sell investments in a bad market to finance the business or are those investments intended precisely as a nest egg for a rainy day when the company ran into trouble? Furthermore, if you use family investments to support the business, how do you protect the interests of family members not involved in the business?

​Of course, ideally, the wise man and his advisers will anticipate these problems and have put in place structures and governance designed to achieve the right balance of risk and ensure all family members are treated fairly. The wise man will also have looked at the detailed risk correlations between the family business and the investment portfolio, to ensure that the market risks in the business are not replicated in the portfolio and that the potential liquidity needs in a downturn are fully assessed and anticipated, before committing to long-term equity investments.

There are however many other types of risk. Some are ongoing, such as monitoring the success and direction of the business, the performance and calibre of family directors and keeping an eye on family relationships, looking for potential sources of friction which might turn into major disputes, with catastrophic consequences. Then there are the one off occurrences, such as an acquisition of a new business, perhaps financed by significant debt, or a divorce where the ‘in-law’ is chief executive of a family company.​

Increasingly the management of risk means looking at the interrelationship between all aspects of the family finances and of the family itself – segregating risk into different compartments each overseen by a specialist is no longer enough.​

Then there is the matter of ‘strategic vision’. Who helps the family decide where it is heading, what the purpose of the wealth is and what their broad objectives are over the next generation. And again, how to pass on the baton from one generation to the next, ensuring that healthy rivalries in the business or other family concerns (such as a philanthropic foundation) do not spill over into family relationships, or vice versa.​

The notion of resurrecting the Homme d’Affaires is not entirely new. Very rich businessmen have usually found an individual from among their advisers or employees who steps up to the role. Lower down the market, private banks and wealth managers have for a long time been marketing the concept of a trusted adviser (often using the medical analogy of general practitioner), but they have too often undermined their own promotional literature by fielding relationship managers who lack the experience or gravitas for the trusted adviser role and are clearly trained and motivated as salespeople rather than advisers.​

It is one thing to articulate a need and another to meet it. Partly because of the product sales approach of many private banks and wealth managers, there is a massive shortage of people who genuinely merit the Homme d’Affaires title. It is not just a case of re-inventing a role that existed 30 years ago – in a much more complex world, the knowledge and experience requirements to fit this role have expanded dramatically, so they are likely to be outstanding individuals who command a very high price.​

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Approach

Our approach is rooted in a deep and practical understanding of the family, its wealth and wider circumstances. We help families develop and implement their plans to pass on an enduring legacy.