Supporting client families in succession planning and family governance is core to our service offering. It is an integral part of almost everything we do and is a crucial consideration in major decisions.
Indeed it is well known that inherited wealth can sometimes have a detrimental impact on the lives of individuals and families, if the succession is not managed appropriately.
That is why helping you pass on an enduring financial and family legacy to future generations is probably the most defining feature of our approach to intergenerational wealth management.
Using all our practical experience, in combination with our technical and legal expertise, we help our client families establish a clear governance strategy wherever possible. In our experience most successful families have defined the purposes and objectives of their wealth in some detail; they have established clear criteria against which major decisions should be judged and they have put in place formal governance and communication processes.
However, there is much more to succession planning than developing a family constitution and governance framework. It is so often about achieving a meeting of minds, as one generation comes to terms with the fact that the successor generation may have a different outlook, different ambitions and different skills. These factors may have a deep impact on investment decisions both before and during the handover.
Where this is the preferred and appropriate approach, we help families develop formal succession plans, governance and decision-making frameworks. However, many clients, especially founding entrepreneurs, prefer a more informal and flexible plan for a gradual handover
On occasions, this transfer can involve significant changes in investment strategy, with the transition managed over a period of several years. During this time we frequently act as a facilitator between the generations.
We not only help to develop family governance, we provide the framework, resources, systems and experience to ensure the governance is effectively and harmoniously implemented to the benefit of all family members.
We often act as trustees, providing sophisticated reporting against objectives and we arrange and facilitate family meetings.
We usually seek to engage with the next generation as early as appropriate, to help them become familiar with their circumstances and responsibilities.
We run programmes to help them explore the opportunities and challenges which lie ahead and we can sometimes play a useful role in opening up the dialogue between the two generations.
The role of properly structured succession planning in reducing the risks to family wealth is beyond dispute. Yet this most important of all risk management tools is too often overlooked, both by the families themselves and their advisers.
It is a well known fact that most family fortunes fail to survive more than three generations. Less well known is that the prime cause of wealth destruction is a breakdown of communication within the family, which often results from failure to plan adequately for passing on the wealth from one generation to the next.
In the current economic environment there is a great deal of focus on the management of risk and, in particular, the potential vulnerability of the family business or the investment portfolio to a further banking crisis and a collapse in market confidence. Increasingly sophisticated risk management tools are promoted by wealth managers and private banks for this purpose.
In the longer term, the biggest risk of all is a failure within the family itself which, at its mildest, results in a loss of direction and leadership and, at its worst, can result in a full scale family war as different family members fight each other for the assets, the legacy or the family leadership. By the third or fourth generation the chances are very high that those who inherit were brought up in luxury with little concept of the work ethic on which the family fortune was founded.
Succession planning is therefore the most important tool of long-term risk management. It does not guarantee the preservation of wealth through the generations, but it can and does improve the chances that the wealth will survive, in an environment which enables family members to flourish as individuals, as part of the family unit and as members of society.
Why is it, therefore, that whilst so much time and resource is commonly allocated to other, less important risk management tools, far too little attention is given to the most important tool of all – succession planning?
The consequences of failure to plan are well known, and far too numerous to list. Perhaps the most obvious are disputes between siblings on the death of the founder or disputes between those who are involved in the family business and those who want it sold. There is also jockeying for position within the business and disagreement about its strategic direction, some perhaps preferring to stick to the core activity, whilst others advocate a more risky expansion and diversification strategy, involving substantial leverage.
There may be family members who want to use family wealth to invest in new ventures, following in the entrepreneurial footsteps of the founder, whilst others have no interest in business and prefer the wealth to be independently managed by professional managers. All this can have an impact not only on the business and the family wealth, but on the family itself, as the key protagonists try to lobby other family members for support. Sadly, in most instances, those who advocate the greatest risks have the loudest and most persuasive voices.
In addition to business strategy, there is the simple issue of management competence and the danger that the next generation does not have the talent to run a large business, either as managers or as owners.
All of these risks and many more, are greatly magnified by the lack of a clear framework for making decisions and a clear set of objectives which have been originated by the founder and renewed by successive generations.
The potential for damaging divisions and perhaps catastrophic wealth destruction is so obvious that it is hard to understand why an exceptionally able and talented human being, who has spent a lifetime putting together a large fortune, would ignore many of the basic principles of handing it down to the next generation. Yet many otherwise brilliant men and women do just that.
Some say that the biggest obstacle to succession planning is the typical entrepreneur’s belief in his or her own immortality, or to put it the other way round, a reluctance to face up to his own death or incapacity.
In truth, the answer is more complex, in that there are many hard decisions to be made, some of them straight business decisions, others highly overlaid with emotional considerations. Some may create a division between father and son, between brother and sister, or even between husband and wife and even when it is all done, the outcome can never be guaranteed.
Many entrepreneurs have observed that it is harder to pass on your wealth than to make it in the first place, but perhaps this is precisely the argument for some sort of formalised process. Such a process takes at least some of the emotion out of decisions, which otherwise have the potential to cause resentment and division. Pre-determined criteria will help provide an objective measure, to avoid the perception that one family member has been favoured over another.
The drawing up of a succession plan is clearly, in the first instance, the prerogative of the founder of the wealth, or subsequent family leadership. However, it is argued by most experts that it should generally be done with some degree of consultation among those principally affected. Those involved need to have a say and the opportunity to work together with other family members in defining a common set of values, objectives and governance framework. This can be a substantial task.
There are three main elements of succession planning:
Defining the purpose of the wealth
Much can be achieved by trying to answer the simple question ‘what is it all for?’ Is the wealth simply to provide for the living standards of subsequent generations? If so, how do you ensure it contributes to enhanced quality of life, when there is so much evidence that inheritance without responsibility can be damaging?
For some families, much of the wealth is tied up in particular assets such as a family business, a landed estate or an art collection, which the founder wishes to be maintained intact. If so, this must be made clear, to avoid future disputes. It should also be specified whether and in what circumstances the wealth should be used to encourage entrepreneurial or other creative activities of family members or to be used for philanthropic purposes. Whatever the specific purposes, the founder will surely wish to leave a legacy which encourages a positive work ethic in subsequent generations to reduce the prospect of wealth being squandered and lives ruined in the process.
Dividing the wealth
The next question is how the wealth is to be divided between different family members. Fairness and equality are easy words to use, but it is not so easy to define what they mean in practice. It could be argued that the wealth should be divided equally between members of the next generation. Alternatively, that a greater share is allocated to those with responsibility for carrying forward the family business or other assets. The responsibilities of family leaders have to be specified and mechanisms put in place to protect the interests of others. Some families have a ‘pot’ of money to finance family members with exceptional talents or business ideas, or those with special needs or suffering hardship. Without a guiding philosophy every decision has the potential to cause a rift.
The processes by which decisions are made is critical to the future wellbeing of the family.
For many wealthy families, their assets are held through a variety of ‘vehicles’, being primarily companies and trusts, each with their own objectives, their own boards of directors or trustees and their own governing instruments. However, most families have seen the benefit of some kind of family constitution, which defines the overall objectives and decision making processes for the family as a whole.
Communications will usually include family meetings (the whole family and consultative only) and the family council (representative body with some decision making powers). Where there is a family business making up a substantial part of the assets, the relationship between the family and the business will be critical, as will the rules which govern the highly sensitive area of family members working in the business.
The above is just a selection of the many issues which need to be considered by a wealthy individual or family, to which should be added all the usual tax and legal issues affecting a family with complex assets, especially those distributed across a number of legal jurisdictions.
As mentioned earlier, many wealth creators postpone consideration of all these matters, often until it is too late. Equally their advisers are at fault for failing to put the issue firmly on the table in a manner which provokes a positive response. After all there are so many arguments in favour of a properly structured succession planning exercise, that it should surely be routine for all advisers?
It has been demonstrated beyond reasonable doubt that in the vast majority of cases an effective succession planning exercise brings considerable benefits to a wealthy family. The question is when to start such an exercise and the biggest challenge is to agree the format and get the process started.
The scope of the exercise and the extent of involvement of family members will depend on the wishes of the wealth creator, or the current family leadership. Although it is generally regarded as advisable to involve the next generation in a consultative exercise, there may on occasions be reasons for not doing so. Equally, the founder may wish to lay down some principles from the outset, as a framework for discussion.
With all the negative publicity surrounding offshore trusts, it would be easy to think that the days of the trust are over, that the risks and costs now outweigh the benefits and that wealthy families will be looking for alternative ways of holding their assets.
At this stage, however, the evidence is the contrary. The trust is a unique structure for holding assets developed in England around 1200 AD and adopted in practically all jurisdictions which have a legal system based on the principles of English Law. Nowadays the trust is increasingly recognised internationally even in Civil Law Jurisdictions (including, for example, Switzerland and most recently Hungary) and is extensively used in both China and Japan, despite their very different legal systems.
The trust has survived many previous attacks, mainly because it has numerous legitimate uses and is a superb vehicle for family succession planning. It is obviously true that increased regulation has added to costs, that the demand for transparency has diminished financial privacy and that increasingly determined tax authorities are curbing the ability of offshore structures to avoid tax. However, there remain many legitimate and compelling reasons for settling assets into a trust, which have perhaps been temporarily obscured by the highly negative and illinformed press, associating all offshore trusts with money laundering and tax evasion.
The reality is that a small number of participants have helped to give the whole sector a bad press, by taking on clients whom most would regard as unacceptable.
The number of international regulatory changes in the past two years is unprecedented, with new AML regulations, EU Directives, transparency initiatives, exchange of information and the ability of foreign tax authorities to learn the identity of beneficiaries. These include the US Foreign Account Tax Compliance Act (FACTA) and the OECD’s Common Reporting Standard (CRS), both of which are threatening the privacy we have taken for granted for so long. The cost implications of these new initiatives are substantial, with all the obligations for enhanced due diligence, disclosure and reporting.
With government budgets under pressure all round the world, the rich are an obvious target:
The often deliberately misleading media campaigns will continue, increasing pressure on politicians to take action against so called ‘tax havens’ and raising concerns that data theft will cause breaches of confidentiality.
The combination of loss of privacy, increased costs, reduced tax benefits and now the potential reputational risks of being associated with offshore structures obviously prompts the question:
“What is the future for offshore trusts?”
The short answer, is that once the current furore has subsided, it will be recognised that Trusts are needed today just as much as they have been in the past.
Whilst implementation of FATCA and CRS is a challenge, there were similar concerns over the introduction by the US of the Qualified Intermediary Regime (QI) in 2001, but it was business as usual, following implementation. Similarly, despite current concerns, the reality is that trust laws continue to be recognised or promulgated on both sides of the Atlantic as well as in Russia, Eastern Europe, Asia and the Middle East, in response to growing international demand.
For the vast majority of individuals and families using Trusts, their tax planning is perfectly legitimate and not based on secrecy or tax evasion. That demand has not waned attests to the durability, versatility and inherent ability of trusts to preserve, manage and develop wealth as “part of the social and economic fabric of society.“1 Foundations, limited partnerships and corporations simply cannot compare with the benefits and flexibility trusts provide.
The many legitimate uses for trusts include: succession and estate planning (thereby alleviating the need for probate); tax planning during life and upon decease; continuity of family businesses; provision for heirs unable to take care of their financial affairs (spendthrifts, minors and the like); for testamentary freedom and protection against forced heirship claims; vehicles for charitable giving; and last, but by no means least, asset protection.
With increasing accumulation of wealth across the Globe and unprecedented numbers of businesses established over the last thirty years, families obviously require holding structures which promote effective succession and protect the assets they have built, especially in countries which are politically unstable.
And what better vehicle than a Trust, which can protect wealth for future generations, while simultaneously allowing families to retain enjoyment during their lives?
The essential element of a Trust, that distinguishes it entirely from other legal vehicles, is the gratuitous transfer of property from the settlor to the trustee, which results in the assets no longer belonging to the settlor. Following the transfer, the assets legally belong to the trustee and creditors will only gain access to these assets if it can be shown that the Trust was made with the intention of defeating legitimate creditor claims or is otherwise technically invalid. This will not be easy if the Trust has been established with appropriate legal advice and properly administered by an independent trustee.
The selection of a “real trustee,” who is independent and fully competent, is crucially important. A trustee who fails to act independently and takes instructions from the settlor and/or a beneficiary, can subject a trust to possible attack by creditors. They may argue that he was not a legitimate trustee of an Inter Vivos Trust but rather a mere nominee custodian holding the assets on bare trust for the settlor. The reality is that responsibility of the trustee is to all the trust beneficiaries and not to the settlor.
In many cases settlors wish to retain a degree of influence and certain jurisdictions have made specific legal provisions to enable this. The Hague Trust Convention2 makes it clear that “the reservation by the settlor of certain rights and powers…are not necessarily inconsistent with the existence of a trust.” However, the less powers the settlor reserves, the stronger the trust. Under certain circumstances it may also be advisable to delegate some powers on to protector committees, family councils and investment committees. The latter may provide family members a forum for discussion, without the risks created by settlor retention of powers.
Even where the validity of a Trust is not questioned, the residence of the Trust for tax purposes might be challenged3. Offshore Trust laws allowing settlor reserved powers will not help protect a Trust if it is pulled onshore because key decisions are made by individual’s resident onshore. The precise definitions vary significantly according to the jurisdictions involved but the conduct of the trustee and the extent of proper trust administration (or lack thereof) by the trustee, will be the evidence principally relied upon by the tax authorities in such cases.
Many wealthy families prefer to hold assets in trust structures to preserve continuity of purpose, to involve trusted family advisers in key decisions, to help avoid family disputes and to prevent the assets being threatened by poor decisions on the part of individual family members.
Frequently settlors come from jurisdictions that limit testamentary freedom (so called ‘forced heirship’). Thus if the wish of the settlor is to ensure that the fortune he/she generated is managed after death pursuant to their wishes, a trust is an obvious solution. Many financial centres have passed legislation that specifically provides for the trust to be governed by the laws of that jurisdiction, irrespective of the law of the settlor’s domicile.
Another benefit of an Inter Vivos Trust is that it is wholly private and avoids the complexity, costs and time that probate takes for international families with assets located in many jurisdictions. There is no requirement for court orders to enable the trustee to continue to act after the death of the settlor or subsequent beneficiaries. The management of the trust assets continues smoothly and these assets can ultimately be distributed, without any public process, quietly and privately.
Families with family businesses need to address the issue of succession, coupled with responsible ownership. Shares directly held by individual family members can give rise to significant problems on death, divorce, bankruptcy, changing financial circumstances or differences of view. Trusts, on the other hand, can offer continuity of ownership from one generation to the next. It is not unusual for differences of opinion to arise between members of the family directly involved in the management of the business and those who are merely shareholders. Such differences can develop into unpleasant and destructive disputes, which often result in enormous legal costs, potentially serious damage to the business and, worst of all, long lasting feuds between family members.
Settling family business shares onto a Trust can assist tremendously. Whilst conflicts cannot be entirely avoided, setting out clear rules to govern the family business in a structured fashion, under the stewardship of appointed trustees, can help mitigate family disputes. It will also increase the chances of the family staying together and keeping control of the business. A trust can provide a mechanism for consolidation and reservation of voting powers, which will limit conflicts arising.4
This presupposes a genuine Trust with a trustee who has a close relationship with all beneficiaries, who can negotiate a course which will be accepted by all parties, in line with the requirements of the trust deed. Without these relationships across generations, a trustee is little more than an administrator.
Where possible, the trustee will try to ensure his or her efforts are supported by a family constitution which addresses and defines the family values and the purpose of the wealth.
Most HNW families will face the probable dissipation of their wealth over three generations unless protective measures, such as a trust, are put in place. This process is called wealth entropy. Trusts can be used to protect the family from their inheritance and the inheritance from the family.
Similarly, many wealthy families do not want their children to inherit family wealth in a lump sum at a relatively young age. They want to ensure their children will receive the assets only if and when it is determined they have the maturity to properly handle such wealth. Placing the assets into trust, with specific tailored provisions, will allow the settlor’s objectives to be achieved, whilst protecting the children from themselves and from others.
Trusts properly implemented with a bespoke, irrevocable, discretionary trust deed, can offer protection against third party creditors but also against liability arising from direct ownership of assets and the claims of divorcing spouses, or disgruntled heirs. However, a Trust can only provide asset protection (AP) if it is established in an appropriate jurisdiction and the settlor relinquishes beneficial ownership, dominion and control to an experienced and competent trustee. This must be done at a time when there are no existing or foreseeable claims against him/her, as alternatively the trust may be viewed by the courts as an attempt to defraud creditors. UK courts, in particular, are extremely alert to any possibility that the trust might have been created to defeat the settlor’s own creditors, even if the settlor was clearly solvent at the time.
However, a trust created by a solvent settlor for the benefit of beneficiaries such as children should prevent their creditors from collecting against the assets in contrast to a direct gift of the same assets.
Additionally, it is important to remember that whilst AP Trusts are subject to the basic principles and laws applicable to Trusts generally, they require specific planning by experienced professionals. Thus whilst such Trusts may always be subject to challenge, a well-planned Trust with a “real trustee” is the best tool available to protect a family’s wealth from unjustified or unexpected claims.
A Trust is not always a silver bullet in divorce cases instituted in the UK courts, but they do provide another layer of protection. The enforcement of an English court order granted in matrimonial proceedings in the Trust’s offshore jurisdiction will be a major hurdle, which the spouse will have significant difficulty overcoming. Furthermore, not all the cases are bad, as the particularly poignant choice of words used by the court in the A v.A divorce case5 (which upheld the husband’s two trusts noting that the trustees had conscientiously performed their fiduciary duties), reflects:
“...even in the Family Division, a spouse who seeks to extend her claim for ancillary relief to assets which appear to be in the hands of someone other than her husband must identify, and by reference to established principle, some proper basis for doing so.”
In a global world it is increasingly common for assets to be owned by a variety of investors from different jurisdictions, whether or not they are of the same family. Each of those jurisdictions will have different tax and regulatory systems, such that it is difficult not to disadvantage some investors or beneficiaries by comparison to others. Holding the assets through an offshore structure is often designed to achieve tax and regulatory neutrality between all investors - i.e. a fair playing field. In general the beneficiaries will be fully taxed in their own jurisdictions but will not be subject to unnecessary complications arising from an unsuitable ownership structure.
Most wealthy families make significant contributions to charitable causes, frequently through charitable trusts. This takes the ownership of the assets outside the family, whilst allowing the family some continuing influence over the way the assets are managed and the causes which they support.
Despite the bad publicity, the trust is a highly useful device which plays a very important and legitimate role in our society. Moreover, it is highly debatable whether criminals and tax evaders make use of offshore centres and trusts any more than they do mainstream bank accounts in major international cities like London and New York.
Gone are the days when commoditised trusts were sold by unskilled salesmen and the demand was for trustees who would acquiesce to every whim of the settlor/beneficiaries. And good riddance to them too because these were the very trusts that created the prejudices of journalists condemning the trust industry today.
HNW families that have trusts for legitimate goals need trusts that will stand up to scrutiny when stress tested, which calls for reputable, knowledgeable trustees who are accountable. Such families understand the price that needs to be paid, in terms of passing control over their assets to the professional trustee, so they will seek out trustees who have real business acumen, knowledge of trust law, independence and the skill to manage family trust relationships. Similarly, in the new world of transparency, companies offering trust services must worry about their reputation and can no longer afford to offer trustee services to families who still want to “have their cake and eat it”, appointing trustees who act according to their wishes and who perceive the settlor and his or her family as “clients”, rather than potential beneficiaries in accordance with the terms of the trust.
Given the myriad of potential issues HNW families face, they have never needed trusts more than they do today. But they require trusts that will stand up to attacks from creditors and tax authorities and this will only be the case if the trustees exercise their discretion and are not afraid to say, on appropriate occasion, “No.” Similarly, those families who understand the old Jersey Law adage ‘donner et retenir ne vaut’ (it is impossible both to give away yet retain) will be less equivocal about passing the necessary degree of control to their trustees, a fundamental requirement for a valid trust. And, undoubtedly, their trusts, like good ports in a storm, will be the ones most likely to pass the stress test.
1 Hon. Justice David Hayton, Reflections on the Hague Convention After Thirty years
2 Article 2 of the Hague Convention on the law Applicable to Trusts and on their Recognition, most of the provisions of which have been incorporated into English law, (by the (English) Recognition of Trusts Act 1987).
3 Garron Family Trust V Her Majesty the Queen  TCC 450
4 See: Trust Ownership of the Family Owned Business: Towards a wider Perspective, Christian Stewart, Family Legacy, Asia
5 Av. A. 2007 EWHC 99(Fam)
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.
Do We Need a Family Constitution?
The terms ‘family constitution’ or ‘family charter’ are widely used, but have different meanings to different people. This article examines how a family should decide whether such a document might be helpful and how to ensure that it meets their particular circumstances, needs and preferences.
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