Positioning a business to service a global family

Some years back, while I was on a business trip to Mumbai, an advisor explained to me that there were two types of people whom he worked with, high net worth and high net worked. At the time, I recall thinking of this as being amusing but not much else, and yet this conversation has clearly stayed with me. Time has inevitably moved on and, now that I am a little wiser and my role and client base have evolved, I believe I am better positioned to appreciate these words of wisdom.

Ignoring the multitude of changes the trust industry has experienced over the years, trustees have generally noticed a significant shift in the profile of the families establishing fiduciary structures, their rationale for establishing such structures and the expectations of their service providers.

Working with 'global' families, although financially and professionally rewarding, is fraught with risk and complexity. This is simply because of the intricacies of working with dynastic structures with beneficiaries dispersed across multiple jurisdictions. With this in mind, firms that actsolely as fiduciaries will almost certainly advocate the concept of being highly networked. At a high level, the services that families and their structures may require, beyond the scope of a fiduciary offering, include legal advice, tax advice, accounting services, property management, capital raising, relocation services, concierge services, immigration services, investment management, treasury services, etc.

It would be extremely difficult to provide the majority of these services in-house to as high a standard as a specialist firm would. To provide them in-house would also arguably be to the benefit of the company rather than the structure (which, in itself, is a whole other discussion). It should also be considered that, by acknowledging in-house limitations and always seeking out industry-leading specialists, a company is arguably able to mitigate certain risks and manage persistent ones better.

Positioning a fiduciary business to service global families does not only mean having an impressive address book: it is also imperative that the business has critical mass. Working with these families and properly implementing their estate plan, while working to the highest regulatory standards and adhering to international legislation, is resource-intensive and a challenge for any business. It will be an impossible task for an under-resourced business.

From a practical perspective, and for continuity reasons, the business will need to have sufficient resources to implement an efficient internal succession plan (many, sur prisingly, do not). Among other things, the firm will also need to have qualified and experienced staff (age has made me realise that being qualified does not necessarily mean an individual is experienced); independent risk and compliance teams; the ability to carry out complex reporting and accounting; up-to-date and relevant internal controls; means of ensuring that conflicts of interest are correctly managed; confidence that it can implement the changing array of legislative and regulatory requirements; and professional indemnity insurance that is appropriate for the assets under administration.

It is important that a trust business has the resources to build a suitable team around a client family with both spare capacity and flexibility. This is because, experience shows, when working with a global family it is extremely likely that a structure's profile will evolve over time. The evolution will almost always entail complex and time-critical transactions and, when this happens, it is only fair to all parties for the trustee to be able to implement any advice/ change to the highest standard.

It would not be right for a team to be under undue pressure and be expected to fit these transactions into already-full workloads as, should this happen, it is likely service levels will drop and mistakes will be made. If the work is sufficiently complex and remunerative, it is quite viable for a relationship manager, with support staff, to service only one or two structures.

It is vital for a trustee to have good lines of communication with its beneficiaries and all the advisors working on the structure. Without this, the administration will almost certainly become even more difficult, if not impossible. Teams need to be encouraged to liaise with relevant parties, and to be allocated the time and means to travel to meet these persons as required on  an ad hoc basis.

What is clear is that, in order to thrive as an independent, fiduciary-services-dedicated trust company, it is important that the business is not only well networked, but also built on a solid foundation that is designed to service modern global families.

 

Michael Giraud, ‘Positioning a business to service a global family’STEP Journal (Vol27 Iss7), p.23

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