In the context of this paper, Family Wealth Consulting (FWC) is an advisory service focused on a bespoke approach to address all issues and aspects of managing the wealth of large Family Groups and / or Ultra-High Net Worth individuals.
The wealth of any family isthe aggregate value of that family’s liquid investments, illiquid investments and their business assets – as applicable. Typically liquid investments include investment portfolio(s), direct listed security holdings and cash deposits held at banks whilst illiquid investments can range from real estate, non-listed security holdings, direct / private equity investment holdings to art collections. Separate from the investment side is the family’s business assets.
This advisory service is a holistic approach that draws on a multitude of expertise ranging from financial, legal, regulatory considerations, accounting to tax (when applicable) in order to determine the most optimal structure(s), systems and controls to manage the family wealth.
The final outcome will invariably need to observe the applicable local custom / religious or civil law. For some Family Groups whereby a number of the family members reside in different jurisdictions a host of cross-border considerations will need to be factored into the planning.
For avoidance of doubt, FWC service is to be distinguished and stands separate from security specific investment advice or investment management at large.
FWC mandates typically address the following high level issues that tend to be common to most families:
- Advising on the Estate planning and / or intergenerational wealth transfer: This step is critical and central to any successful outcome and directly impacts the final bespoke legal structure that will hold the family assets. This could very well include the setting – up of family holding companies, Trust or Foundation settlements and in some cases a Private Trust Company which will involve working with specialized accredited independent Fiduciary Trust Companies and solicitors;
- Advising on the efficiency of managing the Family investments: This covers both the liquid and the illiquid investments and includes but not limited to the following: – Assess the overall distribution between the liquid and illiquid investments taking into account concentration, diversification and correlation analysis and suitability vis-à-vis the family’s investment objective and the corresponding risk appetite / level; – On the liquid investment side, a whole risk parameters framework is addressed from the suitable asset allocation guidelines to setting specific individual security allocation weightings; – Cost considerations at the bank providers and / or custodians; – Reviewing arrangements in place with third party service providers
- Business assets: (includes but not limited to) – Reviewing and advising on segregation between the family private wealth or investments and the financial and legal exposure to the family’s operating businesses. This includes assessing the family’s capital employed and/or contingent liabilities to the family’s business assets; – Dividend generation and policy; – Value creation potential and advising on the valuation of the business assets; – Assessing exit strategies
- Investment Committee / Family Office: – Advising on the set-up, composition and operation of an Investment Committee and Family Office; – The Investment Committee is responsible for the investment decision making and oversight in relation to the family’s liquid and illiquid investments subject to the risk parameters framework as discussed above; – A private family office is responsible for the overall running of the family wealth including the Investment Committee, adhering and maintaining the governance of the legal framework that has been put in place while ensuring overall compliance with any regulatory aspects and cross border considerations. The FO as well can attend to ancillary services particular to each family circumstances. It has to be stressed that setting-up a FO (with its staffing) is not a necessary step for all families and very much depends on the efficiency of the mechanisms and counter party providers that are in place as discussed above.
We trust that the above presents a comprehensive overview of the main issues involved in any FWC engagement.
“XN Consultants, collaborates with DeaconCapital Asset Management LLP in the FWC service area. DeaconCapital is an independent wealth-manager with experience in estate planning, risk management and has in place affiliations with tax and legal specialists in order to undertake FWC engagements to a successful fruition.”
