This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

Q: Why is it particularly important to be proactive in reviewing family structures at the current time?

Daniel Channing (DC): Fundamentally it is always a useful exercise periodically to review structures. This is because, by their very nature, a family’s circumstances and requirements evolve.

However there is currently a heightened sensitivity to political tensions, geopolitical instability, and inflationary pressures, as well as greater public scrutiny. Families, who were already becoming more sophisticated and multijurisdictional in their outlook and behaviours, need to navigate through it and find clarity in what is a complex environment.

For this reason I feel that right now is an unprecedented opportunity for family advisers to demonstrate their capabilities and ensure their clients are comfortable and prepared for the future. Being proactive now – reviewing existing structures and documents, revisiting family values – could really help families focus on their future direction, and future-proof their strategies.

Q: Does this indicate a different approach to what family office advisers have done in the past?

DC: It feels like this new context is a bit different. Families have faced pressures, challenges, and crises in the past. However a generally increased sophistication within a family’s understanding of their structuring, and what it truly seeks to achieve, is focusing minds at the moment. There are two major drivers behind this – a greater focus now on sustainability, and acceleration of digital adoption. Both are evolving constantly and at increasing speed.

For some families this is exciting, revealing new possibilities that they are keen to embrace and explore. For others, though, it’s really challenging, and is questioning their traditional values and disrupting business as usual.

Our ethos remains to work as an extension of our clients’ teams. But this new context gives us added impetus and rationale to be proactive in ensuring every aspect of their structure, model and approach is future-proof.

Q: So what does this mean in practice?

DC: It’s a bit of a cliché, but it’s true that all families are different, and advisers have always needed to adapt to make sure they are able to give independent advice tailored to the individual, and to their circumstances.

It’s the greater complexity of the environment families are now operating in, and the pace of change within that environment, that means that being proactive, and not waiting until the next challenge comes around, is so important. Ultimately, what families want is certainty.

We’ve seen this in several ways in recent months – from working with families to enable them to address specific challenges to managing the migration of decision-making to the next generation.

Governance and oversight is a key area where families are looking for greater support as they gear up for the future. The regulatory, reporting and disclosure requirements families now face are a million miles from where they were just five years ago, and they’ve needed to ramp up expertise quickly. Getting expert advice to inform that journey is vital.

Q: Can you give any examples of how the team has been proactive?

DC: We’ve seen a definite trend towards looking carefully at succession planning and instilling a robust governance framework, but in our experience, families don’t want that to be at the expense of maintaining an element of flexibility for the future. They still want their structures to be able to accommodate future shifts in investment and succession strategies.

In some cases, that’s required the team to take on a more project management role – working hard to make sure governance protocols are watertight, but maintaining a close relationship with the family office
team to develop further governance frameworks as structures have evolved and a family’s desire has shifted to institutionalise their portfolio.

In one case, the team established a new regulated advisory firm in another jurisdiction and relocated part of the local office to achieve the aim. That included providing support around IT and operations, so a really holistic team-based approach.

Q: Why is it particularly important to be proactive in reviewing family structures at the current time?

Daniel Channing (DC): Fundamentally it is always a useful exercise periodically to review structures. This is because, by their very nature, a family’s circumstances and requirements evolve.

However there is currently a heightened sensitivity to political tensions, geopolitical instability, and inflationary pressures, as well as greater public scrutiny. Families, who were already becoming more sophisticated and multijurisdictional in their outlook and behaviours, need to navigate through it and find clarity in what is a complex environment.

For this reason I feel that right now is an unprecedented opportunity for family advisers to demonstrate their capabilities and ensure their clients are comfortable and prepared for the future. Being proactive now – reviewing existing structures and documents, revisiting family values – could really help families focus on their future direction, and future-proof their strategies.

Q: Does this indicate a different approach to what family office advisers have done in the past?

DC: It feels like this new context is a bit different. Families have faced pressures, challenges, and crises in the past. However a generally increased sophistication within a family’s understanding of their structuring, and what it truly seeks to achieve, is focusing minds at the moment. There are two major drivers behind this – a greater focus now on sustainability, and acceleration of digital adoption. Both are evolving constantly and at increasing speed.

For some families this is exciting, revealing new possibilities that they are keen to embrace and explore. For others, though, it’s really challenging, and is questioning their traditional values and disrupting business as usual.

Our ethos remains to work as an extension of our clients’ teams. But this new context gives us added impetus and rationale to be proactive in ensuring every aspect of their structure, model and approach is future-proof.

Q: So what does this mean in practice?

DC: It’s a bit of a cliché, but it’s true that all families are different, and advisers have always needed to adapt to make sure they are able to give independent advice tailored to the individual, and to their circumstances.

It’s the greater complexity of the environment families are now operating in, and the pace of change within that environment, that means that being proactive, and not waiting until the next challenge comes around, is so important. Ultimately, what families want is certainty.

We’ve seen this in several ways in recent months – from working with families to enable them to address specific challenges to managing the migration of decision-making to the next generation.

Governance and oversight is a key area where families are looking for greater support as they gear up for the future. The regulatory, reporting and disclosure requirements families now face are a million miles from where they were just five years ago, and they’ve needed to ramp up expertise quickly. Getting expert advice to inform that journey is vital.

Q: Can you give any examples of how the team has been proactive?

DC: We’ve seen a definite trend towards looking carefully at succession planning and instilling a robust governance framework, but in our experience, families don’t want that to be at the expense of maintaining an element of flexibility for the future. They still want their structures to be able to accommodate future shifts in investment and succession strategies.

In some cases, that’s required the team to take on a more project management role – working hard to make sure governance protocols are watertight, but maintaining a close relationship with the family office
team to develop further governance frameworks as structures have evolved and a family’s desire has shifted to institutionalise their portfolio.

In one case, the team established a new regulated advisory firm in another jurisdiction and relocated part of the local office to achieve the aim. That included providing support around IT and operations, so a really holistic team-based approach.

In February this year, the Dubai International Finance Centre (DIFC) reported its highest ever annual revenue and operating profit.

Meanwhile, in Saudi Arabia, Riyadh is focused on morphing from an oil and gas powerhouse into a business, commerce and finance hub, with experts forecasting that Saudi Arabia will become the preeminent finance hub in the Middle East within the next three years.

On the ground

This is a strong indication that key hubs in the Middle East, such as the DIFC and Riyadh, are being successful in diversifying their proposition and setting out their stalls as global players in cross-border investment.

From an international service provider perspective, it’s long been the case that centres in the Middle East have been active in the private client and family office market – but this is now broadening with investors in the region looking for increasingly sophisticated support to enable them to achieve their global investment aspirations.

At the same time, investors and family offices elsewhere in the world are looking more and more at the cross-border structuring and professional support services available through Middle East hubs like the DIFC and Riyadh to support their international ambitions too.

As local, regional and global investors increasingly put their faith in these Middle East hubs, it is our responsibility as service providers with the experience and expertise in cross-border structuring to support that trend with the same quality service and knowledge that we have applied in other markets too.

It has certainly been the message from family offices that the Middle East market is incredibly busy. Our experience on the ground is that the DIFC and Riyadh are seen as a nexus for investment into key growth markets, specifically Africa and Asia – providing a route from North to South (the UK/Europe to Africa), and from West to East (the US to Asia).

As well as the geographical positioning that plays out well for this sort of structuring opportunity, it is the tax neutral environment they provide that also lends itself perfectly to straightforward collective investment structures – an area where we are seeing particular activity at the moment amongst family offices.

Private equity and venture capital type deals are areas of particular activity, with family offices globally still sitting on significant amounts of dry powder, waiting to be allocated to the right target and put to work. The message is clear, though – it has to be the right target.

Which is why having a tried and tested route to market that can enable them to react quickly when the right opportunity comes along is so important – and the hubs in the Middle East are rising to that challenge.

As well as providing good structuring, attractive tax environments and good mechanisms for upstream investment vehicles needing neutral ground, hubs in the region are significantly enhancing their governance and regulatory frameworks and investing heavily in their hard and soft infrastructures – bolstering their regional stock exchanges, for example, to support listed fund business.

This is where there is significant opportunity for offshore vehicles in supporting the evolution of these hubs. We frequently see, for example, Jersey structures being used to complement activity in the Middle East, whilst the experience in centres like Jersey have in governance and cross border regulation is hugely prized by families and complements the work being done by advisors in the Middle East too.

As hubs in the Middle East continue to evolve and transition at pace from domestic to international centres, IFCs like Jersey can play a positive and complementary role. The fact that Jersey has been visiting the Middle East region for many years, has had a presence in the UAE since 2011 and is ramping up its visibility in Saudi Arabia, puts it in a strong position to support this trend.

The future

Both the DIFC and Riyadh have hugely ambitious but highly achievable growth plans for the years ahead.

2021 saw the approval, for instance, of the DIFC’s Strategy 2030, a new strategy that reflects the DIFC’s role in supporting sustained economic growth. It embraces new legislation relating to the expanded duties and responsibilities of the DIFC and promotes the values of efficiency, transparency and integrity, whilst also placing a real emphasis on innovation.

In Saudi Arabia meanwhile, the Vision 2030 strategy sets out an equally ambitious growth plan, with an aim to rebalance its economy, diversify into new sectors, from financial services to high-end manufacturing, tourism, entertainment and culture.

It’s clear that the Middle East, in particular the UAE and Saudi Arabia, provides significant opportunities to support family office structuring and private market cross-border investment, and the pace of change over the coming years will undoubtedly accelerate.

As a result, there are collaborative opportunities for professionals in IFCs like Jersey who are familiar with the Middle East region and who have so much experience in cross border structuring, to support that growth and achieve mutually beneficial outcomes – for IFCs like Jersey, for those hubs in the Middle East, and of course clients.

In February this year, the Dubai International Finance Centre (DIFC) reported its highest ever annual revenue and operating profit.

Meanwhile, in Saudi Arabia, Riyadh is focused on morphing from an oil and gas powerhouse into a business, commerce and finance hub, with experts forecasting that Saudi Arabia will become the preeminent finance hub in the Middle East within the next three years.

On the ground

This is a strong indication that key hubs in the Middle East, such as the DIFC and Riyadh, are being successful in diversifying their proposition and setting out their stalls as global players in cross-border investment.

From an international service provider perspective, it’s long been the case that centres in the Middle East have been active in the private client and family office market – but this is now broadening with investors in the region looking for increasingly sophisticated support to enable them to achieve their global investment aspirations.

At the same time, investors and family offices elsewhere in the world are looking more and more at the cross-border structuring and professional support services available through Middle East hubs like the DIFC and Riyadh to support their international ambitions too.

As local, regional and global investors increasingly put their faith in these Middle East hubs, it is our responsibility as service providers with the experience and expertise in cross-border structuring to support that trend with the same quality service and knowledge that we have applied in other markets too.

It has certainly been the message from family offices that the Middle East market is incredibly busy. Our experience on the ground is that the DIFC and Riyadh are seen as a nexus for investment into key growth markets, specifically Africa and Asia – providing a route from North to South (the UK/Europe to Africa), and from West to East (the US to Asia).

As well as the geographical positioning that plays out well for this sort of structuring opportunity, it is the tax neutral environment they provide that also lends itself perfectly to straightforward collective investment structures – an area where we are seeing particular activity at the moment amongst family offices.

Private equity and venture capital type deals are areas of particular activity, with family offices globally still sitting on significant amounts of dry powder, waiting to be allocated to the right target and put to work. The message is clear, though – it has to be the right target.

Which is why having a tried and tested route to market that can enable them to react quickly when the right opportunity comes along is so important – and the hubs in the Middle East are rising to that challenge.

As well as providing good structuring, attractive tax environments and good mechanisms for upstream investment vehicles needing neutral ground, hubs in the region are significantly enhancing their governance and regulatory frameworks and investing heavily in their hard and soft infrastructures – bolstering their regional stock exchanges, for example, to support listed fund business.

This is where there is significant opportunity for offshore vehicles in supporting the evolution of these hubs. We frequently see, for example, Jersey structures being used to complement activity in the Middle East, whilst the experience in centres like Jersey have in governance and cross border regulation is hugely prized by families and complements the work being done by advisors in the Middle East too.

As hubs in the Middle East continue to evolve and transition at pace from domestic to international centres, IFCs like Jersey can play a positive and complementary role. The fact that Jersey has been visiting the Middle East region for many years, has had a presence in the UAE since 2011 and is ramping up its visibility in Saudi Arabia, puts it in a strong position to support this trend.

The future

Both the DIFC and Riyadh have hugely ambitious but highly achievable growth plans for the years ahead.

2021 saw the approval, for instance, of the DIFC’s Strategy 2030, a new strategy that reflects the DIFC’s role in supporting sustained economic growth. It embraces new legislation relating to the expanded duties and responsibilities of the DIFC and promotes the values of efficiency, transparency and integrity, whilst also placing a real emphasis on innovation.

In Saudi Arabia meanwhile, the Vision 2030 strategy sets out an equally ambitious growth plan, with an aim to rebalance its economy, diversify into new sectors, from financial services to high-end manufacturing, tourism, entertainment and culture.

It’s clear that the Middle East, in particular the UAE and Saudi Arabia, provides significant opportunities to support family office structuring and private market cross-border investment, and the pace of change over the coming years will undoubtedly accelerate.

As a result, there are collaborative opportunities for professionals in IFCs like Jersey who are familiar with the Middle East region and who have so much experience in cross border structuring, to support that growth and achieve mutually beneficial outcomes – for IFCs like Jersey, for those hubs in the Middle East, and of course clients.

A member of the Crestbridge executive team, Heather also manages the US joint venture, Crestbridge Fiduciary LLC.  One of the most awarded executives in Jersey’s financial sector, Heather is a consistent feature on ePrivateclient’s Top 50 Most Influential list and in 2021 topped the Women in Wealth Management category in the WealthBriefing European Awards.

As Group Head of a professional services organisation, emphasising the importance of building trusted relationships is central to Heather’s leadership philosophy.  She vigorously encourages joined-up and far-sighted thinking throughout her team and promotes regular and open feedback from across the business to nurture a supportive and high-performance culture.

Who has inspired you?

Leading international private client lawyer Richard Hay taught me many important lessons; one of the key ones was that preparation is everything!

I recently read Edith Edgar’s ‘The Choice’.  It tells the true story of an Auschwitz survivor who trained to be a psychiatrist and is a study of resilience and self-determination. Her ethos is that everyone has the choice whether to be a victim or a survivor.

How would you describe your leadership style in three words?

Collaborative, supportive, open.

What makes a successful leader?

Empathy.  I believe in every scenario it is essential to put yourself in the shoes of the person or team you are working with or leading.

What advice would you give to aspiring leaders?

Follow your gut instincts, treat everything as an opportunity to learn and don’t let ‘perfect’ obstruct progress.  Things sometimes go wrong.  When they do, rise, reflect and move forward.

A member of the Crestbridge executive team, Heather also manages the US joint venture, Crestbridge Fiduciary LLC.  One of the most awarded executives in Jersey’s financial sector, Heather is a consistent feature on ePrivateclient’s Top 50 Most Influential list and in 2021 topped the Women in Wealth Management category in the WealthBriefing European Awards.

As Group Head of a professional services organisation, emphasising the importance of building trusted relationships is central to Heather’s leadership philosophy.  She vigorously encourages joined-up and far-sighted thinking throughout her team and promotes regular and open feedback from across the business to nurture a supportive and high-performance culture.

Who has inspired you?

Leading international private client lawyer Richard Hay taught me many important lessons; one of the key ones was that preparation is everything!

I recently read Edith Edgar’s ‘The Choice’.  It tells the true story of an Auschwitz survivor who trained to be a psychiatrist and is a study of resilience and self-determination. Her ethos is that everyone has the choice whether to be a victim or a survivor.

How would you describe your leadership style in three words?

Collaborative, supportive, open.

What makes a successful leader?

Empathy.  I believe in every scenario it is essential to put yourself in the shoes of the person or team you are working with or leading.

What advice would you give to aspiring leaders?

Follow your gut instincts, treat everything as an opportunity to learn and don’t let ‘perfect’ obstruct progress.  Things sometimes go wrong.  When they do, rise, reflect and move forward.