The “family office” has become such a fashionable term in the private wealth management space. So catchy it is that when it comes to really defining what it means, particularly in the context of the single family office, firms of many stripes would invariably – rightly or wrongly – volunteer themselves to qualify.

It was apt and a privilege, therefore, that, for our pre-AGM panel discussion on the topic of family office governance, we had two veteran practitioners with first-hand experience of running established single family offices to share their insights: Mr Bernard Fung had run the London-based single family office and investment vehicle of Lord Sainsbury of Turville prior to returning to Singapore to join Credit Suisse as its incumbent Head of Family Office Services and Philanthropy Advisory Asia Pacific, while Ms Chew-Mee Kirtland is Managing Director of Mornington Services Pte Ltd, a Singapore-incorporated dedicated family office for members of a wealthy Asian family, which she also founded in 1999.

Good governance starts with a recognition of the key issues underpinning the successful operation of a single family office, of which Mr Fung identified the need for adequate and appropriate staffing, clarity of the relationship between the family’s businesses and the assets managed by the family office, and transparency of decision-making processes. While many Asian families are somewhat behind the curve when it comes to laying down the ground rules with regard to each of these three fundamental issues, Ms Kirtland believes financial education for the key stakeholders in the family businesses and the persons of big influence in the family relationships is important. She emphasised the value of investing resources to imbue financial discipline among family members and family office employees, enabling them to think strategically on all matters financial, from investments to administration; and build self-confidence in, and accountability for, decisions made.

Ms Kirtland highlighted the need for governance specifically in the investment process of the family office, an area in which she takes special interest. After identifying investment objectives and setting overall fund management strategies, there needs to exist proper controls, from the engagement of the right professionals to manage, to identifying and managing risks. How investment professionals are remunerated and incentivised in the process also needs to be transparent and certain. A proper governance framework ensures that decision-making at every level is properly focused.

In the end, both speakers emphasised that a family office is every bit the ‘people business’ that, say, private banking, in its truest form, is meant to be. It is about investing time, effort and other resources at the earliest possible time in education and the management of attitudes, expectations and interpersonal relationships and dynamics, between family and professionals. Only then can one develop a sensible, clear process for making sound decisions, which is what governance is all about.

 

The “Climate Change” in the 2nd STEP Global Congress

The second STEP Global Congress was held in NH Grand Hotel Krasnapolsky, Amsterdam from 30 June 2016 to 1 July 2016.  More than 300 delegates and over 40 distinguished speakers from over 47 countries comprising mainly of the trust and estate practitioners attended this be-annual event. 

The first day of the global congress started with the panel discussing on whether trust is still a viable arrangement given that the taxman, the regulators and the banks dislike them, and most clients are still confused over them and to certain extend, civilians are suspicious of them.  The water gets murkier when other panel sessions examines the collision of succession law and the tax law on how inheritance laws of one place often confer property rights which are taxed differently in another.  The day ends with a panel examining an interesting but important topic on the definition of “the other half” where the traditional definition of spouse is challenged given the recognition of same-sex marriage or registration of same-sex partners in different jurisdictions.  The discussion throws up challenges for trustees in the administration of trusts where such issues will surface now and very much so in future.    

The second day congress has an overarching theme of transparency following the implementation of US FATCA and the newly OECD implemented tax information exchange regime commonly called the CRS.  The day started and unsurprising a panel that includes a representative from OECD on the readiness of countries that signed up for the automatic tax information exchange.  Again, and unsurprisingly, many questions were expected from to floor to the representative from the OECD.  The rest of the panel discussions on the second day revolve around the theme of transparency where it examines on managing the risks by practitioners, over reporting of information, service providers being tax agents etc.  The highlight of the second day was a talk by the author of The Laundrymen, Mr Jeffrey Robinson where it amuse the audience with its examples but underlies with an important and serious message on fraud that we faces today.

The general takeaway from the two day conference is that this is a new era and the environment in the wealth management space will be getting more challenging.  OECD member countries are calling for even greater transparency such as registration for trusts and disclosure of beneficial owners to the public.  This does cause great concern among the practitioners and perhaps will be the new theme for the 3rd congress.

 

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