Many clients with recently-acquired wealth in the rapidly-growing emerging economies are considering diversification and succession planning for the first time. This represents a great opportunity for multi-family offices with a clear vision of what these clients’ needs are, according to generation and nationality.
Rolf Roetheli, a wealth and tax planning expert at Julius Baer, the Swiss private bank says: “China now has the second highest global concentration of billionaires. However, the 100-plus family offices in the region do not reflect the boom in regional wealth. The growth of HNWIs and ultra-HNWIs in Asia has outpaced the availability of experienced wealth managers and relationship managers.
“There is a huge opportunity for providing services around structuring their families’ wealth for the future such as intergenerational wealth transfer, philanthropy and estate planning.”
The needs of first-generation entrepreneurs are different from those who are more established. This latter group, typically western-educated, is more responsive to professional advice. First-generation entrepreneurs may require structures and services to be created from new, but can be distrustful and more demanding.
Mark Idriss, head of global emerging markets at UBS says: “Russian, Arab, African and Chinese banks are opening branches to capture this business. Several small Arab private banks have opened in London and Switzerland. Arab families can be complicated, as often more than one brother is involved at high level, and there are multiple families.”
Different nationalities are characterised by different traits and different needs. The Russian market has a high proportion of very wealthy pioneers who have cashed out of businesses and become very wealthy very quickly and are typically keen to diversify out of Russia to avoid political risk. Several multi-family offices have set up an international office outside Russia and London, as an international business centre, and attractive to Russian property buyers, is a preferred destination.
In the west, succession planning is well-understood in terms of mitigating inheritance tax though this is not the case with the emerging markets. Mark Smallwood, head of franchise development and strategic initiatives, Asia Pacific, at Deutsche Bank explains: “Asian environments don’t have that IHT driver so the value of a trust is in the convenience of the succession planning and the consolidation of the assets, and using the succession structure as a means to protect long-term wealth.
“IHT is already in force in certain provinces and cities in China, and big law firms in India are beefing up their teams in the expectation that it won’t be long arriving.”
Cross-border planning is a requirement for international families and this has become more challenging as countries become increasingly sophisticated in enforcing taxes. A solution would be to establish a large network with country-specific competence.
Source: FT.com
