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How families can preserve their wealth in a changing world

In an uncertain world the key to survival rests with those who are flexible and quick enough to adapt. The key to success sits neatly in the pockets of those who can pre-empt change and seize the opportunities it brings, as Andra Ilie, private client adviser at Knox Private Office, explains.

In an uncertain world the key to survival rests with those who are flexible and quick enough to adapt. The key to success sits neatly in the pockets of those who can pre-empt change and seize the opportunities it brings, says Andra Ilie, private client adviser at Knox Private Office.

For UK based ultra-wealthy family office principals, there are a number of matters to contend with and consider as we move through a time of change.

Brexit is clearly one area which international and multi-jurisdictional families may have to deal with, as is the real possibility of a Labour Government. Therefore, local politics are no longer domestically grounded and a myriad of external factors must be considered to protect one’s legacy.

While the immediate effect of Brexit was reflected in a fall in sterling, it is not necessarily all doom and gloom. Assets purchased in the UK became cheaper for international families who are dollar and euro based and while the expectations of ultra-high net worth individuals have been on the rise, the full impact of immigration is yet to be uncovered.

For our clients, basing oneself in a stable and conducive economy is paramount, yet from a personal stance tax may not be the holy grail of decision making when contrasted with a good educational system. So what sits at the junction of business and emotions and contributes to the most powerful entrepreneurs’ decision to relocate? Unsurprisingly, the answer is: it depends.

Many UK based families are reviewing their place of residence. Some will inevitably stay and others will go. However, the decision really depends on the family’s unique circumstances and their personal goals and objectives. A family business may be the goose laying the golden eggs, yet fundamentally, there will be a number of factors that will decide its fate.

Many of today’s ultra-wealth holders are tech-savvy, internationally mobile individuals, shaped by a transparent world that stress tests their complex arrangements and poses many regulatory and compliance challenges. Their advisers are therefore faced with the delicate task of balancing all different aspects of heart and intellect, whilst cautiously helping families reach a balance and maintain focus on the bigger picture—it is not easy.

Aspects such as tax-efficiency coupled with a sound and stable socio-political environment and the ability to enforce the rule of law might be enough for some, while more personal matters such as safety, lifestyle and religion, cultural and linguistic matters or better yet, proximity to home can be the decider for others.

There are always common features that families should consider prior to relocating themselves, their structures or the family business to another jurisdiction, such as asset security, legal framework and quality of the banking system. The availability of good advisers is very important as is the overall regulatory environment and whether the jurisdictions being considered are business friendly. For example, for many of our clients, the ease of maintaining their employees, straightforward compliance and regulatory requirements as well as time zones can be paramount.

The considerations differ for each family, yet somehow, the best advice in making such decision is perhaps asking clients to think twice. If they wish to relocate, does their business or family office need to be located in the same jurisdiction? Once again, the answer will likely be “it depends”. Although this can be very practical from a communication point of view, it is often not the best choice when examined from a wealth preservation perspective.

Where should the family move to? Is it still in Europe? If so, there could still be considerable uncertainty surrounding the political arena. Perhaps the US where the new populist regime is promising lower tax charges has attractions, but what are the downsides? And if a family goes through the burden of relocating, will they actually commit to staying?

Knowledgeable advisers who are experienced in the technicalities of dealing with ultra-wealthy families, combined with a sound family governance framework, can help the family make these often complex and difficult decisions more rationally and understand the impact on their lives and business.

The views expressed are those of the author and not necessarily those of Knox Private Office. The author, and Knox Private Office, cannot be held liable for any action, or inaction, based on the contents of this article.

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