The decision makers of the world’s wealthiest families must be tired of hearing the word “trusted” followed by “adviser.” Everyone in the industry serving wealthy dynasties wants to be seen as such. But how do families decide which advisors to trust the most?
Traditionally, proximity has been an important factor. For centuries, wealthy European families relied on Swiss bankers. Even now, asset managers tend to cluster in centers that are popular with people in specific regions. Matt Farah, managing partner at Evelyn Partners International in Jersey, said the Cayman Islands remains popular with Americans. The Channel Islands are favorable to British allies. And Singapore is attracting strong forces from Asia.
But Falla says clients shouldn’t place too much emphasis on local or personal relationships. “Familiarity can create some awkwardness,” he says. “At the end of the day, our clients are not our friends.” If your family is thrilled when their advisor takes them out to a fancy lunch, he says, you’re probably looking at the wrong indicators. It suggests that there is.
For asset managers like Evelyn, investment performance is far more important than location. As Falla points out, it’s easy to travel to meet customers in person or hold meetings via video link.
Justin Markovitz, global chairman of law firm Wizards, prefers in-person meetings to address client needs. “Personally, I think it’s much better if I can meet my clients in person,” she says. “Both clients and advisors get more out of the meeting. Discussions generally cover more bases and allow for deeper consideration of relevant points.”
However, Markovitz believes that choosing an advisor should be based on the location of the family and its assets, not the location of the advisory firm.
She says families that have members in multiple jurisdictions, assets in other jurisdictions, and are mobile globally should seek out advisors who can understand the interactions between them. Point out that an increasing number of wealthy families want to diversify across borders. But families based in one place with simpler arrangements don’t need that level of support.
“They, their families, and their assets may all be within the same jurisdiction, in which case expertise outside of that jurisdiction may not be needed,” she explains.
This issue of diversification and advisor deployment certainly started to become a big problem for the Agha/Pudumjee family behind Thermax, a major engineering conglomerate headquartered in India.
Family offices were established in India in 1999, but as family wealth continues to grow and some spend more time outside India, there are serious discussions about where to keep their assets. It was done.
“The family business and the family wealth, everything was concentrated in India at that point,” recalls Yogiraj Nadgowda, who heads the recently established overseas, or “ex-India”, branch of the family office. The facility was first established in Dubai in 2016 and then moved to Singapore in 2018 in response to concerns that families were traveling too much to one country.
At that point, Dubai was emerging as a wealth management center in its own right, while Singapore became more attractive, offering incentives such as tax exemptions for the wealthy. It had also established an ecosystem that was beneficial to various service providers, including banks and fund managers, Nadgowda explains.
He said families should strive to establish a reliable asset management structure within the jurisdiction where family wealth resides, rather than focusing on the family’s domicile.
Both Nadgowda and Falla emphasize the importance of families considering what counseling services they should seek.
“We don’t want to be a small fish in a big pond,” Falla said. In short, families don’t want advisory teams managing much larger assets compared to their own, because they can’t get the attention they deserve. they deserve it.
Families with significant assets can avoid this problem by establishing a family office. This should reduce conflicts of interest and provide expertise in handling assets such as yachts, art and private jets alongside investments and real estate.
However, there are some caveats here as well. One of the most common mistakes families make is not starting with the right advisor, Markovitz says. She recommends families ask potential advisors honest questions to see if they have enough experience with their particular situation.
Falla added that another factor is regulation. Offices in apartment buildings tend to be regulated. Single family offices have less regulatory oversight, so clients should assess what protections are provided by their jurisdiction. “You need to make sure your money is there when you get back,” Falla warns.
