Below are some examples of the opportunities and challenges we respond to on behalf of institutions that advise or support wealth owners and their families.
A UK family with substantial property holdings wanted to restructure their portfolio. They wanted lower financing-costs and a better distinction between short-term trading and long-term assets.
We advised on refinancing the core long-term portfolio, and setting up a new trading portfolio to hold short-term assets – in a way that mitigated the tax costs. The restructured portfolio was simpler to run, with lower finance and management costs.
A large family office that mainly held commercial properties wanted to create a more diverse portfolio. We restructured their portfolio to create a stand-alone commercial property portfolio that would be attractive to a REIT.
Eight months after the reorganisation we advised on the sale of the commercial portfolio to a REIT. Our client then used the proceeds to buy a diverse portfolio that should deliver returns for current and future generations.
A lot of property portfolios develop in an unstructured and ad hoc way. Simplifying the structure usually requires significant commercial and tax input.Elizabeth Bradley, Partner - Head of Tax
With property portfolios a family office will often carry out significant administrative functions, but it should also keep an eye on the bigger picture.David Battiscombe, Consultant - Real Estate
A substantial family office wanted to allow third party investors to invest in their portfolio.
We advised on restructuring the portfolio to create an open-ended investment company (OEIC) which could accept non-family investors' funds. The OEIC had a more formalised investment management process and more research resources - and the buying power to access institutional-investment assets. The end result was a better managed, more tax efficient portfolio with lower overall costs.
A wealthy family were concerned that their large holding in a single listed company exposed them to investment risk. They wanted to manage that risk and raise money to build a more diverse portfolio.
We advised on implementing a put-and-call hedging strategy that restricted the upper and lower value of the stock. The family were then able to raise funds against the shares tax-efficiently, and invest into a diversified portfolio.
A family office with a large investment portfolio wanted to diversify into property.
We advised on a substantial investment into a property-development company. We negotiated procedures that would make sure the family had access to all relevant information, and a say in key commercial decisions.
If family wealth is being invested on a more institutional footing, the investment structure should reflect that.Georgina James, Partner - Private Client
The family office of a wealthy international family wanted help to resolve a bitter family dispute.
Two brothers had built up the family’s wealth over many years with little thought to who owned what. When one brother died an argument broke out over how to divide the profits from a valuable property investment. With the family office, we helped the family through a mediation that resolved the issue. We then advised the family office on restructuring the family investments, to make the two branches of the family financially independent.
A family office that ran a private-equity portfolio for two wealthy families needed a solution to an investment-exit problem. The portfolio had been built up by the two patriarchs; when one died, his family wanted to sell.
There was no agreement about how one side could exit. After a long, difficult negotiation we arrived at a solution: some key assets would have to be sold in the short term, the rest would be gradually separated over time. All this could have been avoided if the partners had planned ahead.
Investing with your family is not always worth the risks.Graham Shear, Partner - Head of International - Litigation & Corporate Risk
Families argue over how wealth is shared and controlled. An effective family office needs a mechanism for preventing and resolving disputes.Rupert Ticehurst, Partner - Private Client
Our client, the head of a substantial family business, wanted to make sure that his family used his wealth according to his wishes. We arranged a series of family meetings to hear the family’s views on several points, including how to manage the succession of the family business.
The end result was a series of practical steps to take, and a family constitution that the family understood, and – given their involvement in it – was less likely to be challenged.
Our client wanted to leave the family business to family members who were involved in it – but make sure the wider family benefited from the profits and were involved in major decisions, like a sale of the business or key new investments.
We worked with her to involve the family in drawing up a family constitution. It set out who would run the business, how they would be rewarded, when and how they would involve the family in business decisions, and how the wider family would benefit from the profits.
A wealthy Eastern European entrepreneur was diagnosed with a terminal illness. He worried that without his guidance his young children might fritter away their inheritance or be conned out of it.
We set up a trust to hold his wealth after his death and drew up a governance statement that explained how his wealth should be managed and distributed. The documents set out how the trustees would work with the family: the aim was that control passed from the trustees to the children – with appropriate checks and balances – as they got older.
Our wealthy client had a family office which managed his property portfolio. Whilst the properties were well managed, the growing share portfolios, were not. He was concerned about the unnecessarily high investment-risk due to the portfolios being undiversified.
We helped the family office find and retain an independent investment-adviser to review the family’s assets, manage their investments, and provide consolidated reporting. The intention is that over time the family office will take on some of these functions. The end results were lower costs, better returns – and lower investment risk.
Our high profile client had valuable image rights — a person’s rights to their image and other unique characteristics — and was the subject of a number of defamatory articles in a newspaper’s online and print editions.
We issued a claim against the newspaper; they retracted the offending online statements and published a correction in print. This rapid, firm response should make other publications think twice before they publish anything derogatory about our client.
A multi-family office wanted to take on an ultra-high net worth family as a client but the family was concerned about data security. We, and data specialists we introduced, worked with the multi-family office to put the family’s minds at rest.
We found a three-part solution: a policy that defined how data would be held and used, specific online-security measures, and briefings to educate younger family members on the online risks that very wealthy people face.
Left to their own devices, many portfolios will become layered with overlapping risk and cost.Simon Phelps, Partner - Private Client
Most peoples’ online and social media profile is an asset. Its value can go up, and down.Graham Shear, Partner - Head of International - Litigation & Corporate Risk
We advised a wealthy family with substantial property and investment portfolios on setting up a family office.
First, we carefully defined the services that would be required immediately and in the longer term. Then we created a company which retained some advisers in house (investment, real estate, accounting, administration) and outsourced other advice and services (including tax, specialist investment and concierge). We drafted the relevant contracts, with a focus on confidentiality and service levels, and made sure the family office complied with its regulatory obligations.
A wealthy international family employed a long-standing adviser who acted as their family office. The family wanted to rethink this model and get access to more sophisticated services.
In the circumstances we advised that it would be better to use carefully selected external-advisers than set up a family-office structure. We introduced an independent investment adviser who would give advice but not make investments – so as to avoid conflicts of interest – and prepare financial reports. The family added an extra member of staff to deal with administration and liaise with advisers. The family now gets a higher level of service and six-monthly investment briefings.
The number of family offices worldwide continues to increase, with good reason.Georgina James, Partner - Private Client
“With property portfolios, a family office will often carry out significant administrative functions, but it should also keep an eye on the bigger picture.”David Battiscombe, Consultant - Real Estate