From as early as the nineteenth century, family offices evolved from the Ultra High Net Worth (UHNW) family (the Rockefellers’ and JP Morgan’s to the modern day Oprah Winfrey and Donald Trump) seeking a single office offering full time management of their personal wealth, administrative and life style services, known as the single family office. This later developed into multi-family offices tasked with the management of several High Net Worth (HNW) families under one roof. Today there exists single, multiple and hybrid family offices each tailored to suit the family’s financial needs and lifestyle changes.
Why the shift to family offices notwithstanding of the growing number of international wealth management firms?
There are quite a number of reasons, however to name a few; consideration should be given to the level of privacy and confidentiality available in a family office, the centralization of services and the resulting cost reduction through the consolidation of information by achieving a full balance sheet of investment management and financial solutions in one. Family offices now offer more comprehensive services, among which are wealth and investment advisory services, estate planning, tax and compliance advisory, portfolio management, philanthropy services, and inheritance and wealth transfer services, coupled with personalized services such as family member financial education, family support services and governance (which includes the day to day administration of the family’s affairs).
According to Rishi Yadav, a Senior Consultant with the Market Intelligence team in Capgemini Financial Services, ‘The Global State of Family Offices’, 2012, “the number of family offices in the U.S. has grown to about 3,000 single-family offices, with assets under management between $1 trillion and $1.2 trillion. There are also about 150 multi-family offices having assets under management between $400 billion to $450 billion.”
The growth of multi-family offices was moderated as a result of The Eurozone Crisis and the increased demands on the regulatory environment in the USA, contributed to by the passing of the Dodd Frank Act, multiple- family offices faced challenges to either register with the Securities Exchange Commission or convert themselves into single-family offices.
Of note, Latin American and Asia Pacific regions have seen an increased growth of single and multi-family offices over the past 10 years. This is in part due to the rising wealth in Asia and Latin America. Based on report by the Family Offices Group, “Latin American Family Offices” (August 2015), Latin American economies have seen increased growth leading to foreign investment which resulted in increased wealth. Wealthy families thereby required management of their wealth though family offices. “As Latin American economies continue to grow, so will the demand for qualified family offices to serve the needs of the wealthy in these countries.“
More than before, families are increasingly located in various jurisdictions. As a result family offices are now required to manage assets in foreign jurisdictions and have a need to rely on local service providers, investment, tax and legal advisors.
Jurisdictions such as Barbados, are prime to participate in this emergence and growth, currently hosting numerous asset managers, trust service providers, corporate service providers, private banks, highly skilled and experienced legal and tax advisors and risk managers who together make it more advantageous than not for the advent of family offices.
Barbados has placed itself above other jurisdictions, by the implementation of modern trusts, corporate and anti-money laundering legislation, which offers a sound regulatory environment, favourable geographical location, stable political and economic environment and the lure of prime real estate. Barbados has also implemented alternative tax solutions by its extensive treaty network (implementation of Double Taxation Agreements (DTAs) with 32 countries to date and Bilateral Investment Treaties (BITs), counting 16 as at September 2015, as well as Tax Information Exchange Agreements (TIEAS).
So where do we go from here? It is suggested that the Ultra High Net-Worth Family, the High Net-Worth Family and/or the existing family office seeking to utilize the expertise of local service providers may form partnerships or may opt to set up a single, multi or hybrid family office in Barbados.
Regard should be given to the emerging Latin American markets which Barbados has already begun an international business relationship though its extensive treaty network, and taking into consideration the geographical proximity and the rise of the financial elite.
Karen A. Perreira InterCaribbean Legal