Wealth preservation rather than fiscal planning

With the advent of global initiatives on tax transparency including Group of Twenty and FATF and the ever growing network of tax information exchange agreements and double taxation treaties, it is no longer possible to avoid tax on a global scale.  Whilst tax mitigation remains important, families are focused more than ever on long term, tax compliant wealth preservation and cross generational planning. 

Previously, family offices were viewed much more as independent investment platforms for clients who wanted to keep control of the general strategy and have funds invested across a number of different financial service providers but through a centralised mechanism whereby they could structure daily oversight.  Rather than having individually to analyse the performance of each bank/financial institution, a team of investment experts employed by a family office can co-ordinate oversight.  

The general perception is that, rather than focusing on return on investments, clients are more aware of external factors which will impact their wealth in the long term.  From a Swiss perspective they are aware of attacks on secrecy and in particular monitoring various developments.  These include such as the UK-Swiss Confederation Tax Cooperation agreement, the proposed (but recently rejected) so called relaxation of Swiss banking secrecy rules to allow certain disclosures to the Internal Revenue Service in relation to US tax planning advice given within Switzerland to US connected persons looming on the horizon, the possibility (or perhaps probability) of the introduction of all crimes money laundering legislation. 

Family office service providers in Geneva have noticed that clients are looking in particular for transparency in relation to fees, tax compliant solutions, and most importantly, high levels of confidentiality and security.  Even if banking secrecy itself may be eroded, protection of information is vital in terms of personal security.

Traditionally, clients have looked to Geneva and the Swiss market as a safe haven both in terms of political stability, tax neutrality and protection of information. Clients who are resident in jurisdictions where personal security is an issue, such as parts of Latin America, need to be reassured that their information is secure.  Recent leak scandals have been one of the factors which have encourage clients to look at the solutions offered by single family offices or smaller multi family offices so that they retain greater control.

From an investment perspective, the perception is that, since the 2008/9 global financial crisis, high net worth clients are happier to invest in what they know. Where the family business has been sold, funds are often used for substantial private equity investments in industries with which families are already familiar.  Alongside the change in investment trends,  a far greater emphasis is being placed on risk management with more and more being spent each year by family offices on due diligence.   One family office in Geneva estimated that up to 60% of its annual outgoings is being spent on commissioning due diligence reports for new investments. Family offices in Switzerland are seeing an increasing emphasis on the importance of real estate with some setting up specialised real estate teams. Artwork and other tangible assets are also increasingly popular as families shy away from certain traditional investments. 

Interest in commodities investments has also led to a broadening of a geographical scope in terms of investment strategies. Feedback from people involved locally in formulating investment strategies for multi-family office clients shows that when looking at private equity or seed capital type investments, clients are looking for solid management, good financials, a good “story”, niche/original ideas, a market which is not over-flooded and relatively low barriers to entry.