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Independent trust services a boon for the wealthy
INDEPENDENT, bespoke service is highly prized in the area of wealth structuring. This is particularly so as Asia's wealthy gear up for the complex, often thorny challenge of handing over wealth from one generation to the next. Yet independent service may not be easily on tap, even in a highly competitive market such as Singapore, where wealthy individuals may be served by as many as three or four private banks.
Enter Butterfield Trust, the trust services arm of The Bank of N.T. Butterfield & Son Limited, Bermuda's oldest and largest independent financial institution set up in 1858. Butterfield is listed on the New York and Bermuda stock exchanges.
Butterfield Trust is a specialist in the establishment and administration of fiduciary structures for clients for more than 80 years. Thanks to a network of independent companies in Bermuda, The Bahamas, Cayman Islands, Guernsey, New Zealand, Singapore and Switzerland, it offers clients a choice of jurisdictions to suit their needs. Butterfield Trust has responsibility for assets of over US$105.5 billion and employs more than 300 professionals.
The firm has won recognition for the quality of its services. In November this year the Society of Trust and Estate Practitioners (STEP) named Butterfield Trust as the Trust Company of the Year (Large Firm) in the STEP Private Client Awards in London. In announcing the award, STEP said: "Butterfield Trust's entry demonstrated integrity and an impressive global reach, which has been strengthened by important, high-quality acquisitions that confirm their commitment to excellence in this space."
Brian Balleine, Butterfield regional head for Asia, says Butterfield's success is largely because it offers clients a balance between the backing of a financial institution and the independence associated with smaller, pure-play firms. "We feel we offer the best of both worlds. When I look at the landscape of trust services, on one end you have large banks which offer trust services for the assets they manage. And, you have smaller independent firms which provide less conflicted solutions. While we're a trustee with a strong financial bank, we're independent of banking, which is fairly unique."
On Butterfield partnering with appointed advisers, Mr Balleine added, "We will work with them in tandem to ensure that any structures under administration are both compliant and administered in such a way as to discharge our fiduciary responsibilities, particularly with structures holding a variety of financial and non-financial assets internationally and with beneficiaries who increasingly may reside around the globe."
Butterfield has been working with clients in Asia for over three decades. Most recently it acquired Deutsche Bank's Global Trust Solutions which had operations in the Cayman Islands, Switzerland, Guernsey, Singapore and Mauritius. The acquisition was completed earlier this year. Asia assets comprise about 20 per cent of Butterfield Trust's total assets under administration.
Mr Balleine said the acquisition of Deutsche Bank's GTS handed the firm an "immediate opportunity in Singapore". The permanent presence now allows easier access for clients based in Asia; and staff strength in Singapore has increased from 13 to 18, with the capacity to grow.
The firm's expansion has come none too soon. Experts say Asia is at the cusp of one of the world's largest transfers of wealth estimated at more than US$3 trillion over the next decade. Yet some studies show that less than a third of high net worth families in Asia have established a plan for wealth transfer and succession.
In addition, the burden of compliance and disclosure grows heavy, as jurisdictions including Singapore implement anti-money laundering and anti-tax crime rules which involve a new disclosure framework. Singapore has agreed to implement the Common Reporting Standard (CRS) endorsed by the OECD, which allows for automatic exchange of financial account information between jurisdictions for tax purposes.
To be sure, for families with far-flung assets, and children and grandchildren living in various jurisdictions, there is no substitute for good and careful wealth structuring.
Said Mr Balleine: "The motivation to structure assets was never around evading tax, but there was a concern about privacy and security. That often led people to create offshore structures. The challenge now is to be compliant. Offshore structures have to be properly advised."
Company and trust structures set up to protect the family from various risks - including political and personal risks such as divorce - must be revisited to ensure they keep pace with any changes in regulations, he says. "Even if families take legal advice when they establish structures, I'm always concerned that they don't have the advice refreshed. To what extent do structures change to meet a change in the rules? Families should retain advisers, or they may get a horrible surprise."
He says the issues that confront families seeking to craft a plan to ensure a smooth transfer of wealth are broadly similar regardless of geography. "Succession planning is the common theme for many clients, as well as addressing the reporting responsibilities under the new directives. The dynamics around a family business pose significant challenges. How do you keep the shareholding together instead of fragmenting it? Another dynamic is the next generation who are educated overseas. They may be more sophisticated and are likely to demand more complex solutions."
It may also not be unusual to find that in Singapore's multi-banked wealth environment, clients may find themselves with multiple trusts - each set up with the respective bank with which they have an account. Mr Balleine believes there are benefits to consolidating the trusts under a single oversight. "What clients should have is an independent party acting as trustee for all the trusts. This reduces costs."