Structuring for complex family needs: Act globally, think locally
It’s important to understand all capital has an impact, and to look at value through a wider lens
ULTRA high-net-worth individuals (UHNWIs) have increasingly cross-border needs, yet still require the kind of service offered by a single family office. Only a wealth manager that operates globally and can think locally is able to meet such requirements.
Imagine you are a Hong Kong resident with British citizenship. Your two children work in the family real estate business and live in London under the non-UK domicile regime. Your daughter is about to get married to a US citizen and is planning to live in Los Angeles, while you are considering setting up a family office in Singapore.
Who do you trust to not only effectively manage your investment assets, but also efficiently structure your holdings in different tax jurisdictions? Add to this the creation of a hybrid family office for you and future generations. And, the local knowledge in different countries, as well as expertise across investment asset classes.
It is a tall order for most wealth managers, but that is increasingly what many UHNWIs want. One of the many legacies of Covid-19 – alongside a growing concern regarding the impacts of climate change – has been an increased desire for mobility. A large proportion of UHNWIs are hedging their bets to provide their families with safety and certainty.
There is also a shift in their time horizons, with many now looking for medium-term solutions – places where they may want to spend several months a year, that also offer access to good healthcare and education.
According to HSBC’s 2024 Global Entrepreneurial Wealth report, nearly half of the UHNW entrepreneurs surveyed have families that live in more than one country, and three-quarters conduct business in markets outside their domestic borders.
Beyond short- to medium-term needs, plans for retirement will also play a role in the choices of UNHWIs, as will transferring wealth to the next generation. The largest wealth transfer in history is underway in the US, with an estimated US$84 trillion shifting from baby boomers to their heirs by 2045. This can be complicated in any circumstances, but when individuals with different nationalities and tax residencies are involved, it is even more so.
This shift has implications for how money is invested. Younger generations in particular seem to take to heart the idea that great wealth brings both opportunity and responsibility, resulting in increased interest in sustainable and impact investments.
At the same time, UHNWIs are defying the trend towards deglobalisation by diversifying their investments further, worldwide and across asset classes. There is an explosion in demand for alternatives, as capital holders seek opportunities beyond traditional markets. Aside from their personal circumstances, they are considering the impact of a host of economic issues, such as continued high interest rates and inflation, as well as market and political instability.
Local needs, global views
Global lives and global portfolios mean UHNWIs need a wealth manager that understands their increasingly broad and complex set of needs.
We are finding that local knowledge is a key influence on the choice of institution for these geographically dispersed international families.
Firms must appreciate the impact of a broad range of global measures, such as the UK’s changes to “non-dom” status; Canada’s short-term ban on foreign nationals buying residential property; the new mansion tax in Los Angeles; tighter real estate lending rules in Singapore; higher fees for foreign property buyers in Australia, Italy and Spain’s relatively new wealth taxes for non-residents; and the continued use of – albeit increasing controversy over – investor citizenship schemes.
And knowing that some countries, such as Australia, Singapore, Canada and Greece, are seeing net inflows of UHNWIs – while the UK, Russia, China and India are seeing high outflows – can help wealth managers understand which markets may be of most interest to clients.
While this might seem to favour large global wealth managers, UHNWIs still prefer the personal touch of smaller firms that are able to deliver bespoke, localised solutions that offer clarity and simplicity and are tailored precisely to their needs.
Clients want their advisers to be able to do more for them, rather than having to go to many different places for different specialisations. This desire for a more holistic approach is growing in wealth management, as well as other specialties such as law and accounting.
Trust in advisers is vital, especially during this time of increased intergenerational wealth transfer and growing desire for firms that consider impact when it comes to the investment opportunities they offer. Emerging technologies such as generative AI will become critical in how firms manage client engagement – however, they cannot replace the human touch.
According to a Capgemini report, nearly half of HNWIs surveyed said they are dissatisfied with the digital touchpoints offered by wealth managers, pointing to the need for a continued hands-on approach.
We have also seen that larger wealth managers, often banks, are extremely siloed and teams do not work across borders or share profit and loss statements – effectively operating as separate businesses.
World-class and trailblazing investments
A true multi-family office needs to offer global reach and access – an international ecosystem with an experienced network of specialist client advisers, such as lawyers, tax advisers and professional fiduciaries – while still providing continuity of service regardless of where clients start the relationship.
For a successful firm in this space, it is not just about where its clients and offices reside. It needs to offer access to institutional-grade, global investment opportunities, including innovative and differentiated alternatives, from cutting-edge sectors to tangible, regenerative real assets.
It is also necessary to understand that all capital has an impact, and to look at value through a wider lens – returns are just the baseline. Firms must combine a strong impact team with the investment power of its client base to mobilise capital for impact on an individual and collective scale.
These discussions tell us that the goals of UHNWIs and the challenges they face are almost universal, regardless of their location or jurisdiction. It is just that the financial regulations are different.
Success – for wealth management firms and for clients – stems not only from the ability to offer global reach and access, but also a bespoke service that is based, above all, on trust and understanding.
Kevin Moran is president and COO, AlTi Tiedemann Global; Leonardo Drago is head of investments, AlTi Tiedemann Global Singapore
