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Hand Picking the Family Office Location to Match the Family’s Primary Needs and Interests Ian Slack, Director, Bedell Family Office Family Office Forum,

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Presentation on theme: "Hand Picking the Family Office Location to Match the Family’s Primary Needs and Interests Ian Slack, Director, Bedell Family Office Family Office Forum,"— Presentation transcript:

1 Hand Picking the Family Office Location to Match the Family’s Primary Needs and Interests Ian Slack, Director, Bedell Family Office Family Office Forum, Zurich Wednesday 12 November 2014

2 Introduction Family Office Locations Tax Implications Staff Practical Matters Stable Legal and Political System Family Office Regulation and Legal Structures Case Study : Jersey

3 Family Office Locations In the past, wealthy families have tended to set up their family offices in their home jurisdiction. Nowadays high net worth families have a more global outlook. Family members from different generations of the family often based in various locations across the world. Families are therefore establishing their family office in a select number of global hubs or offshore locations. There are several factors that upon which these decisions are based.

4 Tax Implications Does the office need to be on shore or offshore? The answer will filter out a large number of possible locations. A holistic, global approach to tax management can help the family preserve capital and enhance income for the family. This needs to be balanced with the availability of the right expertise. This may lead to an onshore investment advisory arm of an offshore family office with an appropriate market rate investment management fee paid.

5 Staff In practice, recruiting and retaining the best professionals is one of the primary issues for family offices. Family offices are often established by long-standing trusted advisors of the family principal. It is sometimes these advisors’ home location that will determine where the family office is established with structures put in place to make the running of the office tax efficient. The nature of the family office may impact on the types of professional required.

6 Staff We see a number of types of family offices from investment centric family investment offices to offices that are focussed on succession where trustee and legal expertise is required. Staff in a family investment office will often need to be based in or close to one of the world’s main financial centres such as London, or New York where they can network with top investment experts.

7 Practical Matters The family will want to maintain a close relationship with the family office staff in order to retain control over their assets. The best way to do this is through regular calls and face to face meetings. We spend much of our working day speaking with our clients – this is only practical as we tend to be within similar time zones and use the same common language. If there is a family business, the family office’s involvement and the location of the management of that family business will also need to be factored in. Any family office needs to be based in a jurisdiction with good communication links, great infrastructure (including banking facilities), accounting, tax, legal as well as other specialist professionals.

8 Stable Legal & Political System This is particularly relevant if ownership structures are going to be based in the family office jurisdiction. In certain cases this may drive the family office location to being outside the jurisdiction where the wealth has been earned – particularly relevant for certain families from emerging markets. Likewise, some of these families may have privacy and security concerns about having their wealth managed in their home jurisdiction. A stable legal system would seem to be a given for most Western European and North American jurisdictions.

9 Stable Legal & Political System However, there is a constant array of new tax and regulatory standards that the US, EU, OECD, other countries and international bodies are implementing. Latest being a move towards global exchange of information along US FATCA lines. This puts pressure on banking secrecy jurisdictions such as Switzerland and Austria. Therefore important to look at how the jurisdiction is viewed by the OECD, EU and other tax and regulatory bodies to assess the long term sustainability of the current financial regime.

10 Family Office Regulation & Legal Structures When setting up a single family office, it should be possible to find a suitable jurisdiction where there is no or little regulation and therefore no regulatory cost to the family, and indeed this is part of their attraction. However, specialist advice on this point will be required early on as governments try to regulate more financial activities post the credit crunch. The Dodd-Frank Act in the US, for example, increased reporting requirements for private advisors and created additional reporting burdens for many single family offices. Multi-family offices operating as a business will generally need to be regulated wherever they are based.

11 Family Office Regulation & Legal Structures The legal structure used to run the family office and employ staff will also be important to share ownership and control among family members, limit liability and create a tax effective structure e.g. to allow the family to obtain a tax deduction for the cost of running the office. This might be a partnership, limited liability company or an S corporation in the US. It may also be worthwhile looking at a Private Trust Company (which can assist with control over trust structures), or a Bahamas Executive Entity.

12 Case Study: Jersey Tax Jersey charges 0% income tax on companies (with exceptions for regulated and infrastructure businesses) and 20% income tax on local individuals. 5% Goods and Services Tax (GST). Typically, the majority of structures for non-residents are exempt from GST. It does not charge capital gains taxes, wealth taxes or inheritance/death taxes. In addition, foreign owned companies generally pay tax at 0%. Despite these relatively low taxes, Jersey has no national debt.

13 Case Study: Jersey Practical Matters 12,400 professionally trained staff working in the finance industry (out of a total population of 99,000). 25% of all employees in Jersey work in the finance industry. There are a total of 900 regulated trust companies in Jersey.

14 Case Study: Jersey Practical Matters Jersey is in the same time zone as the UK and is just 1 hour from London with 10 flights per day. English is the main language and pounds sterling is the currency. It has an exceptional financial infrastructure for its size. All major accountancy firms represented including - 5 first tier legal practices, 42 international banks (all listed within the top global 500) and over £150 billion in deposits and employing 4,850 staff. Fibre optic telephony system with the fastest fixed and mobile infrastructure in Europe.

15 Case Study: Jersey Legal and political system Jersey is not part of the UK despite its allegiance to the British Crown. It has its own democratically elected government and decides on its own tax laws. This independence and political stability has been preserved via charter and convention since 1204AD. Jersey operates its own well respected judicial system based on common law principles. Jersey has demonstrated its ability to adopt to tax transparency and regulatory best practice in the past (provided there is a level playing field).

16 Case Study: Jersey Legal and political system (continued) As an international finance centre Jersey:- – was the first centre to be placed on the OECD tax white list – is the top rated offshore centre in the Global Financial Centres – is rated as one of the best international financial centres globally by the IMF Jersey signed a FATCA inter-government agreement (IGA) with the US in December 2013.

17 Case Study: Jersey Regulation and legal structures Single family offices can generally ensure that they are not regulated in Jersey. However, the regulation for investment business, and trust and company business is well established and understood, and provides a best practice framework. Some families may want to opt into in order to give them greater comfort over the protection of their assets. Legal structures include trusts, foundations, limited liability companies (including protected cell companies), and limited partnerships.

18 Case Study: Jersey Regulation and legal structures (continued) Jersey’s trust law was established in 1984 and is seen as the best established and reliable among the competing jurisdictions. It is copied by many other jurisdictions looking to write trust legislation. Combined with 50 years of private wealth management experience, Jersey is regularly used by wealthy families for asset protection, estate planning, family governance. UK resident non domiciled individuals also use Jersey to manage their tax affairs in the UK.

19 Case Study: Jersey Conclusion Offers tax neutrality, political and legal stability and an array of ownership structures. This is combined with excellent infrastructure and a well trained workforce who are highly experienced in wealth management. It is therefore not surprising that there are a growing number of single and multi-family offices setting up in Jersey. This has been helped by an increasing number of international families moving to London and using Jersey as a convenient jurisdiction for their asset ownership structures. It makes sense in this case to base the family office in Jersey to manage the assets (in accordance with the family’s wishes) and outsource investment management requirements to specialists in London.

20 Bedell: Awards & Accolades Best Fund Administration Team of the Year – Investment Week Fund Services Awards 2014 Best Multi Family Office - Wealth Adviser Awards 2014 Top 25 Most Admired Companies - Private Client Practitioner 2012, 2013, 2014 Winner Offshore Law Firm of the Year - Chambers Europe Excellence Awards 2014 Winner - Offshore Law firm of the Year – Legal 500 UK Awards 2013 Legal and Fiduciary Services Provider of the Year - M&A International Global Awards 2013 Winner International Law Firm of the Year - Citywealth Magic Circle Awards 2013 Offshore Law Firm of the Year - Bedell Cristin Guernsey - UK Captive Service Awards 2013, 2014 Legal and Fiduciary Services Provider of the Year - Offshore - M&A International Global Awards 2013

21 Ian Slack Director, Family Office Email: ian.slack@bedellgroup.com Tel: 00 44 1534 814 672 Fax: 00 44 1534 814 815 www.bedellgroup.com


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