By: Stonehage Fleming Financial Services
The services of financial advisers and family offices should not be regarded as mutually exclusive. On the contrary, South African ultra-high net worth (UHNW) clients may benefit greatly from collaborations that align both domestic and global servicing opportunities, while encompassing their inter-generational footprint. This sentiment was reinforced by independent, multi-family office, Stonehage Fleming, at their recent adviser event on intergenerational wealth transfer.
While family offices generally have in-house capabilities in specialist areas such as law, fiduciary and investments, relationships with third parties may be seen as a conflict of interest in the eyes of advisers. Quite the opposite, says Layve Rabinowitz, Partner in the Family Office division in South Africa. A family office’s key driver is to offer the rightadvice pertaining to its client’s unique situation. Due to the nature of their UHNW families, who typically live and own assets across multiple jurisdictions, the help of a number of external specialists may be required to tailor the right solution.
In order to make the most of the opportunities arising from collaboration, Rabinowitz says that advisers should expand their focus to develop solutions tailored to meet the needs of the entire family. Such solutions must facilitate passing wealth down to children and beneficiaries as tax efficiently as possible.
Due to the high level of economic and political uncertainty and volatility in South Africa, the typical picture of intergenerational wealth transfer does not reflect international, first world trends. One distinctive characteristic is the shortened life cycle of the family business, where it is uncommon for business owners to keep their wealth tied up in the family business across multiple generations. Rather than pass down the leadership baton to their children, heads of family look to reduce their local asset exposure through the timely selling-off of their family owned businesses in favour of offshore diversification.
In the above scenario, there are two key areas in which a family office with an international capability can assist local advisers to offer clients a holistic and seamless global service.
Offshore Capability, Local Presence
Due to the existing cost barriers to entry of setting up offshore infrastructure from South Africa, it makes sense to work with a local firm of critical mass size that has the required invested technology and resources to operate efficiently on a global scale.
For example, while local advisers might offer offshore investment services inhouse, it is unlikely that they would have an offshore fiduciary structure in place, which would mean outsourcing this service to more expensive international advisers. However, South African family offices with a global infrastructure are able to offer offshore fiduciary as an in-house service, reducing client costs and maintaining an important local touch point.
From an international standpoint, offshore advisers and banks dealing with South African residents may find it difficult to develop the same depth of relationship with clients as a family office, due to their lack of familiarity with the local landscape.
By joining up the pieces of the local and global service offering, global family offices can add value through synchronization, ensuring that no contradictions exist between the movement of funds and structuring of flows in and out of South Africa. In the situation where an adviser is already covering certain services within the chain of advice, a family office should have the capability to seamlessly fill in the gaps to ensure a smooth and efficient overall offering.
Rabinowitz concluded: “While we understand that a possible overlap of select services may cause advisors to approach family offices partnerships with caution, we maintain that collaboration opens up the possibilities for a far greater depth of global client service that can significantly benefit all parties in the long term.