This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

This article was published in ALM’s The Month – Luxury Assets Magazine – May 2023

The indications are that wealthy families continue to hold some form of luxury asset within their investment portfolios. Such assets make up some 5% of investable wealth on average – that’s the same proportion as gold and crypto assets combined (Knight Frank Wealth Report 2023).

And possibly with good reason – the latest Knight Frank Luxury Investment Index rose by a healthy 16% during 2022, beating inflation and outperforming most mainstream investment classes. Art was the top performer, growing by 29%, according to the Index, with classic cars rising 25%.

There is, however, some differential within the sector – wine grew 10% (down from 16% the previous year), while whisky was up just 3%.

Often for families, returns when it comes to luxury assts are not necessarily the be all and end all – they are ultimately investments of passion, sentiment, interest and lifestyle. Yachts and private planes, for instance, may meet the lifestyle requirements of a family, but they are notoriously expensive assets to hold, depreciating in value and delivering very little, if any, income return.

But when do non-income generating luxury assets become a problem for the family strategy more widely – particularly with total UHNWI wealth having been eroded by some 10% last year against challenging and high inflation versus previous years market conditions (Knight Frank), and with the nextgen continuing to take more of an interest in driving family portfolios?

Fresh Look

With almost a third of wealthy private investors targeting capital growth this year (Knight Frank), the role of luxury assets within a portfolio may well become part of the conversations between advisers and their clients in the coming months, as they take a fresh look at how hard their investments are working and how they could be put to work harder to generate returns.

Crucial in this scenario is looking at where luxury assets sit within the wider portfolio and the family’s wealth strategy holistically. Often, of course, family wealth creators are emotionally tied to their luxury assets and may well consider them to be part of their family legacy. At the same time, though, those assets may well be at odds with the shifting priorities and values of the increasingly influential nextgen.

In any situation, of course, a family will want to avoid the potential for future disputes – and advisers have a crucial role to play in putting in place measures from the outset that can reduce that risk.

At the heart of this is good governance. Advisers with a focus on nurturing close, positive relationships with their clients are best placed to deliver on that. By understanding their clients, bringing all stakeholders to the table, advisers can establish clearly what a family’s fundamental values are and what its shared vision is.

Is there, for example, a mismatch between what a family says its core values are, and what is reflected through its existing portfolio allocation and the luxury assets within it? Does it ‘fit’?

Equally, deep conversations with an adviser can reveal whether there is a concentration risk when it comes to luxury assets, which often have high or fluctuating valuations. One piece of art can significantly shift in value, up or down, for instance, and make a considerable impact on the total wealth valuation – which in turn could impact its risk profile. An adviser can in this instance guide a family as to whether there is a need to think about diversifying to meet its overall wealth objectives.

Indeed, when it comes to luxury assets, families should see it as an opportunity to make sure they have robust, independent, good quality legal and advisory frameworks in place to avoid current and future intergenerational disputes.

All this can subsequently be documented through the family charter, investment strategy, letters of wishes and other documentation, providing a clear framework that should help guide them in an area that is so easily impacted by individual sentimental and emotional preferences.

Practicalities

Balancing the growth, purpose and legacy objectives can be a tricky task but, with a foundation of good governance and sound documentation, there is still undoubtedly a place for luxury assets within a wider portfolio.

There are some practicalities, though, that can help ensure such assets are properly managed and structured.

First and foremost, luxury assets frequently require specialist expertise if they are to be managed effectively. That might mean, for instance, getting specialist insurance advice where family art may be moved across borders, or drawing on yacht management services to administer crew and ensure adequate marine insurance is in place. Bringing in the right expertise early can dramatically reduce risk in the long run.

Taking a view on a family’s structures and whether they offer enough, or too much, flexibility in terms of holding assets is another practical point that should be addressed.

Luxury assets are often acquired to be enjoyed by a family – art, jewellery, or vintage cars for example. Others, such as fine wine or whisky, may form part of a collection. Whatever the approach, choosing the right structure is an important factor in achieving the desired and proportionate flexibility – protecting the assets while allowing a family to enjoy those assets too.

Ownership is a key question too when it comes to structuring luxury assets – regrettably there can be instances where question marks over ownership of an asset can lead to inter-family disputes. The case of Robert Tibbles, a collector of contemporary art, and one of his pieces of artwork, a Damien Hirst painting entitled ‘Beautiful tropical, jungle painting (with pink snot)’, is a case in point. Robert’s father, Nigel, and twin brother, Sebastian, sued him over ownership of the piece when it was sold, leading to an unfortunate and bitter family dispute – clear structuring played a key part in resolving that case.

In addition, if structured appropriately, it may well be possible for non-income generating luxury assets such as art to be used as leverage to generate capital liquidity – thereby meeting the needs of both the wealth creator and the nextgen, without directly impacting the asset itself.

Evolution

As families look to a new era of investment, shaped by the need to balance their own growth ambitions with the desire for purpose-driven investment and a need to integrate the values of the nextgen, advisers have a responsibility to ensure luxury assets are managed and structured appropriately as part of a family’s holistic wealth management strategy.

Really understanding the needs and ambitions of a family as a whole by cultivating a close relationship with them is critical in establishing a robust governance framework that can cater for the appetite to hold luxury assets on the one hand with the need to generate returns on the other. By taking a number of practical steps -from establishing good oversight models and structuring to seeking specialist expertise where needed – luxury assets can continue to provide both the family enjoyment and legacy they promise, and play a role as part of a wider investment portfolio.

Elisabeth Philippe, Senior Manager, and Elliott Carlow, Manager, both won silver awards in the Citywealth Future Leaders Awards 2022, in the ‘Trustee of the Year – Manager’ and ‘Accountant of the Year’ categories respectively.

The Awards were announced at an event in London last week, with winners being selected through a combination of online voting and an independent panel of professionals in the private wealth management sector.

Now in their seventh year, the Awards are designed to identify young professionals from right across the international wealth sector who make in impact in their profession and in the industry and contribute positively to the communities where they work.

It is the third successive year that Elisabeth has been nominated in the Awards. She has over 16 years’ experience in the finance industry providing private client services to HNW and UHNWIs and family offices and has been involved in the establishment and administration of a variety of trust and private wealth management structures across multiple jurisdictions including Jersey, the US, BVI and Cayman. Elisabeth is ACCA qualified.

Meanwhile, Elliott, who has been nominated for the Awards for two consecutive years, has over 16 years’ experience in the offshore financial services industry, spent in Cayman and Jersey, working across private equity, real estate, mezzanine debt, Shari’a compliant instruments and listed equities and securities. He is a Chartered Certified Accountant.

Commenting on the Awards, Heather Tibbo, Co-Group Head of Family Office Services at Crestbridge, said: “Crestbridge Family Office Services has a really strong commitment to nurturing young talent and supporting our people throughout their professional journey, and that is reflected through these award wins. I’m really pleased for Elisabeth and Elliott, who both make such a significant contribution to our team and the business more widely, and who are incredibly appreciated by clients.”

Elisabeth Philippe, Senior Manager, and Elliott Carlow, Manager, both won silver awards in the Citywealth Future Leaders Awards 2022, in the ‘Trustee of the Year – Manager’ and ‘Accountant of the Year’ categories respectively.

The Awards were announced at an event in London last week, with winners being selected through a combination of online voting and an independent panel of professionals in the private wealth management sector.

Now in their seventh year, the Awards are designed to identify young professionals from right across the international wealth sector who make in impact in their profession and in the industry and contribute positively to the communities where they work.

It is the third successive year that Elisabeth has been nominated in the Awards. She has over 16 years’ experience in the finance industry providing private client services to HNW and UHNWIs and family offices and has been involved in the establishment and administration of a variety of trust and private wealth management structures across multiple jurisdictions including Jersey, the US, BVI and Cayman. Elisabeth is ACCA qualified.

Meanwhile, Elliott, who has been nominated for the Awards for two consecutive years, has over 16 years’ experience in the offshore financial services industry, spent in Cayman and Jersey, working across private equity, real estate, mezzanine debt, Shari’a compliant instruments and listed equities and securities. He is a Chartered Certified Accountant.

Commenting on the Awards, Heather Tibbo, Co-Group Head of Family Office Services at Crestbridge, said: “Crestbridge Family Office Services has a really strong commitment to nurturing young talent and supporting our people throughout their professional journey, and that is reflected through these award wins. I’m really pleased for Elisabeth and Elliott, who both make such a significant contribution to our team and the business more widely, and who are incredibly appreciated by clients.”