Daniel and Faizal discuss how Gulf based families are choosing to structure their wealth, and which of Jersey’s wealth management products they are choosing and why. Plus, Daniel shares key insights into working with Gulf based family offices and enterprises, and how he sees this developing.

Listen to the episode here: https://jsy.fi/3YoTciF

Held in London recently (24 September), the event – of which Crestbridge Family Office Services (FOS) was once again a sponsor – brought together more than 500 professionals from across the private wealth sector to explore the concept of a ‘Permacrisis’, from geopolitical upheaval to technological disruption.

Keynote speaker at the event was former diplomatic editor for Sky News and bestselling author Tim Marshall, who highlighted the emergence of a ‘multipolar world’, whilst a fireside chat with Claire Williams, one of the most successful women in Formula 1 history, focused on the need to identify opportunity in moments of significant change.

Across two panel sessions, other key points included:

• The world is currently experiencing a combination of the ends of economic, political and geopolitical cycles, which is creating significant complexity for families
• Being tuned into the wider environment and listening to clients carefully is critical for advisers in this environment, with circumstances around safety and security now driving family decision making far more than issues around tax
• Building flexibility into structuring, keeping an eye on the long-term and ensuring good standards of governance are all vital in enabling families to navigate change, drawing on the platforms provided by jurisdictions like Jersey that can offer stability and robust frameworks
• Change and volatility can provide opportunities too and families should be alive to that possibility

Commenting on the event, Heather Tibbo, CEO, Crestbridge Family Office Services, said:

“There’s no doubt that the concerns and values of families are changing as they adopt a new world view. Safety and security are absolutely critical and we need to respond to that, by being sensitive to those concerns and empowering clients to build into their structures the sort of flexibility they need to navigate this period of change in the long-term.”

The global value of philanthropic capital, for instance, is estimated to stand at more than US$2.5trn (Philanthropy and the Global Economy, Citi Bank 2022), with 73% of family offices now managing philanthropic efforts in some capacity (BNY Mellon, February 2022).

Family philanthropic efforts are becoming more professional, more sophisticated and more targeted – and there are good reasons for this evolution. 

The ‘external’ benefits of adopting such an approach are clear through the tangible impact family-driven philanthropy is having in society and on the planet. But families are also increasingly alive to the more ‘internal’ benefits of philanthropy too.

Increasingly, families are understanding that the very process of philanthropic professionalisation – from opening up conversations around philanthropy to developing and implementing purpose-driven strategies – has the potential to bring multiple additional benefits to the family, through better governance, more efficient structuring and family cohesion.

In turn, this new family approaches to philanthropy is also set to create a multiplier effect, paving the way for a number of additional opportunities.

Benefits

From an external perspective, the clear need for private capital to step up and support good causes remains strong. 

UN figures show, for instance, that if the Sustainable Development Goals (SDG) investment needs to 2030 are to be met, some $30 trillion of additional investment must be found. Private capital, including through philanthropy, will play a key part of that.

The signs are that families are aware of that need and are ready to step up. 27% of family offices, for example, emphasise giving back to society through philanthropy as a key priority, according to the UBS Global Family Office Report 2023.

Beyond these external impacts, though, philanthropy is increasingly being embraced by families to help reinforce family values and promote family cohesion. 

Whilst in the past, philanthropy might have been driven by the personal values and goals of a patriarch or matriarch, a truly joined-up family approach to philanthropy can provide a platform to help bring different voices to the table, engender better understanding between family members, and create a unified dynamic that reinforces a family’s values.

A genuinely shared family philanthropic strategy can provide a good ‘ringfenced’ channel for families to educate the nextgen. Giving them a certain amount of autonomy but with clear parameters, philanthropy can create a training ground for the nextgen, providing them with an environment to develop financial skills and better understand the environment they operate in, whilst empowering them to apply themselves to a cause they are passionate about.

Practical Outcomes

Building strong family cohesion through philanthropy can be a powerful process that can have a number of additional practical implications too.

Roles such as Head of Philanthropy are increasingly common within family offices, giving them a more formal organisational model to help develop and implement bespoke strategies professionally and with confidence. It can also provide a good opportunity to revisit governance frameworks and family charters, to ensure documentation is clear and aligned with purpose-driven values.

In turn, this is helping families undertake robust reviews around how they structure their philanthropic activities. How can they differentiate between different types of philanthropic activity – charitable giving, impact investing and seed investing, for instance? What structures should they be using to help them realise their objectives effectively and efficiently?

Seed funding or ‘venture philanthropy’ to support start-ups or higher risk social benefit projects, for instance, might require very different structuring options to more straightforward ‘pure giving’ to a charity.

There is also the question of active and direct involvement, which is becoming increasingly popular amongst families. The fact that 48% of families have established their own foundations would support this and demonstrate that families are firmly fixed on the long-term (Campden Wealth, 2023).

Meanwhile, co-projects with other families are also becoming more common as families look to pool resources where values, objectives and approaches are complementary, with a view to achieving greater impact. Further, families are also integrating philanthropy more with their wider wealth, business and investment activities, and this is having an impact on structuring options. In fact, there is growing understanding that philanthropy needs to permeate all other areas of a family’s affairs if it is to be authentic and have the desired measurable impact.

Expertise

As family approaches to philanthropy become more embedded within a family’s holistic framework, there’s no doubt that specialist advice is increasingly important. 

It’s telling that although 71% of family offices believe they have a role to play in alleviating economic inequality, just 41% have a philanthropic strategy in place to do that (Milken Institute, 2021). In that light, external advisers can be critical in enabling conversations amongst family members so they can set out their visions, agree a way forward and put that into practice through effective and robust documentation, control mechanisms and structuring. 

The complexities of risk monitoring, governance, evaluation and measurement in particular are areas where is a growing demand for specialist advisers. Having the benefit of an independent voice that can provide rational, data-driven advice can be highly valuable in an area that can be highly emotive too.

Despite these potential complexities, philanthropy continues to evolve at pace. Families taking a fresh, open and coherent approach stand to make a real impact, in multiple ways – on the world around them, on their own operation, and on their long-term legacy.

These were some of the trends to emerge from a roundtable held recently, hosted by Jersey Finance’s Director – UK Robert Moore, and attended by a range of family and private client professionals, including Crestbridge Family Office Services Executive Director Daniel Channing.

In particular, participants at the roundtable noted the persistent and significant growth in the private wealth sector, driven by a sustained rise in HNWIs relocating and bolstering their presence in the region, in turn increasing demand for family office and ancillary expertise to support bespoke family diversification strategies.

In addition, participants also highlighted the heightened sophistication of the investment landscape in the region. As well as sovereign wealth funds, such as the Kingdom of Saudi Arabia’s Public Investment Fund (PIF), providing considerable opportunities for joint ventures with private investors looking to diversify, the alternative funds landscape is also maturing and expanding – with hedge funds in particular growing in popularity in both the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).

Commenting on the roundtable, Daniel said:

“There’s no doubt that the growing and rapidly evolving family office landscape across the Middle East is presenting a number of new opportunities for advisers as families look to professionalise and diversify. Jersey in particular has become increasingly important as a hub for family structuring where there is a Middle East nexus, whilst there is also a growing demand for advice around succession and nextgen wealth transfer.

“Meanwhile, on the investment side, the sophistication we are seeing now amongst Middle East families is shining a spotlight on the Jersey Private Fund, which has become a go-to vehicle for targeted, tailored and flexible structuring in the alternative asset space.”

In that time he has worked with and helped manage a broad range of complex and multi-jurisdictional fiduciary structures for high net worth and ultra high net worth individuals, and has developed experience in the Middle East family office market.

In more recent years, he has become highly involved in supporting the philanthropic activities of clients, including managing multi-trustee structures.  Mr Hind is also a full member of STEP.

Why do you specialise in this area?

Having worked in fiduciary services for approaching three decades, I think there’s been a natural gravitation towards philanthropic structures as families have become more and more sophisticated and outward looking with their wealth. The ability to assist clients with their philanthropic structuring needs, help them develop and implement their purpose-driven strategies, and shape their conversations in this space is very rewarding.

Why is philanthropy so important to the industry?

You can look at this externally, and internally from a family’s perspective. Externally, clearly there is a real need for private capital to step up and support good causes. With public spending unable to keep up with the demand for funding of increasingly diverse societal and environmental charities, there’s both a necessity and an opportunity for private capital to play a big part.

Internally, there are clear benefits to a family pursuing a formal approach to philanthropy. In particular, in a world where the court of public opinion holds real sway and wealthy families are under intense scrutiny, there are reputational benefits for a family to engage in supporting charitable initiatives.

There are operational benefits too – implementing a philanthropic strategy can help reinforce key family values, which is really important in terms of family cohesion, and when it comes to communicating those values to the next generation. A philanthropic strategy can also provide a good ‘ringfenced’ channel for families to educate the nextgen – giving them a certain amount of autonomy but within clear parameters, philanthropy can create a training ground for the nextgen.

What are the key trends shaping philanthropy at the moment?

There’s a definite movement towards greater sophistication amongst families when it comes to implementing philanthropic strategies.

At a strategic level, the concept of ‘purpose’ is increasingly important when it comes to families considering how they can manage their wealth with a conscience. We are starting to see, for instance, roles such as Head of Philanthropy increasingly within family offices, and families are looking more and more at different types of philanthropic activity – differentiating between charitable giving, impact investing and seed investing, for instance. Families are also integrating philanthropy more with their wider wealth, business and investment activities.

In tandem, families are also becoming more focused on how their philanthropic endeavours are not just driven by the personal values of a patriarch or matriarch but are underpinned by shared family values. That’s crucial where complex, multigenerational families are displaying diverse viewpoints. Philanthropy can play a role in bringing family members together, which is vital in terms of succession planning.

Regulatory evolution – reporting, disclosure, ESG credentials and so on – is playing an increasingly important role too and navigating that often that means drawing on specialist outsourced support. Advisers have a duty to help families recognise what is important, supporting them in applying a more conscious approach in line with their governance framework, and providing guidance with measuring value – an increasingly important area of evolution.

What are your favourite ways to relax/switch off from work?

I am a new convert to golf, so I spend many hours spoiling a good walk! I also enjoy reading historic novels and dining out with friends

What’s one book you think everyone should read? 

A Tale of Two Cities by Charles Dickens. The novel provides historical insight into the French Revolution and features a fascinating cast of characters cleverly blending the themes of love, ambition endurance and sacrifice . It also includes two of the most famous Dickensian opening and closing lines.

If you couldn’t do your current role what would your dream job be? 

I have always been intrigued at being a palaeontologist – the challenge and painstaking work involved in excavating a fossilised dinosaur fascinates me.

This article was first published by ePrivateclient. 

Crestbridge Family Office Services CEO Heather Tibbo has helped grow the business into one of the industry’s most innovative and successful firms. A lawyer by training, Heather has featured in ePrivateclient’s 50 Most Influential List for five consecutive years and has been the recipient of a number of other prestigious awards and accolades. We recently met in London to discuss the sector’s latest trends, and what the future has in store for this thriving and dynamic enterprise.

Tell me a bit about what’s been happening in the business over the last year or so.

It’s been an exciting and extremely busy year for us. In 2023 New York-based Fund Services firm Gen II agreed to purchase the Crestbridge institutional business. With the acquisition now complete our private client business Crestbridge Family Office Services has maintained its status as a privately owned and independent provider, and we have ambitious plans for how we can continue to grow, both in scale and reputation. We have also been celebrating our ten-year anniversary, and we recently moved to new offices in the heart of St Helier.

In early 2020 you also launched Crestbridge Fiduciary with leading US Fiduciary Services provider Willow Street. How are things progressing across the Atlantic?

One of the many benefits of our independence and private ownership is our ability to respond quickly to trends we identify in the marketplace. We were one of the first in our sector to recognise the growing importance of the US as a destination of choice for international families, and our vision and values were a strong fit with those of Willow Street. The venture has gone from strength to strength, and is greatly helped by Willow Street’s Wyoming location, which offers a number of valuable jurisdictional advantages to our clients. It is notable that, since establishing Crestbridge Fiduciary, a number of others in the private client sector have followed suit. We were also pleased to have recently appointed industry professional Darrell King as Managing Director, Americas, based in New York.

You are always quick to recognise and praise your team when you receive industry awards and other accolades. Tell us about your team, and its culture.

Everything we accomplish is a team effort. Regardless of who is being recognised or awarded I try never to lose sight of that. We also work hard to maintain a structure and organisational culture that allows everyone to feel heard, valued, and empowered. We are extremely aware of the fact that the only way we can continue delivering the high standard of service and support that our clients have come to expect is to first ensure that we are looking after one another, and working together towards common goals. Our business is ultimately the sum of its people, and I strongly encourage our leadership team to make the employee experience a top strategic priority.

As a Channel Islands business the pool of available talent is obviously finite. How do you approach recruitment, and ensure that the culture of the firm is preserved?

Finding good people is certainly something upon which we focus a lot of our attention. We have worked hard to create and preserve a collaborative, supportive culture within the firm so recruitment is as much about fit as it is about experience and technical skill. The firm continues to grow strongly, and we have also recently implemented some organisational changes following the sale of the Crestbridge institutional business.

These included the strengthening of our senior central services team who, by providing a more robust layer of managerial support, are enabling our leadership team to be more focused ‘on’ the business – our clients and client service– rather than ‘in’ the business – its day-to-day functional management. The new roles cover areas including Risk and Compliance, Human Resources, and IT, and have allowed us to bring in a huge amount of industry experience and new expertise, and position ourselves strongly to scale our business in the coming years.

Which markets remain attractive for your growth?  Are there any other regions you are looking to develop? 

A key focus for us has always been and remains the Middle East. We visit frequently and are extremely committed to the region. We started building our presence in the Middle East 11 years ago because a colleague had strong connections there. I’m a firm believer in the importance of a clear and distinct value proposition, and we don’t try to be all things to all people.

We also want to continue growing our US business, and we’re seeing increased interest from Asia too. Singapore has a well-supplied market on its doorstep, however, despite it growing in sophistication it’s still quite nascent as a jurisdiction. Clients in the region are often interested in diversification, and a different approach, so will often contact us.

Finally, given the importance of intermediaries to our business, and with so many based in London, this is always a market we pay close attention to.

A critical and closely related consideration in this area is retention, which is only possible by investing in the team, actively managing training and career progression, and creating new development opportunities. We make a point of encouraging senior colleagues to share their experience and insights with others in the firm, whether through coaching, mentoring or through more informal, ad-hoc methods.

What’s your perception of the younger generations coming through today, and what skills do they need to succeed in the industry?

We have some outstanding young talent in the business and already I see many of them emerging as strong leaders of the future. I think Covid has had a significant impact on

many younger people, as it interrupted their careers at a critical point of development. I think the work that we do has value in helping younger people develop confidence and good interpersonal skills by working face to face with people. However, I think that’s where working from home can present certain challenges. Not only are we a highly collaborative team by nature, but as a high-touch service business so much of what we do is underpinned by earning and nurturing a client’s trust over time. That can only happen by being present and working on developing the right skills and a high level of emotional intelligence.

Held recently, the event (‘Strategies for a World in Transition’) of which Crestbridge Family Office Services was a sponsor, was attended by Heather Tibbo, CEO, Daniel Channing, Director and John Harris, Chair.

Across the keynote speakers and panel sessions, key issues highlighted at the event included:

• The importance of working with partners and advisers to pre-empt imminent global risks, including AI, market instability, political and social volatility and climate change
• The growing appetite to integrate legacy planning and sustainability into wealth strategies
• Legacy for families is as much about the transfer of values as it is about the transfer of wealth
• The appeal of stable jurisdictions is set to grow even further in a world that is increasingly volatile

Commenting on the event, Heather Tibbo said:

“The clear message was that political, regulatory and legislative change is prompting families to call on the expertise of their advisers and partners more and more as they try to navigate an unknown future. Being on the front foot is really important, and we’re absolutely seeing that play out amongst forward-thinking families who are focused on robust, innovative planning and want to ensure an impactful legacy.”

Daniel Channing added:

“Families are alive to the risks the current environment presents – what these families do however recognise is that a common purpose and shared values can provide a stable core around which they can find stability. To truly harness and implement the benefit of that purpose and value families recognise the need for specialist advice and sophisticated governance. These families are in a world that provides significant challenges, but that also offers up much opportunity too. With the support of external experts and with a solid foundation and structuring options through jurisdictions like Jersey, families are being positive in their outlook, setting themselves up well for future wealth transfer and investment.”

In essence, a VFO is a wide group of consultants servicing the assets and supporting the specialist needs of families from afar, with responsibilities usually divided amongst the group and clearly delineated, as opposed to the more traditional, physical family office with salaried staff.

A number of factors are driving this trend, Mr Channing explained.

In particular, multigenerational family dynamics, the shifting needs of the next generation and a greater diversity of focus are making family interests more complex – in terms of family members, ‘branches’ and geographies, as well as investment interests, businesses and asset classes.

This broadening span is, Mr Channing said, a key driver to family offices having to scale in both size, expertise and jurisdictional reach, leading to a greater propensity to turn to trusted external partners to support those complex areas.

In addition, the uptake of the VFO model is also being driven by the increasingly challenging landscape of international regulation and requirements around, for instance, reporting relating to more diverse investment strategies or beneficial ownership disclosure.

These factors are ‘the stick’ – all demanding more of families and precipitating the demand for specialist expertise; expertise that need not necessarily be ‘on the ground’ locally but could be tapped into wherever it is in the world.

In addition, the continued progression of communications technology has meant that the transition to remote and hybrid working practices has been relatively smooth. This is ‘the carrot’ – the enabler that has meant the shift to accessing the best expertise, wherever it is, is absolutely possible.

“The VFO has become a very viable option for families at all levels,” Mr Channing said.

“Getting the very best expertise and support is what families ultimately want – and actually it can be far more accessible, more flexible and more cost effective to be able to tap into that expertise remotely or virtually.”

Mr Channing explained that a key benefit of a VFO was its flexibility.

Rather than a fixed office with a static staff, a VFO functions as a group of advisors and consultants orbiting the family, and ‘departments’ can be added or removed with greater ease than traditional recruiting.

They enable families to respond to changes in the market or indeed the family itself with speed and without incurring the fixed, longer-term costs of salaries and rent. They also allow families to access a wider range of expertise and experience than traditional FOs.

“If a family, for instance, wanted to move assets to a new jurisdiction,” explained Mr Channing, “it can be much faster, easier and potentially cheaper to consult with a remote team on a temporary basis than to set up a physical office and hire salaried employees.”

VFOs can also be very well equipped to deal with generational change in the family. As wealth cascades down and disperses through inheritance to multiple family members, more advisors can be consulted with this in mind, as and when necessary – for instance in new markets where a family has little existing experience or is not as comfortable.

“Family offices are having to become more sophisticated quite quickly,” Mr Channing said.

“A virtual structure can allow them to cope with that rapid change much better than a traditional approach, allowing them to get access to the very best financial advice, remain agile, and enabling them to meet the changing needs of the market.”

Such a fundamental shift in operations is not without its challenges, Mr Channing warned.

While a VFO can be very nimble, the nature of the ‘office’ means that direct communication between advisors, who may have entirely different responsibilities, can be difficult.

“It’s important to be mindful that VFOs have the potential to create ‘silos’, where consultants do not interact, and this can lead to opportunities slipping through the cracks or a lack of efficiency,” Mr Channing advised.

“Clear and effective leadership is necessary to prevent mistakes and losses due to this lack of communication.”

In addition, while VFOs are very flexible in addressing logistical and regulatory challenges, they can struggle when it comes to technology, Mr Channing warned.

He explained that they can be less secure than traditional FOs, who will run their own servers and house their own data, and because the consultants all work for different firms, they may prove to be slower than more centralised operations in adopting, for example, the potential benefits of AI systems.

“While there are challenges in the operation of VFOs, most can be solved with a focus on strong leadership, regular and easy access to the family, and a clear focus on the mandate – while assigning an experienced, trusted service provider that can act as a central point of contact and liaison for all parties can be an effective approach,” Mr Channing said.

“If the founders remain close to the operation and ensure a high level of cooperation between the advisors involved,” added Mr Channing, “then there is no reason why the VFO can’t be an incredibly exciting opportunity for families to grow their wealth and secure their holdings for years to come.”

Organised by Jersey Finance, the roundtable involved an invited group of London and Jersey-based intermediaries to discuss and debate what ‘responsible stewardship of wealth’ means to them and their clients.

Speaking at the event, Daniel highlighted that ‘purpose’ was increasingly a key word when considering options for families who are looking at how they manage their wealth with a conscience, appreciating that ‘wealth’ goes beyond financial gain.

“It’s important to note, though, that every family has their own unique situation,” added Daniel. “Global economic instability, inflation and the current high interest rate environment is also creating uncertainty and complications in making these decisions.”

Other participants agreed that integrating purpose into family strategies brings with it a need to explore concepts of social capital and to ensure that decisions taken tie in with a client’s values and often diverse viewpoints. Participants stressed that advisers have a key duty here in helping families recognise what is important and support them in applying a more conscious approach in adhering to the family’s values in line with their governance framework.

Beyond purpose, discussions at the roundtable also focused on educating the younger generation by cutting through jargon and obstructive language in order to safeguard future wealth transfer, while participants were also keen to emphasise the importance of good, open conversations with clients, and establishing a process for reviewing structures carefully and frequently to ensure they remain fit for purpose in a rapidly evolving world.

Reflecting on the roundtable, Daniel said:

“This was a really lively discussion that served to highlight some of the key issues for the family advisory community at the moment, when it comes to responsible stewardship.

“Certainly families want and need to address their interpretation of ‘purpose’ carefully – and that is achieved through good communication between advisers and clients, having strong governance frameworks in place, and focusing on nextgen education, as they prepare to take over the reins to manage their families’ wealth.”

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.