Although professional private wealth management is something that both individuals and couples can benefit from, it is often most keenly appreciated among families, especially when inter-generational issues come to the fore. This is certainly the case when some branches of the family reside – and pay tax – in overseas locations and when family-owned assets are located outside of the main country the family lives in. Broad wealth management will take into account international factors, of course, but when these are more complex due to the desired transfer of wealth from one generation to the next, even more experience in wealth structuring will be desirable.
Some estimates suggest that the distribution of wealth within international families will top US$2 trillion (£1.68 trillion) in the next decade or so as one generation passes on its wealth to the next. To do this efficiently, the wealth structure of each family must be carefully considered. Remember that affluent financial planning is not simply a question of maximising investment returns in the short and medium-term but of ensuring generational transitions are handled in the most efficient way possible. In short, without a sufficiently robust plan, wealth management arrangements can fail when financial assets are inherited. Read on to find out more about the impact wealth structures and family office plans have on international families these days.
What is the difference between asset management and wealth management?
To begin with, asset management is a part of international wealth management. However, asset and wealth management should not be conflated and considered to be the same thing. Why? Because asset management is primarily focused on growing investments and ensuring that a strong return is achieved for the investment in assets an individual has. On the other hand, managing wealth structurally requires more of a holistic approach that takes into account families’ inter-generational needs over the longer term. Understanding what to do with a property portfolio, for example, is, therefore, a part of asset wealth management but only one aspect of it. Sometimes, real estate can be sold just like any other asset. Nevertheless, much-loved family homes, for instance, can have a more sentimental aspect to them which also needs to be taken into account due to the personal relationships that exist within family structures. To put it another way, any international wealth management structure must deliver more for families than simply working out which assets to hold on to and which to divest in.
Managing wealth through trusts and foundations
Another important difference between asset management and wealth management is that the latter tends to be centred on longer-term planning, often thinking about wealth structuring that will be effective for 50 years or more. Frequently, grandparents and great-grandparents of wealthy international families don’t simply want to manage the transition of wealth to their immediate offspring but are seeking a wider familial distribution of wealth. This is when in-depth knowledge of trusts and foundations can be so effective in inter-generational financial wealth management.
By creating foundations and trusts for grandchildren, cousins, great-grandchildren and others who do not stand to immediately inherit under the local laws and customs of the countries involved, wealth creators can ensure that their finances do not all pass into the hands of their children. Such wealth structures can be set up long before they’re needed and even cover as yet unborn members of the family. However, specialist knowledge of the regulations in different countries is essential for such structures to work as expected, given that laws covering foundations and trusts differ greatly in different jurisdictions.
Which products of wealth management are most effective?
As mentioned, foundations and trusts are often useful financial products for wealth structuring within international families. Neither should be regarded as better than the other, however. It is better to say that they offer different advantages and disadvantages in international wealth management. It depends on how much control – or otherwise – the wealth creator wishes to retain. Some will want to be able to alter their foundation’s constitution, for example, while others won’t. Some may want to manage their familial wealth in a trust to pass on business-generated income without losing control of the board. Again, it depends on the individuals concerned but for some, preventing a family business from fragmenting is the top priority, while others seek a wealth structure that might allow their family to flee political instability at a moment’s notice.
Why is professional experience in international wealth management essential for most families?
There are so many different aspects to international family wealth structuring that no single way of managing wealth will be adequate. Everything needs to be tailored to financial circumstances, existing family structures and the priorities of the family’s wealth creator(s). As such, Tallard Management’s range of financial services can help to provide the sort of enhanced wealth management that international families are seeking today. Not only do we possess the financial planning skills to help families handle inter-generational wealth structuring, but we also have the know-how in multiple tax regimes around the world to ensure wealth structures are fit for future requirements in the long run.