Reviewing the jurisdiction for a future-focused family office is a necessary action that requires considerations varying from the obvious tax advantages to inconspicuous privacy concerns. While it may previously have seemed natural that location would be based around the proximity to the beneficial owner, this is certainly no longer a given, and location may actually be locations.
The reality is that these days, many family offices either have multi-region exposure or operations that adds a layer of complexity. And this isn’t only the next generation, James Dyson’s family office is in London & Singapore, Ray Dalio is in Conneticut, Singapore and now Abu Dhabi. Taking into account a global investment approach and international interests, the shifting complexities around regulation and significant benefits of tax incentives plus tools that make teams in multiple locations more easily connected than ever, different functions in multiple locations might make sense.
A hybrid approach could mean the actual family office structure could be registered in a tax-friendly location, an investment team works from a financial hub and the lifestyle management team operates from the primary residence of the family.
Making these decisions depends not just on external factors but also the structure and maturity of the family office business itself and what its objectives are. Is there a major growth plan around alternative investments? Is there a potential shift from being a single family office to become a multi-family office? Are the next-generation wanting to align it around impact-related themes or perhaps a technology focus?
Such factors have to be considered when it comes to evolving the family office structure but also when assessing the family office jurisdiction, which should very much be aligned to these. Here are some factors that the forward-thinking family office should consider when it comes to aligning jurisdiction with family office strategy.
1. Death & Taxes
If longevity experimentalist Bryan Johnson succeeds in his quest to live forever, one wonders how he feels about being taxed forever too. Benjamin Franklin’s quote still rings true several hundred years later, although with a significant caveat: the limitation of taxes is based on location.
Family offices can choose locations that offer beneficial tax treatment designed specifically for family offices, making them attractive options for the business entity. Hong Kong and Singapore are currently going toe-to-toe in their actions to attract family offices through this – in addition to further benefits like impact investing incentives.
The UAE is also making a push, with zero personal or corporate income tax providing an attractive option for family office wealth preservation.
2. Law & Order
A robust regulatory framework provides the necessary security for investments that any family office requires and therefore is a crucial consideration. But at the same time, the ease with which an office can be set up in a jurisdiction matters, the costs related to this, how significant the regulatory hurdles are and what restrictions there are in terms of immigration and freedom of movement can work against its favor.
Similarly, the sophistication of the legal structure is important for both protection but also reporting requirements and company structure, with some jurisdiction having specific legal frameworks in place that negatively affect entities with shared ownership. A further consideration is information privacy and how exposed both internal and external communications are in the event of a legal dispute.
3. The Lay Of The Land
For a small country with a population less than New York, Switzerland has carved an enduring reputation for long-term stability, which along with its reputation for privacy sets it at the forefront of jurisdictions in terms of economic and political risk consideration.
If it’s unpredictability that family offices want to avoid, they need to weigh up the risks of pursuing short-term wins achieved in countries that don’t provide near-guaranteed stability. Geographic location and neighbor relations are significant, as well as corruption, another factor here that can play a major role and as the news reminds us, something that is applicable worldwide.
4. Help at hand
Like any company, the best family offices rely on sourcing and retaining top talent, something that has emerged as a recurring pain point as the industry grows. Availability of skilled professionals in key areas like finance, accounting and legal is essential, as is the experience and networks these employees will have cultivated.
Equally important and directly related are the availability of banking and financial services that are sophisticated enough to handle complicated family office requirements. It’s here where locations like New York or London offer significant advantage over emerging jurisdictions, but also where family office strategic alignment is a key consideration. Is there push for direct investing into technology initiatives or supporting venture capital endeavors? Such questions will also influence which jurisdiction has the best resources applicable.
5. Culture Trip
Somewhat dependent on whether the family office is run by family members themselves, but an important consideration when it comes to retaining top talent, the quality of life element cannot be overlooked.
This is related to everything from living standards, infrastructure, safety and leisure activities, plus the overall culture of that jurisdiction. It also brings with it certain reputational elements too, depending on how local customs align with international values.
There are other considerations such as connectivity, which can be another priority, especially if the family office is a global setup and the need to move between countries is essential. Do you want to hop on a quick flight for a critical meeting or connect three times in an 18-hour journey that leaves you jetlagged?
But overall, matching the jurisdiction structure of a family office with the objectives and values of the family is crucial and in today’s world this goes beyond picking a metropolitan hub and setting up an office. It’s also something that should be assessed regularly, taking a strategic approach with the assistance of specialist advisors that can bring in independent perspective and guidance, to ensure the optimal structure is in place for the next-generation family office to operate efficiently.
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