Wealth Management Tidbits from Around the Globe

What should show up the the mail the other day but Private Wealth Management 2007, from the UK firm Campden Publishing Limited. Lots of glossy ads, but some content worth noting as well. For instance:

Foreign trusts in America

Kent Lawson, San Francisco tax accountant, notes that trusts may now be structured as foreign for US tax purposes yet appear to most people "as American as apple pie."

All it takes is giving a nonresident a single substantial decision-making power. For example a trust is foreign if it has a non-resident protector who can replace the trustee. Thus, a trust can have Delaware law as its proper law and be administered by a financial institution in Delaware and still be classified as foreign.

Freedom from wealth

Charles A. Lowenhaupt, Saint Louis wealth manager, asserts that bundling family wealth for management by a family office doesn't suit all families, especially as new generations arrive.

Currently our firm is helping a family ‘unbundle’ its wealth in its fourth generation. That fourth generation is in their 50s and 60s. The unbundling will cost a great deal in taxes and administrative fees and make wealth management much more expensive and less effective. Yet, the senior members are exuberant. Each feels that a huge burden had been lifted — one characterised herself as ‘a bird being freed from a cage’.

In my experience wealth frequently stays bundled not for the good of the family but to support the family wealth steward. We have more than one client who needs to keep the family's wealth bundled to support the family office and staff — all of whom provide the family wealth steward companionship and a feeling of importance.

Asia — the Klondike of private banking

Justin Ong and Wei Lii Khoo, writing from Singapore, report that the rapid growth in the number of wealthy Asians has created a severe shortage in the number of private bankers needed to serve them. “Given current wealth creation trends, industry players have estimated that up to 10,000 private bankers will be required by 2010 in Asia and the Middle East (excluding Japan).” That's a tall order:

Banks are taking the easy way out by poaching relationship managers, often entire teams in order to start up their business. This situation of musical chairs in unhealthy for the industry, detrimental to client's long-term interests, and leads to an upward cost spiral that may be potentially unsustainable should the relationship team under-perform.

Banks are also converting retail and mass affluent bankers into relationship managers and mid-career hires from outside the industry to meet staffing demands. In all these instances, training and quality issues are critical.

Private Wealth Mangement is available online (lots of registration required) here.