Clients look for simple answers

PUBLISHED : Sunday, 23 October, 2011, 12:00am
UPDATED : Sunday, 23 October, 2011, 12:00am


Two questions inevitably confront investors and entrepreneurs once they achieve a certain level of personal financial success: how to protect their wealth and who else should benefit from it.

Increasingly, the solution they opt for is to set up a trust, a device that provides legal clarity, an agreed approach to managing assets and investments, and certainty about succession planning.

Also important for many high-net-worth individuals are the terms and conditions that can be structured in line with the principal's - or settlor's - express instructions and remain flexible enough to incorporate future changes, and allow continuing involvement in investment-related decisions.

'The first issue for us is to identify what clients want and then, in practical terms, what they actually need,' says Michael Low, Bank Sarasin's Singapore-based head of trust and fiduciary services in Asia.

He notes that this can involve lengthy discussions over months, or even years, covering topics such as how best to provide for children, who will receive what and which assets to place in the trust.

These conversations often reveal unsuspected layers of complexity. Family issues may come to the surface; the client may have to clarify personal views on things such as philanthropy and expectations of others; and future control of continuing business concerns can lead to detailed debate.

For example, the client might want shares in a family business to go to the children, as beneficiaries, but not the day-to-day management of the enterprise.

Also, it may be necessary to separate the principal's personal assets from other holdings, in a way not previously thought essential.

And an attendant requirement exists to make sure beneficiaries have sufficient understanding of what, in round terms, they may be getting into.

'Deciding about purely financial assets with the bank is the easiest part of the planning,' Low says. 'At the other end of the spectrum, you can be dealing with properties and investments in many jurisdictions. That is when the specialist lawyers and external experts come in to look at tax implications and the best structures and methods for transferring complex assets.'

Naturally, every case is different since each family 'operates' according to its own rules and conventions.

Low emphasises, though, that whatever advice and recommendations his colleagues may offer, the client is the ultimate decision maker.

'In most cases, clients are not going to put assets into a trust and then 'walk away',' he says. 'We are here to provide a solution that is as flexible as it needs to be, while generating long-term income and giving capital protection.

'Clients can remain involved in managing the assets and make changes - minor or major - depending on the circumstances.'

Amy Lo, head of ultra-high-net-worth business, Asia-Pacific, for UBS Wealth Management, similarly notes that trust services are now a key element of smooth succession planning and, indeed, for creating a legacy that goes beyond the financial. A usual starting point is to hold informal talks with the client/principal to sound out personal priorities and, subsequently, outline decisions that will have to be addressed.

This demands cultural sensitivity, particularly if dealing with older clients or entrepreneurs used to exercising fairly tight control over family and financial matters.

'The process is very much driven by the needs of the client, but we try to guide thinking and aim to get key stakeholders round the table to discuss and agree on the main principles,' Lo says.

When it comes to the trust's structure and implementation, Jonathan Hubbard, head of wealth planning, Asia-Pacific, for UBS Wealth Management, stresses that at some point it is necessary to go 'line by line' to verify each detail and double check possible implications.

This applies to everything from the actual ownership of assets to future tax liabilities, inheritance laws in different countries, and the choice of legal jurisdiction and trustees.

'We take a close interest in the beneficiaries who, for example, may be in different counties with different tax treatments,' Hubbard says.

'Regarding the structure of the trust, we try to keep it simple, but keep it flexible because regulations can change.

'And we also encourage settlors to visit the trustees, so proximity, convenience and access to support can be a factor.'