Economic substance versus family office structures in the Channel Islands Economic substance legislation came into effect across the Channel Islands in January 2019, meaning companies must now demonstrate they meet these rules if relevant.
A family office is bespoke to a family’s needs and can take many forms to look after the family’s wealth, often incorporating trust and company structures within.
The purpose is to manage, preserve and grow the family’s wealth for both current and future generations, ensuring the legacy of the family that set up the office, and also providing for the family’s day-to-day running costs.
Typically, this will involve managing the family’s investments, moveable assets (such as art work, vehicles and antiques), commercial and residential properties, as well as administering privately-owned businesses.
It can also include day-to-day accounting and coordinating with the relevant professionals to undertake payroll, tax services, legal affairs, investment management and succession planning.
Concierge services are often also provided, which could include managing household staff, settling education fees, making travel arrangements, and even personal shopping services.
Family office and concierge services are as unique as the family they support. Their primary goal is to give the luxury of time by removing the hassle of organising day-to-day life.
Family offices can be structured in one of three ways:
There are many benefits to using the hybrid structure, particularly when it comes to its set up and management.
Setting up a single-family office requires a huge investment and level of trust in whomever the family appoints to manage the responsibility, given it is on an ongoing basis.
This appointment would also need monitoring and remunerating to ensure its longevity with the family, whereas the hybrid approach, using a regulated service provider in the Channel Islands, removes both the recruitment and selection process of individuals, as well as the remuneration, as they would be appointed by the service provider directly.
Likewise, it is the regulated service provider’s responsibility to ensure the business is adequately resourced (on an ongoing basis) and can manage the workload of its clients, including its hybrid family office arrangements.
This provides for a longevity of relationship and peace of mind to families, not least as there is a succession plan in place.
Another clear benefit of using a regulated service provider is the procedures and controls it has in place to mitigate risks when managing assets on behalf of others.
With single-family office arrangements, the personnel are not operating in a regulated environment and the focus is much more on delivering what the family wants. The hybrid option also looks to achieve the family’s goals, but within a robust risk management environment, which provides both independent oversight and effective risk management for families.
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Nedgroup Trust is able to offer hybrid family office and concierge services tailored to the UHNWI’s family needs by outsourcing certain functions to third-party tax, legal and investment experts, while providing a single primary point of contact to coordinate all aspects of the family’s affairs. A dedicated administrator will be responsible for the day-to-day administration of the family’s affairs, with the supervision and support of a manager and director to ensure the relevant expertise is always available.
Should you require any further information, please contact your usual Nedgroup Trust relationship manager who will be happy to discuss how we can help. Or get in touch using the links to the forms towards the end of the page.
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