Next Gen’ clients seek greener, leaner wealth managers
Ethically minded, obsessed with technology and wealthy — the next generation of private client is a new breed of customer that wants a new kind of wealth manager to match.
The younger client is more interested in an iPhone-friendly investment portfolio than an adviser with the correct width of pinstripe and will want to debate the merits of ethical and environmental funds rather than take a trip to the golf course.
“The attitude of the younger generation of client is very different [from their parents],” says Matthew Fleming, partner at family office Stonehage Fleming. “There has been an unmistakable shift in the past five years towards impact and sustainability through overtly responsible investing.” Faced with the realities of climate change and bringing up children, wealthy millennial investors want to know their money is doing good rather than adding to the world’s problems, say wealth managers. Just as they might buy organic produce, they want their adviser to show them sustainable investments too.
More than 40 per cent of the 45 wealth managers surveyed by Wealth-X on behalf of the FT say they are focusing on environmental, social and governance (ESG) themes as a way of appealing to the next generation. Many have introduced funds or portfolios or are launching new ESG services to enhance their offering in this area. But why is this so important?
How to manage your passion investment in Art
Whether one owns art for pleasure or as an investment, the volume of administration related to managing a collection is the same: initial due diligence, lending to museums, maintaining an inventory, transport, storage, insurance, valuations, the structure through which the collection is owned, cataloguing, strategic planning for the future (including inheritance planning), and more.
Inevitably there comes a time when the collection is so vast, and the transactions so complex, that the owner realises that he or she needs assistance and guidance to address day-to-day matters as they arise.
Choosing an expert
The decision about what type of assistance is required must start with a thorough and honest appraisal of both the collector and the collection’s needs. Dedicated art advisers tend to focus on the minutiae of a transaction rather than the lifecycle of the artwork after the transaction. A collection manager, by definition, has broader knowledge and knows where to find the right expertise. Some aspects of managing the collection—such as specific art historical research, conservation, or legal and tax advice—will demand significant specialised professional input that a seasoned collection manager can easily draw upon.
If the collection manager works within the context of a family office they will also recognise that the long-term preservation of an art collection across multiple generations, and decisions about the future of the collection, are far more dependent on the collector and his or her family than on the collection manager.
Italy perceived as trouble — but not by all
Money managers are carefully watching the political situation in Italy unfold, deeming the country “too big to fail.”
But sources said they’re not just watching for negative investment effects from the country’s political and fiscal problems: They’re also looking for opportunities to add to positions. “Political risk is back with a vengeance in Italy,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management in London.
“As the third-largest global issuer of government bonds after the USA and Japan, Italy is too big to be allowed to fail without severe contagion to the global financial system. However, it is also too big to comfortably bail out using tried and tested mechanisms.” Recent weeks have seen Italy’s population and investors forced to reckon with a populist government coalition and a potential snap election.
Next Gen’ clients seek greener, leaner wealth managers
Ethically minded, obsessed with technology and wealthy — the next generation of private client is a new breed of customer that wants a new kind of wealth manager to match.
The younger client is more interested in an iPhone-friendly investment portfolio than an adviser with the correct width of pinstripe and will want to debate the merits of ethical and environmental funds rather than take a trip to the golf course.
“The attitude of the younger generation of client is very different [from their parents],” says Matthew Fleming, partner at family office Stonehage Fleming. “There has been an unmistakable shift in the past five years towards impact and sustainability through overtly responsible investing.” Faced with the realities of climate change and bringing up children, wealthy millennial investors want to know their money is doing good rather than adding to the world’s problems, say wealth managers. Just as they might buy organic produce, they want their adviser to show them sustainable investments too.
More than 40 per cent of the 45 wealth managers surveyed by Wealth-X on behalf of the FT say they are focusing on environmental, social and governance (ESG) themes as a way of appealing to the next generation. Many have introduced funds or portfolios or are launching new ESG services to enhance their offering in this area. But why is this so important?
How to manage your passion investment in Art
Whether one owns art for pleasure or as an investment, the volume of administration related to managing a collection is the same: initial due diligence, lending to museums, maintaining an inventory, transport, storage, insurance, valuations, the structure through which the collection is owned, cataloguing, strategic planning for the future (including inheritance planning), and more.
Inevitably there comes a time when the collection is so vast, and the transactions so complex, that the owner realises that he or she needs assistance and guidance to address day-to-day matters as they arise.
Choosing an expert
The decision about what type of assistance is required must start with a thorough and honest appraisal of both the collector and the collection’s needs. Dedicated art advisers tend to focus on the minutiae of a transaction rather than the lifecycle of the artwork after the transaction. A collection manager, by definition, has broader knowledge and knows where to find the right expertise. Some aspects of managing the collection—such as specific art historical research, conservation, or legal and tax advice—will demand significant specialised professional input that a seasoned collection manager can easily draw upon.
If the collection manager works within the context of a family office they will also recognise that the long-term preservation of an art collection across multiple generations, and decisions about the future of the collection, are far more dependent on the collector and his or her family than on the collection manager.
Italy perceived as trouble — but not by all
Money managers are carefully watching the political situation in Italy unfold, deeming the country “too big to fail.”
But sources said they’re not just watching for negative investment effects from the country’s political and fiscal problems: They’re also looking for opportunities to add to positions. “Political risk is back with a vengeance in Italy,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management in London.
“As the third-largest global issuer of government bonds after the USA and Japan, Italy is too big to be allowed to fail without severe contagion to the global financial system. However, it is also too big to comfortably bail out using tried and tested mechanisms.” Recent weeks have seen Italy’s population and investors forced to reckon with a populist government coalition and a potential snap election.
Are foreign trusts still relevant for South Africans?
The role of foreign trusts in the structuring of foreign affairs of South African residents is changing, says international family wealth manager Stonehage Fleming. Foreign trusts will always have a broad benefit for wealthy families with complex, international affairs and should not be used to mitigate tax, but rather to maximise the wealth protection and estate planning opportunities. Foreign trusts are no longer the only option for investors looking to remit funds from South Africa, due to a changing international tax environment coupled with the recent focus by SARS on both local and foreign trusts.
More specifically, with the implementation on March 1 2017 of Section 7C of the Income Tax Act, which addresses low or no interest loans to trusts, the 2018 tax year marks the first year where South African taxpayers are subject to a Section 7C liability. Additionally, it was proposed in the 2018 Budget Speech that the ‘official rate of increase’ (which is also the rate used to calculate Section 7C donations) be upwardly revised to be more aligned with a market-related rate. A change in this ‘official rate of interest’ will necessitate a review of whether the interest rate applicable to existing loans needs to be adjusted, and where Section 7C applies to a loan to a trust, it will also result in an increased donation and therefore donations tax liability.
Further developments include the rising costs of administration and management of foreign trusts due to heightened governance, compliance and reporting functions of trustees, as well as the growing trend of remitting funds offshore (over and above the R10 million available through the annual foreign investment allowance) by way of special applications to the South African Reserve Bank. These special application funds cannot be lent to a trust and must be invested in the name of the applicant, which may deem the costs of establishing and maintaining a foreign trust unwarranted to house only a small portion of the taxpayer’s foreign funds remitted from South Africa.
“In determining the tax implications of a foreign trust where a loan is in place which is not attracting interest at a market-related rate, the relationship between three primary tax principles must be considered – transfer pricing provisions, attribution rules and the new Section 7C,” says Elana Nel, senior associate in the tax advisory division at Stonehage Fleming in South Africa.
In Profile: Stonehage Fleming
“In a sense, we are an outsourced family office, as we will do whatever the family itself doesn’t want to do, from everything to very little,” explains Clarke-Jervoise.
He adds that the firm’s services lean more towards fully discretionary services than solely advisory, though there is a mix between the two for many clients.
Clarke-Jervoise spends all his time on private equity in a team of four and says that of the 250 clients Stonehage Fleming has, 40-50 would like help on their private equity investing. Those clients that do wish to invest in the asset class have roughly 10-25% of their assets in private equity. Last year the family office deployed circa $100m into private equity.
Are foreign trusts still relevant for South Africans?
The role of foreign trusts in the structuring of foreign affairs of South African residents is changing, says international family wealth manager Stonehage Fleming. Foreign trusts will always have a broad benefit for wealthy families with complex, international affairs and should not be used to mitigate tax, but rather to maximise the wealth protection and estate planning opportunities. Foreign trusts are no longer the only option for investors looking to remit funds from South Africa, due to a changing international tax environment coupled with the recent focus by SARS on both local and foreign trusts.
More specifically, with the implementation on March 1 2017 of Section 7C of the Income Tax Act, which addresses low or no interest loans to trusts, the 2018 tax year marks the first year where South African taxpayers are subject to a Section 7C liability. Additionally, it was proposed in the 2018 Budget Speech that the ‘official rate of increase’ (which is also the rate used to calculate Section 7C donations) be upwardly revised to be more aligned with a market-related rate. A change in this ‘official rate of interest’ will necessitate a review of whether the interest rate applicable to existing loans needs to be adjusted, and where Section 7C applies to a loan to a trust, it will also result in an increased donation and therefore donations tax liability.
Further developments include the rising costs of administration and management of foreign trusts due to heightened governance, compliance and reporting functions of trustees, as well as the growing trend of remitting funds offshore (over and above the R10 million available through the annual foreign investment allowance) by way of special applications to the South African Reserve Bank. These special application funds cannot be lent to a trust and must be invested in the name of the applicant, which may deem the costs of establishing and maintaining a foreign trust unwarranted to house only a small portion of the taxpayer’s foreign funds remitted from South Africa.
“In determining the tax implications of a foreign trust where a loan is in place which is not attracting interest at a market-related rate, the relationship between three primary tax principles must be considered – transfer pricing provisions, attribution rules and the new Section 7C,” says Elana Nel, senior associate in the tax advisory division at Stonehage Fleming in South Africa.
In Profile: Stonehage Fleming
“In a sense, we are an outsourced family office, as we will do whatever the family itself doesn’t want to do, from everything to very little,” explains Clarke-Jervoise.
He adds that the firm’s services lean more towards fully discretionary services than solely advisory, though there is a mix between the two for many clients.
Clarke-Jervoise spends all his time on private equity in a team of four and says that of the 250 clients Stonehage Fleming has, 40-50 would like help on their private equity investing. Those clients that do wish to invest in the asset class have roughly 10-25% of their assets in private equity. Last year the family office deployed circa $100m into private equity.
Eight Wealth Managers; most recent fund buys
Tristan Dolphin, Senior Associate at Stonehage Fleming said: “Our most recent equity fund investment was in the Vulcan Value Equity fund in August last year. Vulcan’s differentiated approach to investing with a focus on quality and price appealed to us”.
Stonehage Fleming bolsters Jersey
Commenting on the appointment, partner and head of family office in Jersey, Ana Ventura, said the hiring of Bodenstein ‘reflects the growing importance of Jersey to the group’. She added: ‘The needs of our clients are constantly evolving and Rudi’s experience will contribute significantly to our already existing talented and dedicated team, as well as the strategic vision we have for Stonehage Fleming as the international family office.’
People Moves: Stonehage Fleming
Bodenstein comes to Stonehage from Guernsey-based wealth manager FNB International Trustees, a part of South Africa’s FirstRand National Bank, where he spent eight years developing its fiduciary and advisory business.
Eight Wealth Managers; most recent fund buys
Tristan Dolphin, Senior Associate at Stonehage Fleming said: “Our most recent equity fund investment was in the Vulcan Value Equity fund in August last year. Vulcan’s differentiated approach to investing with a focus on quality and price appealed to us”.
Stonehage Fleming bolsters Jersey
Commenting on the appointment, partner and head of family office in Jersey, Ana Ventura, said the hiring of Bodenstein ‘reflects the growing importance of Jersey to the group’. She added: ‘The needs of our clients are constantly evolving and Rudi’s experience will contribute significantly to our already existing talented and dedicated team, as well as the strategic vision we have for Stonehage Fleming as the international family office.’
People Moves: Stonehage Fleming
Bodenstein comes to Stonehage from Guernsey-based wealth manager FNB International Trustees, a part of South Africa’s FirstRand National Bank, where he spent eight years developing its fiduciary and advisory business.