the Wealth Management Industry
“Wealth management is a knowledge business, but sadly run by many who are more focused on their own interests than on the need to invest in and manage knowledge for the benefit of their clients. A wealth owner has little choice but to get a handle on what is relevant to their own situation, and be in a position to ask the right questions that will lead them to the right advisors. And for the wealth manager who gets it right, the opportunity to excel and attract clients is significant.”
“Today, around the world, there are increasing regulations that require asset managers to provide transparency on charges to their clients, but there continue to be many circumstances of hidden charges that asset managers, such as private banks, impose on their clients. Is the client aware that the bank may have made arrangements to receive ‘retrocessions’ or kick-backs from investment funds in which they may invest the client money they have under discretionary management? Relatively recent court decisions in Switzerland require banks to refund retrocessions they historically received in a number of circumstances, but unsurprisingly the industry is pretty quiet about the rights their clients may have to obtain refunds of amounts their advisors secretly received.”
On Independent Asset Managers and Family Offices
“Interesting to observe is that the independent asset manager and single and multi-family offices usually come into the picture when the wealth owning family gets fed up with the poor service they get from their traditional private bank. And while the private bank ends up being nothing more than a custodian, the independent asset manager or family office begin to focus on negotiating even these fees on behalf of the wealth owner, putting more pressure on the private banks.”
On Compliance as a Client Need
“Compliance is a client need. Tax and related reporting requirements are only part of the picture, and too few banks realize that families need help to understand the choices they have on how to structure their affairs and ensure that they know who has what information on their family and assets and where that information is going to go. Delegating these things to the compliance department is not enough – helping clients deal with increasing compliance is part of the service an effective bank or trust company needs to provide.”
The Destructive Power of Family Wealth
A GUIDE TO SUCCESSION PLANNING, ASSET PROTECTION,
TAXATION AND WEALTH MANAGEMENT
Philip Marcovici
This edition first published 2016
© 2016 Philip Marcovici
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Preface
Now retired from practicing law, I spent my career as an international tax and private-client lawyer, working with families, businesses, and the wealth-management industry, first in New York and Vancouver, then in Hong Kong and Zurich. I have also worked with governments seeking to address the global problem of undeclared funds, and have taught widely in Asia and Europe, learning while sharing my views on the potentially destructive nature of wealth and the failings of the wealth-management industry, and of advisors, to truly help the families they are meant to serve.
I began working with wealth-owning families on their succession and other needs early in the 1980s, in Hong Kong. Having studied law in both Canada and the USA, I had started out as a corporate tax lawyer in New York, and then moved to Hong Kong where I spent 12 years practicing law. The 1980s and early 1990s were interesting times in Hong Kong. Pretty much the most capitalist place in the world was soon to revert to pretty much the most communist place in the world. China, which was a very different country in the 1980s and early 1990s than it is today, was negotiating the return of Hong Kong by the UK. The UK had been governing Hong Kong under treaties that, in part, were coming to an end after a term of 99 years. The handover of Hong Kong to China was ultimately agreed between Margaret Thatcher and Deng Xiaoping and took place in 1997.
In the run up to 1997, many of Hong Kong's wealth-owning families began restructuring their businesses in view of perceived political risks and sought second (and third and fourth) citizenships and places of alternative residence. My work changed from being work for companies on their tax affairs to work for the owners of companies looking more comprehensively at their situation, mixing in issues of political risk and asset protection with tax exposures in the USA and elsewhere particularly those associated with cross-border investment and new residences and citizenships. Many of the wealth owners in Hong Kong came from families who had fled China on the arrival of the communists and who suffered the expropriation of their businesses and many other similar setbacks and challenges. They were not about to let themselves lose everything again.
My work with families in relation to their personal and business assets, and the protection of wealth, led to me working with the wealth-management industry – the providers of asset-management services, trusts, and other “tools” of wealth planning. Something I learned early on is that the industry all too often does not meet the comprehensive needs of the clients it serves. This led to me becoming active in training and education within the industry, and working on strategy for private banks and others interested in greater alignment with the needs of their clients. But overall, I was working in a major growth industry that was – to me – surprisingly chaotic (and often unethical) in its management and delivery of services.
In the mid-1990s, I moved to Switzerland, where I spent 15 years working with private banks, trust and insurance companies, and the global families that use their services. With young children, we were looking