provided important comments, but also line-by-line corrections that were much needed and appreciated. My good friend and colleague of decades, Paul Stibbard, provided not only detailed comments – correcting my English (and I very much trust his!) – but also important input on many aspects of my book and particularly my references to Islamic law, one of the many areas of his deep expertise.
Michael Morley was most helpful and supportive in his comments, and for years was one of the few leaders in the industry who I believe really understood what wealth management is about. Stephen Atkinson, Jurgen Vanhoenacker, Anthonia Hui, Leo Drago, Maurice Machenbaum, Amaury Jordan, Tom McCullough, and many others were also most helpful and generous in sharing their thoughts.
I also thank Annie Chen for her years of patient support and insight over martinis and otherwise, Lisbet Rausing for sharing her views over pancakes she made for me in London, and Michael Olesnicky, Jeff VanderWolk, and Richard Weisman for their input and friendship. Professors Joseph Fan of the Chinese University of Hong Kong, S.F. Wong of the University of Hong Kong, and Roger King of the Hong Kong University of Science and Technology were all of support and influence, along with many, many others.
I have been fortunate to work with John Wiley & Sons in relation to the publication of this book, and particularly want to thank Thomas Hyrkiel and Jeremy Chia for their professionalism and support.
Finally, my love and thanks go to my wife, Peggy, for her insights and consistent disagreement with almost everything I say.
About the Author
Philip Marcovici is retired from the practice of law and consults with governments, financial institutions, and global families in relation to tax, wealth management, and other matters. Philip is on the boards of several entities within the wealth-management industry, as well as of entities within family-succession and philanthropic structures. An adjunct faculty member at the Singapore Management University, Philip is actively involved in teaching in the areas of taxation, wealth management, and family governance.
Philip was the founder and CEO of LawInContext, the interactive knowledge venture of global law firm Baker & McKenzie. Philip retired from his CEO role with the company in 2010, and from his Chairmanship of the company in 2011.
Philip was a partner of Baker & McKenzie, a firm he joined in 1982, and practiced in the area of international taxation throughout his legal career. Philip was based in the Hong Kong office of Baker & McKenzie for 12 years, relocating to the Zurich office of Baker & McKenzie in 1996. Philip has also practiced law in both New York and Vancouver. Philip retired from Baker & McKenzie at the end of 2009.
Philip Marcovici is the former chair of the European tax practice of Baker & McKenzie and of the steering committee of the firm's international wealth-management practice, of which he was one of the founders. Philip was also one of the founders of the Baker & McKenzie Asia-Pacific tax practice and was involved in a number of firm and practice group management functions.
Among others, Philip Marcovici received the Citywealth Magic Circle Lifetime Achievement Award in 2009 and, jointly with Fritz Kaiser, the Wealth Management Innovator Award in 2011 for his work in instigating the Liechtenstein Disclosure Facility. In 2010 Philip received the Russell Baker Award from Baker & McKenzie in appreciation for his exceptional contributions to the firm's global tax practice. In 2013 Philip received a Lifetime Achievement Award from the Society of Estate and Trust Practitioners and in 2016 a Lifetime Achievement Award from Wealth Briefing.
Philip holds law degrees from Harvard Law School and the University of Ottawa.
Introduction
This book is designed to share my experience of working with families and their advisors around the world.
My hope is that this book will help wealth owners and their families understand their considerable opportunities to avoid wealth being destructive of their family and of the relationships that exist and will exist in future generations.
While my professional experience has been primarily oriented toward families at the upper end of the wealth spectrum, I am absolutely convinced that wealth can and does destroy any family, no matter what the level of wealth involved. A single asset, whether a piece of jewelry, a sum of money, or a small property, can carry with it enormous importance to the younger generation – either due to its value, or for sentimental and emotional reasons, or, as is more likely, both. How wealth transfers from one generation to the next, who gets what and when, carries messages that are remembered, rightly or wrongly, as being what the transferor “meant.” Gifts of one asset to a son and another to a daughter may be well intended, but may also end up leaving one of the children with a false sense that they were less loved than their sibling.
I also hope that this book will be a guide to those beginning their careers in the wealth-management industry, and that it will help them to understand the real needs of their clients, leading them to become effective, trusted advisors. For the more experienced advisor, this book will, hopefully, help make them even more effective in their work with families. But I am sure that for some in the industry, there will be offence at some of my views. Here, I stand by my convictions – the wealth-management industry, sadly, is in chaos, and often does little to address the real needs of wealth-owning families. For those involved in management and strategy, this is a time of opportunity for those who can understand how an alignment of interests with those of client families can produce results.
The wealth-management industry is a substantial one, producing far more revenues for those involved than investment banking, and one that will grow significantly in the years to come. The Boston Consulting Group, in its 2014 Wealth Report, predicted that global private wealth will reach US$198.2 trillion by 2018, and states that in 2013 there were 16.3 million “millionaire” households around the world, a figure set to grow.
The business of serving wealth owners, from managing their money to offering advice and more, is massive. But there are too few stars who understand that success requires looking at things from a client's perspective. And my criticism of the industry also extends to many financial centers, including Switzerland, Hong Kong, the USA, and others, that have failed to take leadership in the interests of wealth-owning families and their communities.
Hopefully, some of my criticism may positively influence the way forward. For the wealth owner, understanding how the business of wealth management works is an important step toward taking ownership of the succession and asset-protection process, and helping to protect wealth and family relationships.
This book begins with some stories – stories about real families and the difficulties wealth has presented them with. Sadly entertaining, the challenges I outline are meant to show how easy it is for wealth to destroy families and relationships, and how advance planning can reduce the risk of the same patterns recurring. Throughout this book I continue to use both examples of real families whose situations have been in the news and examples from my experience of working with families over the years. In terms of my experience of working with families, I have made sure to reflect in my examples a mix of the issues I have seen occurring – this to ensure that no particular family will see any confidences breached. But I can say with certainty that I have seen far worse than some of my stories suggest.
I then move on to discuss some of the psychological issues associated with wealth that I have observed in my work with families and their advisors. There are many psychological issues that arise in and around wealth, and these impact the thinking of wealth owners as they get older and their life circumstances change. I also discuss the effect of gifts on the recipients of the gift – as well as the effect of not receiving the wealth that one may expect to receive. Gold-diggers, mistresses, toy-boys, illegitimate children, and many more interested players come into the mix. I am sometimes playful in relation to the messy relationships that come into the picture, but I do believe that there are some very practical lessons to be learned for all from reading this book. Not everyone is as evil as I might suggest, and there are many nuances to the complexity of human relationships. But protecting wealth, businesses, and families requires me to approach things in a frank and practical way. These psychological issues are often referred to as being part of the “soft” issues in wealth planning – but the reality is that they are not so soft