In 2018, the number of people having a net worth of more than US$ 1 million worldwide exceeded 19.6 million and this is expected to grow by 19% over the next 5 year period. The UHNW population (worth US$30million+) in 2018 stood at 198,342. The predicted UHNW population is going to grow 22% by the year 2023.
Key Reasons to Set up a Family Office
In Malta the interest for setting up a Malta family office has increased considerably in the past couple of years and the trend seems to be continuing and that it will continue well into next year. Why should you set up a family office? In 2018, the number of people having a net worth of more than US$ 1 million worldwide exceeded 19.6 million and this is expected to grow by 19% over the next 5 year period. The UHNW population (worth US$30million+) in 2018 stood at 198,342. The predicted UHNW population is going to grow 22% by the year 2023. The number of billionaires in 2018 stood at approximately 2,229 and by 2023 this is estimated to grow up to 21% to reach 2,696. This increase in wealthy families will mean that the requirement to have their interests protected by knowledgeable professionals will increase.
Main Advantages of Family Offices
Dedicated Family Asset Protection
Family members want to continue with their current lifestyles and not experience any major changes unless these changes are for the better. The main aim of family members during their wealth creation years is that of enjoyment of this wealth creation but also of a certain level of protection to provide for their less active years. Retirement is perhaps one of the least discussed topics during ones prime however it is a period of ones life that one has to plan for especially with retirement no longer being what traditionally has been viewed as a period where one sits down with a book for the rest of his days but where retirement is being seen as an opportunity to catch up with anything that one has missed previously; pursuits ranging from adventurous travelling (health permitting) to arts discovery to voluntary work and philanthropic endeavours are now becoming more common. One of the advantages of having a family office handle the family's affairs is the education and mentoring of next generations to take responsibility of the family's wealth and allow older generations to retire with a peace of mind.
More effective and knowledge-based decision making
A sense of family unity can be offered through a family office where the family together with their dedicated advisors within the family office work together towards one common goal i.e. that of growing and protecting the families assets. This is where the position of a family office becomes crucial in taking important decisions with the family and of steering and leading difficult discussions which would usually either be circumvented by the family because they are uncomfortable or else lead to disagreements between family members especially in the scenario where family businesses are concerned. Having a family office means that professional input is being given along the way so that certain decisions are reached without the necessary hurdles that a family acting alone would usually encounter. These decisions are taken with a better understanding of the individual and family goals and thus there is better alignment of interests.
Privacy
Having a dedicated family office also means that one can protect the family's privacy and financial information. In an era where transparency of financial affairs is top on the agenda of all governments in order for them to be able to curb abuse, families sometimes feel that their private business affairs are being given way too much airing and especially in certain jurisdiction security of family members might also become of major concern. A family office offers a controlled environment where this information in kept within one entity rather than having different providers deal with different aspects of the business and therefore information does not need to be shared with these different providers. Engagements can be held by the family office for advice which necessitates involvement of third party advisors thus retaining family confidentiality. This is not to say that a family office will offer a safe haven for those who want to circumvent statutory information sharing with authorities but it means that receivers of this information are reduced to a minimum.
Personalisation and Economies of Scale
The services offered by the office are exclusively developed for that family and together with the family and are therefore only what the family needs and thus the cost is reflective of this reality. Coordinating of expertise and advice procured from third party advisors is coordinated through the family office rather than family members directly and therefore it is consonant with what the family at large requires and there is no risk of one family member steering the discussion in his/her favour. External advisors could range from investment managers to property managers to accounting professionals based in various jurisdictions depending on where the family have their interests or where they are seeking to grow their interests. The family office has a full picture of the family's requirements, investment strategies and objectives, preferences and varying characters and ideologies. This makes gives the family office an advantageous position to be able to play other service providers' strengths to the advantage of the family by only choosing the best for that specific scenario in the relevant jurisdiction whilst not being tied to any of them. Using pooled entities and investment vehicles also means that a family office is able to give a premium service and procure other high end services for different businesses of the family at advantageous rates.
The Malta Family Office Toolbox
The family office can use a variety of tools in order to achieve its objectives of capital accretion and protection. Holding Companies play an important part in the ownership of the operational business of the family with specific special purpose vehicles and trading entities located wherever the business operates. Identifying the best suited holding company jurisdiction is very important because it is ultimately protecting any underlying assets and consolidating wealth whilst facilitating re-investments.
Different asset protection vehicles including Malta trusts and Malta foundations can then be used in order to ring-fence assets for protection purposes with the family office working hand in hand with the trustees and administrators to achieve the central objectives for which they were set up in line with the family's goals. A family office could indeed be instrumental in setting up the family's own private trust company to administer the trusts of the family. Private trust companies are specifically exempted from regulation under the Malta Trusts and Trustees Act. The process is one of registration and is therefore much faster and simpler to achieve. Investment requirements can be achieved through a family and friends fund which is much more flexible in terms of regulation and can again be centrally conducted through the family office.
Families internationally have become more sophisticated and mobile. Families are increasingly becoming forward looking and are extending their plans beyond those of one or two generations because they want to create a long-lasting legacy. Cross-border issues will inevitably arise and having one central family office to manage these is a great relief for all the members of the family.
Our Malta Family Office Services
Led by Senior Partners Dr Jean-Philippe Chetcuti and Dr Priscilla Mifsud Parker, our Global Family Office Advisory practice undertakes a limited number of bespoke assignments each year. Family office advisory projects, which include family office design, review, audit, and advice, require a hands-on approach due to their complex and personalised nature.
Our multi-disciplinary approach ensures comprehensive all-in-house services to business families and successful entrepreneurs of all ages, addressing both their business needs and personal family goals. Specialist private client practices combine seamlessly together to provide best-in-class advice on personal tax, corporate tax, trusts, corporate governance, immigration and family law often on an international level. Our experienced family office lawyers understand the unique needs of families and offer strategic advice to enhance wealth growth and protection, business potential, smooth operations and effective personal lifestyle management.
Family Office Solutions on a Global Level
Our Family Office Structuring practice operates on a global level through our close network of legal and tax firms and works with best-in-class colleagues in their respective fields across the globe. This ensures we are able to offer our clients the best fit for their requirements without country bias.
As a multi-disciplinary legal and tax firm with a strong international practice, Chetcuti Cauchi offers a wide range of services for family offices, tailored to meet the unique needs of high-net-worth families and their businesses.
