Was Tony Blair right second time?

Is privacy and data protection a good thing or not?

 

Should there be a public register of what you own? Would you like your neighbours, friends, children and employees knowing precisely what you own; properties, businesses, pensions and bank accounts? Why not – if you have nothing to hide?

 

Tony Blair, is on record as saying that one of his greatest regrets had been his own Freedom of Information Act. Why because in his view ‘information is neither sought because the journalist is curious to know, nor given to bestow knowledge on ’the people’. ‘It is used as a weapon’.

 

To protect his privacy once he left office and started to make money, he erected barriers to prevent an accurate assessment of his wealth His income was channelled through a complicated legal structure. At the top was BDBCO No.819 Limited a company called either Windrush or Firerush. Windrush Ventures No.3 LP was part owned by Windrush Ventures No.2 LP which in turn controlled Windrush Ventures Ltd. The scheme’s advantage was that the LPs, or limited partnerships, were not obliged to publish accounts. Even without public registers and the protection of limited partnerships, Tom Bower, author of ‘Broken Vows’ managed to track down these details – so why do we need a public register?

 

Furthermore, the drive for a public register is for ownership of companies and properties, but  not of the beneficiaries of a trust – so for anyone wishing to disguise their ownerships they simply need to set up a trust – or take their assets outside the Overseas Territories and Crown Dependencies – in which case Britain plc is shooting itself in the foot. We will get nothing and business will flee from the territories we should be protecting.

 

This week a Government Bill designed to protect the City in the event of a no-deal Brexit was pulled in the face of almost certain defeat after MPs added an amendment that would have forced greater transparency on the Isle of Man, Guernsey and Jersey – the Crown Dependencies.

 

The idea of public registers of companies, was originally proposed by David Cameron and George Osborne in 2013 in the fight against the use of offshore financial centres to launder money using a myriad of offshore companies. It was dropped when May became Prime Minister, but resurrected by a bank benchers Hodge and Mitchell.

 

It is generally accepted that the UK cannot interfere in the affairs of another country even an ‘Overseas Territory’ such as the BVI or Cayman, or a ‘Crown Dependency’ such as Guernsey except in extreme circumstances.

 

The UK has however intervened in the affairs of the Overseas Territories, such as in the repeal of the Death Penalty in 1991 and decriminalising homosexuality in 2,000, but has made no such intervention in the Crown Dependencies, which is why the bill had to be pulled to give time for a more detailed debate.

 

Hodge takes the view that a public register of ownership to stamp out the ‘traffic of corrupt money and illicit finance’ across the world’ justified such intervention! The Paradise Papers according to the campaign group Global Witness estimates that £68bn flowed out of Russia via the British-overseas territories between 2007 and 2016, - but what of other countries? To date only three prosecutions have been made. Is this a good enough justification for undermining the privacy of many others?

 

Andrew Mitchell takes it one stage further, ‘It is only by openness and scrutiny, by allowing charities, NGOs and the media to join up the dots, that we can expose this dirty money and those people standing behind it. Closed registers do not begin to allow us to do it’

 

That did not prevent Tom Bower finding out all he needed to know about Tony Blair!

 

The real debate needs to be on how far can we undermine the human right to privacy enshrined in many countries so that rich countries can pick out a few bad apples in a barrel of good ones?

 

Do you agree, let me have your thoughts or you may like to share this with a friend who may wish to comment.

 

If you would like to find out more please contact caroline@garnhamfos.com or phone on 020 3740 7422.

 

You can also buy my books ‘Uncovering secrets: How to win from Private Clients’ or ‘When you are Super Rich who can you Trust?’ from Amazon or direct from www.garnhamfos.com

 

You can also contact Barbara on barbara@bconnectclub.com if you would like to join our club of UHNW families, or attend our B2B matched networking events starting in May.

 

How to win business from Private Clients

Some years ago, I asked myself ‘How do I win business from Private Clients?’. Not knowing the answer, I decided to write a book on it – which meant reading up on the psychology of selling and winning business –The book was eventually written and published under the title ‘Uncovering secrets: Winning business from Private Clients’.

 

The first chapter deals with setting goals – what business do you want, at what profit margins and who is likely to want your services.

 

Setting goals is the most important step to take, as I have proved time and time again – if you do not set your own goals – someone will set them for you, and you will end up resentful or envious – which is not good for your health or happiness.

 

I included a sub chapter in setting goals on ‘Your subconscious’

 

‘Have you ever been at a party chatting to someone and then out of the blue heard your name? How did you hear it over all the noise? Have you heard a mother tell her child ‘Don’t run’ and the child immediately starts running? Or you say to yourself ‘Why am I so clumsy?’ and immediately drop something?

 

Your subconscious or reticular activating system is continually working; trying to solve problems, and looking for things of interest. But, like a child who is told ‘not’ to run and immediately starts running, it cannot process a negative.’

 

You need to set goals and they must be specific and positive – For example; I want a profit of £3,000,000 from global families who want to protect their family wealth through a trust over which they have control and they want their wishes to bind future generations.

 

Once goals have been set, it is much easier to find clients – direct and indirect.

 

I took the slightly more unusual route of finding clients direct by forming a club of UHNW global families with a partner, Ankush Mehta, who is better able than me, to run events and promote private deals which is what single family offices want. Ankush and I formed The BConnect Club and Barbara Brudenell Bruce is our business development director. The Deal Dinners which Ankush hosts are already established and proving to be popular with our UHNW global families and single family offices.

 

It is now time to add into the event mix ‘Learning Lunches’.

 

Each Learning Lunch event, will be exclusive to 6 global families where they can learn how best to protect their family wealth through a trust while staying in control of the investment decisions and the distribution policy, without being beholden to professional trustees, and how to  introduce binding wishes which guide the family for more than three generations.

The other, and more widely adopted route to win business, is networking and how to do it effectively and efficiently. At its most basic level, networking should be about finding a group of professionals who have clients who you would like to be introduced to.

 

Sadly, however, most people have no real idea why they go to events or what they are expected to do when they get there. They have a glass of wine and look vaguely around for someone they may know. According to the professionals I interviewed for the book, their networking has poor if not non-existent returns on their investment of time. They collect business cards, put them in a drawer, and do nothing further with them.

 

In my book, I talk about the innate fear of the influence of strangers, and that it takes between 5 and 12 touches, before this fear is sufficiently reduced to want to refer business.

 

As from May, BConnect Club will host B2B networking events –designed specifically for private client professionals to win business.

 

At each event, we will ask three or four professionals across a wide spectrum of services to give a ten-minute case study. Stories involving people who have a name (not their real name), an age, family and lifestyle are engaging, informative and fun stories. Ironically stories are one of the four ways to get around the innate fear of the influence of strangers, which means through case studies you can win business more quickly.

 

At our B2B events we will also digitally match each professional with five others across a wide spectrum of service providers. When you arrive, you will be given five names who you our BConnect Club team will introduce you to. So, at our events, you will have no fear of walking into a room full of strangers, you will be carefully matched with the people you need to meet.

 

If you would like to find out more about how to stay in control or your trust and how to create binding wishes, you can contact me at caroline@garnhamfos.com, or on 020 3740 7422.

 

If you would like to buy my book ‘Uncovering Secrets: Winning business from Private Clients’ you can do so from my website www.garnhamfos.com or from Amazon.

 

Or, if you would like to know more about our Deal Dinners, Learning Lunches, or B2B events, please contact Barbara on barbara@bconnectclub.com or call her on 020 7484 5168.

EU: Naming and Shaming

The EU; naming and shaming

 

A Note from Caroline

 

The EU earlier this month revised its blacklist of non-co-operative countries, and increased the number from 16 to 23. Countries such as Panama, Saudi Arabia and Bahamas have now been included. Ireland is not included, because it is in the EU, even though it has been used extensively as a country into which to shift profits.

 

Business is harder to do with entities located in a blacklisted country, because banks operating in the bloc of 28 countries are expected to carry out additional checks on payments to and from a blacklisted country.

 

There is nothing wrong with a country changing its laws and its tax rate to attract business, but high tax jurisdictions, such as most countries in the EU bloc, don’t like it. Companies such as Amazon and Starbucks, have made extensive use of tax haven or low tax jurisdictions to mitigate taxes on their world-wide profits.

 

Intellectual property rights, for example can be based in a low tax jurisdiction such as the BVI and royalties paid for using the brand will lower the taxes in the high tax jurisdiction such as the UK and increase the profit in the BVI entity the low tax entity.  This practise is called base erosion and profit shifting (BEPS).

 

There is little that high tax jurisdictions can do to stop this practice other than to bully, and ‘name and shame’ – which is what the ‘blacklist’ is designed and succeeds in doing.

 

Take the Bahamas, it is a small jurisdiction which has succeeded in establishing itself as a financial centre. It wants to become the number one jurisdiction for headquarters of personal empires. Being included in the blacklist will damage its reputation for being a trusted place in which to base business headquarters.

 

The Minnis administration recognises this, which is why in December 2018, it made amendments to the Commercial Entities (Substance Requirements) Act and sent high level Government Officials to Brussels to meet with the European Commission. Despite these efforts it still failed to stave off entry on the EU’s non-conformation blacklist, and joins countries such as Afghanistan, North Korea, Iran, Iraq and Samoa which are not known tax havens. 

 

In particular, the Bahamas has been accused by the EU Commission of failing to satisfy the physical presence tests.

 

The EU sets out three objective criteria which a country needs to satisfy to stay off the EU blacklist

 

·      Transparency: whether the country is compliant with the international standards on automatic exchange of information (AEOI), exchange of information on request (EOIR), and that the jurisdiction has ratified the multilateral convention. The Bahamas tried to sidestep signing the multilateral convention a few years ago, until the EU forced it to sign through the use of its blacklist

·      Fair Tax Competition: the EU and OECD do not like countries such as the Bahamas charging zero rate of tax on its business income – which it calls a ‘harmful tax regime’. High level Government Officials I have spoken to talk of introducing a tax on business profits, but as yet have not done so, we need to wait to see whether the EU will demand this in due course, and

·      Base erosion profit shifting implementation; the EU wants to see only businesses with substance benefiting from low taxes; not businesses which book profits in the jurisdiction, but have no real presence. Where businesses do not have this ‘Inclusive Framework’, it will be added to the EU blacklist, which was the decision the EU Commission took about the Bahamas.

 

The EU through its harsh use of the blacklist shows us just how serious it is in stamping out tax mitigation which affects their countries’ tax revenue, even if it is completely legal. Naming and shaming works and the smart money now knows that it needs to build in substance or be investigated and attacked.

 

But this approach is not limited to international businesses. Trust structures must also have substance.

 

They need to have

 

·      No persons of significant influence, which could indicate that the settlor did not intend to set up a genuine trust by reserving powers to someone else who could remove and replace them

·      No persons who have no real knowledge and experience of the family, the family business or the family investments. The trustees must act as a prudent man of business and therefore must have the necessary qualifications to do so, and

·      No indemnity clauses, or non-interference clauses, if the trustees are not taking any responsibility for doing their job.

 

 

Most professional trustees are now looking to decouple the administration of the trust from the decision making, by setting up a special purpose trustee for their most significant clients working with GFOS. It is now accepted that tax authorities will do what they did with information they bought from a Liechtenstein Bank employee. HMRC systematically investigated every client of the bank who lived in the UK and argued that it could tax the settlor/ beneficiaries as if the structure did not exist.

 

If you would like to find out more or would like to book a meeting with Caroline, please phone on 020 3740 7422 or e mail on caroline@garnhamfos.com.

 

You can also buy Caroline’s books, ‘When you are Super Rich who can you trust?’ and ‘Uncovering Secrets, How to win business from Private Clients’ direct from www.garnhamfos.com or from Amazon.

New trend for single family offices

Twenty-three single family offices with a combined net wealth of $20 billion came together for a BConnectClub dinner at L’Oscar on February 6th to listen to three investment presentations.

 

Amongst the investors was my client, Jacob (not his real name).

 

Jacob sold his company in 2015, and the first thing he did, as I say in my book ‘When you are Super Rich who can you Trust?’ was to set out for himself goals for what he wanted to do with his new found wealth.

 

He wanted to invest half his liquid wealth in growing tech companies and the remaining half he wanted managed by professional investment managers. With regard to his family, he wanted his children and grandchildren to have a decent education, a home and a fulfilling career, but he did not want to spoil them financially - and he wanted a boat.

 

In 2018 I set up for him a Special Purpose Trustee (SPT) and embodied his goals and strategy into a binding family constitution. We also set up for him a family office to administer his tech investments and to keep his investment managers on their toes. They were expected to prepare investment reports on a six-monthly basis which would be reviewed by the executive board of his SPT.

 

‘I am not sure the board of my SPT are being critical of my single family office executives or the investment managers. None of us are investment specialists. They all seem too cosy; they get paid a lot for pitiful returns. Is this the best they can do, or should I expect more?’

 

I asked Jacob how he had picked his tech investments, single family office executives and the investment managers and why had he kept them.

 

‘I suppose I hand picked my single family executives on shared interests; tennis, rugby and the opera, and a good cv, and they picked the investment managers. I know what to look for in tech companies so I tend to pick which projects to invest in. I like to keep an eye on the tech projects, but I am not sure that my single family office executives or investment managers are any good, and I don’t understand their reports’

‘Why not explore with the executive board of your SPT at your next meeting appointing an independent investment performance analyst to review the performance of your single family office, each investment manager and your non-liquid projects – an independent asset audit?’

 

‘For example; investment manager A may be producing a better return than investment manager B, but he may be taking a higher risk or paying dividends out of long term borrowings. The performance of investment manager B, may be taking less risk, but is invested in sustainable companies.’

 

Jacob looked puzzled ‘So we appoint an investment performance analyst to teach us what to look for in our single family office executives and investment managers?’

 

I agreed. By carrying out an independent investment performance review, he and the board would learn more about the ‘art’ of investment management and what to look for. The board would then be much better informed as to what it wanted and could then analyse the reports prepared for it more critically.

With regard to finding a new investment manager or single family office executive, I told Jacob they could find private client professionals through the BConnectClub.

Each private client professional has a network of professionals who have clients to whom they refer business – however, referring a client to someone in your network can be a bit ‘hit and miss’ and a reliable network takes years to develop.

 

With digital technology pioneered by BConnectClub, this process can be sped up and made much easier and more efficient.

 

Every adviser wanting to win new business, whether from Club members or through its network, is asked to fill out a questionnaire; what services do you provide, what type of clients do you have and what are your interests. These answers are then matched to the questionnaires of other professionals. Each professional is then ranked by his or her peers according to ‘likes’.

 

This process of ranking professional advisers, in a particular sector, gives a fairly accurate assessment of how the industry views each professional. From this a short list can be identified and the executive board of the SPT can interview each of them against an objective investment strategy.

 

To further speed up the process BConnectClub not only provides deal dinners for Club members like Jacob, but it also hosts B2B networking events for private client professionals. At each event they learn what others do for their clients in a series of case studies, and are given a short list of five other professionals who are at the event and with whom they may like to refer business.

 

This strategy is not new, it is set out in my book, ‘Uncovering secrets; How to win business from Private Clients’

 

If you would like to find out more about GFOS or to buy my books, ‘When you are Super Rich, who can you Trust?’ or ‘Uncovering Secrets; How to win business from Private Clients’ call Caroline on 020 3740 7422 or email caroline@garnhamfos.com or you can buy her books on Amazon.

 

If you would like to be a part of BConnectClub, call Barbara on 07970 000020 or email on her on barbara@bconnectclub.com.

Omissions can be expensive

Our property expert recommended me to a client recently who had inadvertently got caught up in a wasteful and unnecessary dispute.

 

A professional trustee ABC Fiduciary Limited, (ABC) held a property portfolio for a trust it was administering, worth in excess of £20 millions. The trust had been set up by lawyers in the UK, for the settlor Amin, his wife Sally and their three sons of whom Rauolf was the eldest. Amin lived in the Middle East and worked on an export business with his brother, Saoud.

 

The first property the trust acquired was a mews house in Mayfair, which the family wanted to use, from time to time, when they visited London, which was once or twice a year.

 

When Raoulf, turned twelve Amin and Sally decided to send him to school in the UK, and given that the family would be spending more time here, decided the mews house would be too small.

 

The Trustees of Amin’s trust bought a more substantial property in Mayfair for the family as well as Raoulf’s friends, some of whom would be staying in the UK over the school vacations.

 

About this time, Saoud’s son, Maan, Raoulf’s cousin, finished his education and was looking for a job in London. He did not have anywhere to live so Amin agreed with Saoud, that Maan could live in their mews house, since Amin and his family now had somewhere else to stay. The Trustees kept a minute of their decision.

 

Time went on, and Saoud and Amin fell out, Amin took over the Western side of their business and Saoud the East. In due course, their grievances grew into a serious dispute and the families stopped speaking with each other, but Maan and his occupation of the mews house was overlooked.

 

In due course, Raoulf finished his education and went to university in Durham, where he did very well. After university, he was offered a training contract with a US law firm in London. But by now his younger brothers were at university and school in the UK, and Raoulf found their home too crowded and noisy to live in and asked his parents for a place of his own.

 

It was at this time, that Amin remembered that Maan was living in their mews house and asked the trustees to obtain vacant possession so that Raoulf could move in.

 

Maan had by now been living in the mews house for fifteen years completely free of charge, apart from paying the bills and outgoings which he had in his name. He had no intention of moving out. He spent most of his time in Mayfair, ‘doing deals’ which rarely came to anything, but that did not stop him living a lavish lifestyle with expensive holidays and habits.

 

Amin took legal advice, and was told that in the absence of any License Agreement or correspondence stating that his occupation was unwelcome he had obtained squatters rights of ownership and could apply to have the mews property registered in his name. ABC Fiduciary was informed of the application, as the registered owner.

 

It instructed solicitors, who advised ABC Fiduciary to object to the application which it did, it then started legal action to get Raoulf removed from the property which was not easy.

 

Raoulf was adamant that the mews property was his, and would not give up without a court order. Years of expensive legal wrangling ensued and finally both parties had to appear before the Land Tribunal, each represented by a qualified and expensive barrister.

 

The Judge in his summing up was critical of ABC  for not taking its responsibilities as a property owner and trustee with due care and attention. He specifically pointed out that Raoulf, at no time was asked to sign a License Agreement and not once had ABC inspected the property to see who was living there or how well it was being maintained.

 

However, despite being critical of ABC, Raoulf was ordered to vacate the property.

 

By the time he moved, out the total cost in legal fees payable out of the trust fund was in excess of £500,000.

 

ABC was anxious to avoid Amin suing it, given the harsh criticism of the Judge, but Amin was keen to give it a bloody nose. Our property expert suggested Amin see me.

 

My advice was that given the wide non-interference and indemnity clauses it was probably futile for Amin to sue ABC, but that he should replace ABC with a Special Purpose Trustee. We could then remove the non-interference clauses and replace them with positive obligations on the Trustee to interfere in the inspection and legal audit of the trust properties (and other trust assets) to avoid this unnecessary and costly omission occurring again.

 

GFOS was able to introduce Amin to our team of investment performance analysts including our property expert, bankers, dispute resolution specialists, investment managers and fiduciaries who are skilled and able to carry out an independent report as to whether Amin’s trust assets or trustees were doing what they should to maintain and preserve the value of his trust fund.

 

If you would like to find out more about our team and what they can do to ensure you and your trustees avoid expensive disputes and diminution of value, call GFOS on 020 3740 7422 or drop us an email at caroline@garnhamfos.com.

 

You can also buy Caroline’s book ‘When you are super rich who can you trust?’ or ‘Uncovering Secrets; How to win business from Private Clients’ direct from ww.garnhamfos.com or direct from Amazon.