Interview with Financial Times

Matthew Vincent of the Financial Times contacted me last week to ask my views on UHNW deal clubs and to find out about the launch of our BConnect Club. The article can be found in the next edition of FT Wealth delivered FREE with the FT newspaper on 4th May.

As I told Matthew, the vision for BConnect Club is quite simple - we want to offer our UHNW members a place where they can find co-ivestors, find exclusive deals, find the best professional advisors and do it efficiently. They are part of an exclusive Club which has their interests at heart and provides them with an independent investment platform.

Investment is a people's business so all of our members are interested in meeting one another and finding partners for their projects. Our launch tonight will be one of the many events we will be hosting this year as a way to connect our members on and off line.

Matthew’s first question was ‘Why is there was so much interest from UHNW investors in doing deals direct?’.

In my book ‘When you are Super Rich who can you Trust?’ I remind my readers that the price of any stock or share quoted on a market, is dependent on how many people want to invest in it. Investment Managers may know all the facts and figures of stocks, shares, sectors and economies, but cannot predict whether any one will interpret these facts and figures in the same way and invest. It is only when a lot of people are chasing the same investment that the price goes up. 

At the same time Governments oblige financial institutions to be transparent in what they charge for their services.  Gone are the times when charges could be hidden in the small print.

So not only does the Financial Institution have to comply with the Governments hunger for information, but they must also openly declare how much they are making in fees. The point at which the investment manager is making as much, if not more, than the investor, is the point at which the investor starts to look for new ways to invest. And for many that point has been reached.

I personally know of deal clubs in London, Singapore, Canada, Dubai and Switzerland and they are growing almost daily. But each club faces the same challenges - good quality members, good quality deals and good quality events.

Some clubs get ‘good quality members’ by charging a high up-front fee, to weed out those who are not serious. We don’t. We screen our members and each and every one of them must be 'verified' before they join the platform as an UHNW or SFO member.

Another challenge is to make UHNW individuals and their single-family offices want to come back. From our experience, like minded wealthy people want to find others like them, to do deals – of course -  but also to ask for their opinion, ideas and recommendations. Like this evening’s event we bring our members together regularly, not only to promote deals, but as you can see from our broad range of sponsors, such as Bank Julius Baer, Cult Wines, and SPS security services we promote exclusive luxury products, as well as specialist advice.

BConnect Club enables anyone who wants to promote their luxury product and or specialist service providers to connect with our UHNW members, how best to do so is explained in my book ‘How to win Business from Private Clients’.

If you would like to find out how you can join the Club please contact us direct.

Contact :

                        020 3740 7423

To buy Caroline's books please press here:

Family Governance III

This is the third in my mini-series on good family governance. In the first Note, I defined family governance to mean ‘the facilitation of effective entrepreneurial and prudent management of family assets that can deliver long term preservation of the family wealth’.

An essential element in the preservation of family wealth is to keep costs and risks to a minimum. Last week we looked at keeping fees to a minimum when dealing with a dispute within a family, and the week before we looked at keeping fees to a minimum when dealing with disputes outside the family. Now we look at keeping costs and risks to a minimum when dealing with an investigation from a tax authority.

In my experience, dealing with a tax authority is unlike any other interested party. It has a bottomless pit of resources, a manual as to how to deal with investigations and the ability to impose criminal sanctions.

An economist Dr Pickerty works closely with the OECD. He has calculated a whopping $7,600 billions of private wealth is held offshore which is untaxed. For cash-strapped Governments this is a prize worth fighting for, but until recently they were uncertain as to how to attack them, until Olenicoff.

Olenicoff was a Russian gentleman, under investigation by the IRS. He had $200 billions of untaxed and undeclared monies. The IRS gave him the option, spill the beans as to who and how he was advised or face a jail sentence of 22 years.

It took him just 30 seconds to decide.  He admitted that his advisers were UBS and his trust was a sham. For him it was preferable to pay the tax than go to jail. He was then taxed as if the monies had never been transferred into trust, but had remained in his unfettered ownership. He paid a lot of tax – but kept his freedom.

Until the case of Olenicoff, monies held in offshore trusts were beyond the reach of foreign tax authorities. But this case gave the IRS the ammunition it was looking for – the doctrine of sham.

All the IRS now needed was to get the information they needed about offshore trusts and who set them up, they could then investigate for evasion of tax and use their extensive criminal prosecution powers to impose jail sentences.

The IRS then came up with FATCA.

Under FATCA all financial institutions with assets in the US were obliged to report on all its clients who were US nationals. At the time, many thought it was shooting itself in the foot. Financial institutions, it was thought, would divest themselves of their US assets – but they did not – they preferred to report on their clients even though to do so cost them a fortune. Forbes has estimated that the cost for financial institutions to comply with FATCA is ten times the expected tax take for the IRS

The OECD encouraged by the success of FATCA followed suit. It introduced the automatic exchange of information (the Common Reporting Standard ‘CRS’) on all its member states – other than the US (which already had FATCA). Under CRS financial institutions are obliged to collate and exchange information with the tax authority in which the Settlor is tax resident.

However, despite this sword of Damocles, most fiduciary businesses are sanguine. They are satisfied that they operate their businesses with care, keep proper records and minutes and do not operate ‘sham’ trusts.

But this is to miss the point. Tax authorities are of the opinion that any trust over which the Protector has powers; such as to remove and replace a trustee is prima facie evidence of a lack of intention to transfer total control over the assets to the trustee. The tax authority then has all the information it requires to investigate. 

Olenicoff was faced with a plea bargain – confess that he did not have the necessary intention to relinquish control over his assets to his trustees, and pay tax on the trust assets as if they were not in trust, or go to jail for 22 years.

That may be a sensible decision for a Settlor such as Olenicoff to make albeit costly, but it is not such good news for the professional trustee.

If a trust is a sham, the trustees have no right to recover their professional costs from the trust fund and must return all their fees from inception to the Settlor. It does not take much work to calculate just how damaging such an investigation could be to any fiduciary business.

Good family governance recognises the risks and dangers facing families such as from over-zealous tax authorities and comes up with solutions.

If you have comments or would like to discuss matters relating to, privacy, control, trusts and protection of your assets please contact us direct.

Contact :

                        020 3740 7423

To buy Caroline's books please press here:

Family Governance II

In my last note, we looked at how poor Family Governance can adversely affect disputes outside the family in offshore trust situations. Poor Family Governance is the term I use to indicate a lack of accountability of trustees, and how it can adversely affect disputes.

This week, I will look at how poor Family Governance can adversely affect disputes within the family.

Last week, I was the guest of the International Business Finance Summit, presented by the Bahamas Financial Services Board. It was clear from the Government Ministers who attended and spoke, that the Bahamas is focussed on positioning itself to be the most attractive jurisdiction for businesses owning families to base their home and headquarters.

However, if it is to succeed in attracting these highly discerning clients, it needs to be able to demonstrate that their trust structures operate good Family Governance.

Let’s take the situation of Don who is keen to set up a trust with his second wife Susan. Don has a son from his first marriage, Ali, a son from a brief relationship, Josh following his divorce and a young daughter with Susan, Rebecca. He gave Ali a house and a large settlement when he divorced his mother, and the same for Josh when he became 21.  He wants to benefit only Susan and Rebecca.

The trust was set up for him before Josh was born and the beneficiaries are, his wife, children and grandchildren. He is very concerned that on his death, incapacity or the sale of his business that Josh and Ali, will put in a claim against the trustees for a greater share. He asked what he could do.

There are a number of provisions which can be included to deter Josh and Ali from bringing a claim, many provisions are variations of a ‘no-contest clause’. This is where a beneficiary who brings a claim against the trustees will be excluded from benefit.

My personal view is that such clauses are a retrograde step. Trustees must be accountable to the beneficiaries and if they do not act in the best interest of their beneficiaries, the trustees must be made to account. If this right to make trustees accountable is removed the are then beyond reproach.

Another possibility is to ask the beneficiaries to declare that in receiving a benefit on reaching 21, they will renounce any further right to benefit. This could again act as a deterrent, but it is by no means watertight against a claim.

Don is citizen of a country where children are forced heirs, which means they could put in a claim that the trust be put aside on the basis it is a sham. If the case succeeds then each child will get such share as is permitted by law.

To succeed Josh and Ali’s lawyers will need to analyse the trust in close detail to see what powers the trust has and whether these powers were exercised by the trustees independently from Don – which is unlikely.

The other avenue that Josh and Ali could pursue would be to see whether the powers over the trust were reserved to a Protector and to explore whether the Protector only exercised his powers at the request of the Settlor, in which case it may be argued that the Protector was the Settlor’s alter ego – and was therefore an administrative sham.

To make these arguments against the trust – are likely to be extremely expensive in legal and fiduciary costs. If both Ali and Josh are excluded as beneficiaries from the trust, the trustees would have no alternative, but to continue the action, because they may otherwise be restricted in their means to negotiate a settlement.

In most family disputes, excluded beneficiaries do not care how much a trust costs to resolve a dispute, on the basis that if they cannot benefit, they will make sure there is little left after legal fees for Rebecca and Susan!

My personal view is to steer Don away from ‘ruling from the grave’, and to put in place good governance principles. Mechanisms which will make the trustees or people who take the trust decisions accountable with their office, and not their pocket.

One trust dispute with which I was involved in a similar situation, was frozen in taking a decision, and as each year passed with the dispute unresolved, the legal and fiduciary fees got ever bigger.

If the trustees making the decisions could lose their office if they failed to resolve a dispute swiftly they are more likely to act in the best interests of the beneficiaries and resolve the dispute as soon as possible.

My suggestion for the Bahamas if it wishes to attract the business it wants, is to promote themselves as a jurisdiction which specialises in and understands Family Governance which is reflected by their trust law. I am actively advising clients on setting up robust wealth ownership structures. 

If you have comments or would like to discuss matters relating to, privacy, control, trusts and protection of your assets please contact us direct.

Contact :

                        020 3740 7423

To buy Caroline's books please press here:


Family Governance

Last week I wrote about the announcement of the BConnect Club launching its online platform which connects clients direct to exclusive deals, invite-only events for Family Offices and UHNW and an independent resource of information. If you would like to hear more, please get in touch with Svetlana.

This week I'd like to write about something I consider of utmost importance when planning for family wealth structures.

The term ‘Family Governance’ is a term I used some twenty years ago in response to the question: Why do most companies survive for a considerable time after the death of the founder, whereas most trusts do not?

At that time, I was due to go on a long-haul flight, so took with me the Cadbury Report and the Greenbury Report (which later became the Combined Code of Corporate Governance) to see what I could incorporate into trust structures with substantial wealth to assist in creating dynasties.

As a result I coined the phrase Family Governance, which I define ‘to facilitate effective, entrepreneurial and prudent management of family assets that can deliver long term success of the family wealth.’

At the heart of good governance is accountability; the executive or directors of the company are accountable to the Shareholders. In a similar way in the traditional trust, the trustees are accountable to the beneficiaries. However, beneficiaries have never had the power to remove the trustees – the trustees are accountable not through their office but through their pocket. If any decision causes a loss to the trust fund the trustees are obliged to make good such loss.

As trusts became ever more useful tool for international families with substantial wealth, so did the need for professional trustee indemnity became important. Now, it is commonplace for the trustee to be liable only for acts of fraud or gross misconduct. This I contend has undermined their accountability and good governance.

There are three areas in which disputes arise, which I will look at over the next three weeks to see in which ways accountability has been undermined, with reference to cases in which I have been involved. The first area of dispute is with extra family parties.

Trust assets are outside the reach of the creditors of the settlor, provided the assets are properly settled within the time limits set by the jurisdiction which governs the trust. I was working for a very wealthy individual, he was anxious about putting his business into a trust structure, given the need he said for the trustees to make good commercial decisions affecting the running of his business, which he did not feel comfortable that they could do.  A few years later he was sued by a former business colleague who accused him of fraud. If he had put his business into a Trust in a timely fashion as advised, he would have saved his business. Instead it suffered irrecoverable loss.

Protectors are often given powers to remove and appoint new trustees, but the office of a Protector is not comfortable. Take the situation in which I was involved recently. A beneficiary requested the trustee to pay to him trust assets in specie. The trust was of considerable value to the professional trustee, so they acted slowly and with extreme caution.

My client asked the Protector to remove and replace the trustee, but the trustee sent only a record of the decisions taken without any reasons behind them, and refused to fund him to take a legal opinion. The Protector with no recourse to the trust fund to indemnify him against the cost of legal action, was afraid to do anything, but if he did nothing, and a loss was incurred he knew he could be sued by the beneficiaries for breach of his fiduciary duty to remove the trustees when required.

In a similar case, trustees were asked to bring a trust to an end in favour of a particular beneficiary. They incurred huge costs in approaching each of the other beneficiaries to get consent to the distribution and a waiver of any right they may have against the trustee. The beneficiary disputed this cost as not being for his benefit but for the benefit of the trustees. However, the trustees were not liable as the loss incurred was not as a result of fraud or gross misconduct.

The third area of dispute is with regard to the spouses of the settlor and/or the beneficiaries. One case in which I was involved many years ago, involved a settlor of a substantial estate. She subsequently divorced her husband. He claimed in the divorce, that the trust assets should be brought into account, since the trustees had never denied her request for monies. The matrimonial judge made an order in favour of the husband, but the trustees refused to make the payment to my client on the grounds that the payment was not for her benefit but for the benefit of her former husband.

In due course, the Judge made an order that she was in contempt of court, and threatened her with prison. She pleaded with her trustees to make the payment to stop her going to prison – which they did but not without a waiver from her of her rights to sue them for loss due to their breach of fiduciary duty.

These cases highlight the frustrating situations which arise due to a large degree on a lack of good governance which is prevalent in most international trusts.

Next week I will address the difficulties which can arise between families and how poor governance exacerbates the problems.

If you have comments or would like to discuss matters relating to, privacy, control, trusts and protection of your assets please contact us direct.

Contact :

                        020 3740 7423

To buy Caroline's books please press here:

A Club for UHNW Families

I am proud to announce BConnect, a Club for UHNW individuals and single-family offices, which combines the connections and expertise of both GFOS and Bespoke Connections to form a ‘one stop shop’.

Our mission is to introduce our UHNW members and single-family offices of which GFOS and Bespoke Connections have, between them hundreds, to investment deals, luxury products and advisory services through our digital platform. We use technology to connect our UHNW members and single-family offices with the opportunities, skills and expertise of our contacts and make the connections between them bespoke and personalised.

My boutique law firm, GFOS focuses on the protection of family wealth and the preservation of privacy, in a fully compliant manner. I was head of the private client department of Simmons & Simmons, and am a practicing lawyer and fellow of the Chartered Institute of Taxation. I have worked for some of the world’s wealthiest families for over three decades and know a lot of people, many of whom share my passion to connect the UHNW community and their single-family offices with investment opportunities, products and services they may not otherwise find.

In setting up Protection Packages for my UHNW clients I am frequently asked to be on the board of their ‘Headquarters’, the board which sets out the strategy for their single-family office or global business empire, either in an executive or non-executive capacity. From this lofty position, I am able to find out what these wealthy families want. They are looking for good returns without excessive costs, freedom from disputes, privacy and meaningful succession.

Ankush Mehta who founded and runs Bespoke Connections, is of the same view. He is in business with a team of 15, working for hundreds of single family offices helping them to find the investment opportunities they are looking for.

With record low interest rates and stratospheric compliance costs, single family offices are tasked to find good investment deals. Many speak highly of the service and connections Bespoke has made for them, but are also aware that if they are to see more deals in real time in their area of interest, across the globe, connections need to be made digitally.

Through BConnect we want to offer you a better way to connect to our UHNW individuals and single-family offices.

For centuries, the private client industry has relied on personal contacts to find the right investments, luxury products and advisers. Each adviser has on average 3,000 – 5,000 contacts, how can you keep in touch with them all, in a meaningful way, if not digitally?

In my book ‘How to win business from Private Clients’ I address this question.  Everyone has an innate fear of the influence of strangers – to build trust, this fear must be overcome. It takes between 5 and 12 touches before this innate fear begins to abate and trust starts to grow. If you only ever do this in face to face meetings – it can take years, Most people give up after just 2 touches – one meeting and one follow up. This is not enough to build trust and win business.

Only 1-2% will buy from a stranger, to win business effectively and efficiently, it is necessary to overcome the ‘innate fear of the influence of strangers’ and to connect more regularly - digitally.

My book sets out an eight-point plan and shows you how with the proper use of digital technology, you can increase touches and build trust electronically, easily, cost effectively and simply – at a click of a button.

If you have an investment opportunity, luxury product or advisory service which you think may be of interest to our UHNW members, and/or you wish to buy my book, simply contact Svetlana who will put you in touch with the appropriate person.

Our launch party is on the 20th March for our UHNW members and single-family offices. If you wish to find out more simply contact Svetlana on 020 3740 7423 or e mail on