Join me on the Nicky Campbell show

Last week the BBC asked if I would join Nicky Campbell on his show the Big Questions which will be live on Sunday 6th January 2018 from James Allen’s School for Girls in London. The issue to be debated will be whether it is fair that the super-rich earn in four days what the average man or woman earns in a year and whether London is only for the super-rich.

My response is, of course, it is not fair that some can earn in four days what others take a year to earn. But before we get heated up with issues of fairness and envy let’s look at what is really going on. My clients have money to invest, and this country/London needs cash for investment; into affordable housing, better child care, good education and excellent health. The simple question is how to get those with money to invest in what we want? One way is to raise taxes. Hollande tried this in France and the French simply sold up and walked away. Macron then reduced the rates and the investors came back.

My clients have lots of money to invest. On average, 28% want to invest in equities. If this were invested in our stock exchange it would create thousands of jobs across the country, and 18% in property, if this were invested in affordable housing it would solve the capital’s biggest crisis facing London’s workers; our cleaners, shop assistants, teachers and waitresses.

So, what are the barriers to entry, what is holding them back, why is the UK not benefiting from investments in the UK?  Simply, because our tax system, discourages it. Our foreign residents are incentivized to keep their money invested outside the UK, investors keen to invest in affordable homes to let, have to pay up to 15% on acquisition, and most investments in the UK attract inheritance tax at 40% – with a few simple tweaks this could be changed and we could see investments flood into the UK, from which we could all benefit; affordable housing, better education, care for the elderly and excellent health care – just a few simple tweaks and some political will to make the UK a better place!

As to the second part of the debate, we need the Government to free up the housing market. A lot of my clients have money tied up in property in which they do not live – empty homes. They would sell and reinvest if the Government were to introduce incentives to these owners to invest in what we want; affordable housing, better education, care for the elderly and health improvements.

So, what are the causes of stagnation in the housing market? George Osbourne in 2015 increased stamp duty land tax by a further 3% for second homes and buy to let homes. As a result we now have £4 billion shortfall in Stamp Duty Land Tax against projections and the overall tax take is less tax compared to before the changes. Sellers can’t find buyers for homes above £2 million, - the rates of tax are simply too high, owners are not selling and the government and we in Britain are losing out!

What we need is some joined up, long term, back to basics thinking. Who has the money, what do they want, what do we want and join up the two with some incentives and penalties. If we were to reduce the 15% top rate of tax on buy to let properties and introduce incentives to invest, the vast swathes of land east of London could be freed up for housing, industry, research and development. My clients would readily sell up their mansions and reinvest.

But, are our politicians more concerned with getting elected next time around, or what is best for Britain, are they rearranging the deckchairs as good ship Britannia sinks, are we in danger of throwing away a great future on some ideological mantel of ‘fairness’, sacrificing our potential out of political cowardice, consigning our fellow citizens to homelessness, because we stubbornly ignore some basic facts of reality, wanting some mythological ‘fairness’?

It is really very simple incentivize those with money to invest in what we, Britain, want and need.

Please let me have your comments ahead of the show and of course your comments after it.

If you would like to buy Caroline’s book When you are Super Rich who can you Trust? or Uncovering Secrets; How to win Business from Private Clients you can buy them from Amazon or direct from www.GarnhamFOS.com or you would like to book a meeting with Caroline to find out more about how to protect wealth without losing control, email her on caroline@garnhamfos.com or call on 020 3740 7422.

2019 - let's make it a good one.

2019, is the year to win new business, and we want to do what we can to help you.

Here is an extract from my book, ‘Uncovering secrets; How to win business from Private Clients’ about how to go about it.

‘Traditionally, there are only two routes to market to win new business; making more out of what you have got…and networking.

All UHNW individuals need an adviser to help them manage their wealth. All UHNWs will need to put in a tax return and must have a bank for the safe custody of their wealth. By definition, all UHNW individuals in the world can be contacted - once removed - through their advisers.

Furthermore, if the adviser wants to build a trusted relationship with his or her clients, they use their extensive knowledge about them to find ways to assist. ….., this means recommending the services of those in their network to their clients. … in this manner … they get a qualified lead, pre-screened by your network and you are on the way to building a trusted relationship with your client.

Liz is an estate agent. She knows that Juan is coming from Argentina and she has been looking to buy a house for him and his family. She already knows a lot of valuable information about him, which she can use to help Juan and build trust, but also strengthen the ties with her network. She’s worked with Juan for several months and has got to know him quite well. If she focuses merely on her expertise she will be missing out on a valuable opportunity to use the information she has gleaned about Juan to win her new business.

As it begins to look as if a purchase is going to proceed, she will ask Juan who he’ll use to do the legal work for his purchase. If he does not have a lawyer, this is her first opportunity to make a recommendation.’ Liz introduces him to Shaun.

…. A month after the sale, Liz phones Juan to find out how he is getting on. He tells her that Shaun did a great job for him, introduced him to Jason who helped him with schools for his daughters, and is now working on a succession plan. He also tells her that he’s bought some new art which looks stunning in the flat and is starting a collection.

This is another opportunity for Liz. She asks him where he bought the art and whether he has proper insurance for it. She can now recommend Juan to an insurance broker and of course let the insurance broker know that she has done so.’

Having a good network is not about quantity, but quality.

‘If a contact, has neither the clients she is looking for or has services her clients could use, or are not the professionals she would like to refer business they need to be axed: they will not refer work to her and she will not be referring work to them.’…

Every professional should actively manage their network. ‘You need to record what work your network does, how often you have referred business to them, how many times you have gone out with them for coffee or tea, …’

‘Having an active network should be a two-way street. …’

‘The reason why advisers do not reciprocate business is either because they do not care for their clients or do not know what you do well enough to recommend you. ..’

In 2019, I will be working with BConnectClub and its UHNW members and single-family offices. BConnectClub is where UHNW individuals find deals they may not have come across, luxury products they may not know about and advisers they may need.

My role in working with the BConnectClub is to find out whether our UHNW members have structures which need reviewing, assets which need auditing and portfolios which need pruning. I will be actively involved through GFOS in working with them and in building trust by introducing them to the services they need from the BConnectClub directory. For this I need to build an unparalleled network of luxury product providers and best of breed advisers to which we can introduce our members.

To assist me, BConnectClub will be hosting four B2B events in 2019. The purpose of the event is not to educate, or to socialize, but to win business. This is done in two ways, first to introduce each of our advisers to a carefully selected group depending on who their clients are and what they want – which we call ‘matched networking’. Second, we want our subscribers to be visible to our UHNW members and single-family offices by creating a profile on our advisers’ directory. We can then direct our UHNW members to our advisers which they can then check out online.

Each event will have a limited opportunity for a sponsor to promote him or herself by presenting a case study. This case study will be sent to all our UHNW members, promoted online to all our subscribers and presented personally to our 100 hand-picked best of breed attendees.

If you would like to find out more about sponsoring one or more of our events – or attending an event and having a profile on our directory, please contact Barbara Brudenell Bruce on 020 484 5168 or 0970 00020 or if you would like to buy a book ‘Uncovering Secrets: how to win business from Private Clients’ or ‘When you are Super Rich who can you Trust?’ you can order direct from www.garnhamfos.com or from Amazon, or contact me at caroline@garnhamfos.com

Wishing you all a very happy Christmas and a prosperous new year and a big thank you to all who bought a book for a Christmas gift.

The French - should the rich pay more?

The super-rich may not have misgivings about a mortgage or where the next meal is coming from, but they do have their worries. This community is valuable to the country in which they live. In Great Britain, the top 1% pay 30% of our income tax, they spend in our shops and oil the wheels of our economy – and yet in general they are poorly served and often despised – look at the attitude of 70% of the French who want the government to reinstate the wealth tax.

Already concern has been expressed that if the French tax the rich more they will simply leave – as they did before.

Very few advisers are given any training in how to build trust with their clients, so they adopt ‘tribal’ learning. They watch to see how their colleagues treat their clients and simply copy them. Most never stop to think whether what they are doing is building trust or destroying it. But first we need to understand what it feels like to be Super Rich.

George a PR agent, who acts for one of the wealthiest people in the Sunday Times Rich List, arranged to meet his client in a country golf club. George arrived at the agreed time, but still hovering above him was his client’s helicopter and it wasn’t making an approach to land. George phoned to find out why.

The client refused to land due to a charge of £95. George offered to pay – he hadn’t spent two hours travelling to a far-flung golf club only to have the meeting cancelled. The client - in a rage – refused to let him pay. This was a matter of principle. So, George had to plead with the golf club to waive its fee which it eventually did, and George’s client finally landed.

Surely the golf club should be encouraging their members to arrive by helicopter and governments should encourage the rich to live in their country, as it adds cachet to the club. By charging a fee, the club was in severe danger of losing one of their most prestigious members, purely through greed. Their thinking was if you can afford a helicopter you afford a landing fee. As in France – if you are wealthy you can pay a wealth tax. It’s like saying if you drive to the club in a Bentley you pay a parking fee, but if you arrive in a Toyota you don’t.

UHNW individuals are being fingered for money ALL THE TIME. It is hardly surprising therefore that they fly off the handle and appear difficult when they are being fleeced for yet more cash. Being pestered for money is a way of life for them, and most of them hate it, which is why they want to preserve their privacy and live in countries which appreciate their contribution.

We may watch their antics with surprise, but most of us do not know what it is like to be wealthy. However, as advisers, we need to understand them.

UHNW individuals are looking for people they can trust. But trustworthy people cannot be bought with money, because their precious quality is an attitude rather than a product. UHNWs want advisers who care for them, who see them as people rather than money mountains. Unfortunately, there are many organisations which stifle any attempt on well-meaning advisers to provide a personal service for their clients.

Most advisers are not encouraged to spend time with their clients; to find out what are their concerns, hobbies, interests and worries, beyond their immediate area of expertise. A banker or professional trustee, may have an annual meeting with the client or send a letter telling him or her how much the annual fees are going to increase or to cross sell other services from their organisation, without first finding out whether these services are valued, needed or required.

Lawyers, are encouraged to ‘start the clock’ the moment a client comes to a meeting. An engagement letter is sent out without any prior discussion, and by the time the client is billed, the amount on the invoice comes as a complete surprise. Is it hardly surprising that most lawyers have on average 183 ‘lock up’ days – this is the amount of days between delivering the bill and getting it paid.

If a lawyer does not get a bill paid on time and in full, he needs to ask the client why. However so little time is spent explaining what is to be done, what it is to cost and why – ahead of the work actually being done. If a client does not recognize they have a problem or that the advice given provides them with a resolution to that problem, they will not value your work and will resist paying your fees.

Put another way, do you care for your clients or are they only an afterthought to the work you are doing for them?

In a survey of ninety advisers of private client legal services, a staggering 100% said they should keep their clients updated more regularly. Three months later, not one had done anything about it!!!

In my book, which I researched and wrote during a break from legal work, ‘Uncovering secrets; How to win business from Private Clients’ I challenge the existing way most people treat their clients and do business.  Over 8 chapters, I explore, setting goals, planning, time management, getting there, getting more, delivery, retain and maintain and – the holy grail – trust.

Next week I will dip my toe into how to win business from private clients.

If you would like to buy Caroline’s book ‘Uncovering secrets; How to win business from Private Clients’ or her other book ‘When you are Super Rich who can you Trust?’ simply e mail caroline@garnhamfos.com or phone on 020 3740 7422, or buy direct from Amazon or www.garnhamfos.com

Family Offices: come of age?

At the Marcus Evans’ Real Estate Investors Summit at the Chelsea Harbour Hotel recently I spent some time talking to Mark (not his real name). He is the son of a wealthy family tasked with investing in real estate for his family office. Mark expressed frustration ‘I struggle to find Family Offices to be co-owners for big investment deals; they are just so chaotic and disorganized’.

I asked why he thought this was, ‘Most family offices are owned by passive trustees offshore which do not give the family office any direction! They talk a lot about co-investing, but would prefer not to take any risk – so they do nothing!’

This does not come as a surprise.

As I mentioned last week in my blog ‘When the music stops’ most offshore structures were set up years ago and unless they are reviewed, are unlikely to survive an investigation from the world’s tax authorities. The Trust and Corporate Service providers which are currently holding the assets in trust, will get caught in the cross fire. Most however have recognised the danger and are reviewing the structures of clients most at risk to mitigate this threat.

High on their to do list, is to review the ‘non-interference’ and ‘total indemnity’ clauses.

Tax authorities are looking to undermine trust structures using information under the Automatic Exchange of Information introduced this year, so that they can tax the underlying assets as if they were still owned by the settlor. Last week, I referred to the case of Bartlett v Barclays Bank. Professional trustees have a high duty of care to monitor the investments they own – so they prefer to avoid this with extensive ‘non-interference’ and ‘indemnity’ clauses.

However, these trusts are now facing a risk of a different kind.

Tax authorities will use the presence of these clauses –  to argue that the ‘trust’ arrangement was nothing more than a sham, or nominee arrangement. Clearly, with negligible risk adopted by the trustee, was there the necessary intention to form a trust.

In a structure, I put in place some months ago, I set up a ‘Special Purpose Trustee’ (SPT) managed and controlled (from a zero-tax jurisdiction) by the family and its advisers, to which we transferred the family trusts. The existing Trust and Company Service provider continued to administer the trustees, but under contract.  In the documentation, I inserted a positive obligation on the Trustee, which was by now the SPT, to carry out regular asset audits and in particular in relation to the family office which managed the family trusts’ investments.

I was made a non-executive officer of the SPT, and appointed an experienced corporate finance professional, James, to review the performance of the family office and report back to the executive board of the SPT. The report made interesting reading. The return on investment of running the Family Office was negative.

The family were shocked. After a meeting held in Guernsey, I asked James, to devise an investment strategy in line with the family’s binding Family Constitution, and to put in place some goals and targets. James came back with a clear strategy, a list of investments which needed to be sold, and where further investment was required.

The CIO of their family office was then given a year to make the changes and to achieve the modest targets set by James, which if achieved, would more than compensate for the cost of James, the revised structure, and the report.

Excited by this success, the board then looked at the other asset classes held by the trust, including the art collection held in store, the property portfolio and the wine cellar. I was again tasked with appointing a professional to carry out an asset audit and to report back on what strategy to follow, where to take profits and where to reinvest. We are awaiting the outcomes of these reports.

In today’s digital age, with costs of compliance rising exponentially and the threat of litigation around the corner, many private banks and wealth managers are looking at ways to cut corners, rather than innovative ways to cut costs – which I will address next week.

In my opinion, we need to go back to basics to find solutions.

The Trust and Corporate Service providers (‘T&CSps’) with whom I am working are carrying out a thorough review of all structures most vulnerable to attack, and to impose a positive obligation to carry out an asset audit to make sure that suitable benefits are being derived from the costs incurred. This covers the two main areas in which the T&CSps are at most risk.

Offshore trusts and their assets are in the firing line, but now is not the time to throw in the towel. It is an opportunity to give the world’s wealthiest a world class service to make their assets work for them, rather than leaving them in danger of an investigation or worse.

If you would like to find out more, you can buy my book ‘When you are Super Rich who can you Trust?’ or ‘Uncovering Secrets; How to win Business from Private Clients’ from Amazon on www.garnhamfos.com or call me on 020 3740 7422 or on my mobile 0799 188 288.

When the music stops

There is little doubt that all the major Trust and Company Service providers are now aware that they are the next to be squeezed by tax authorities keen to raise more revenue. The question is will their indemnity clauses hold up, or will they get caught in the cross fire and what can they do to protect themselves?

The case of Bartlett vs Barclays Bank [1980] makes it clear that a professional trustee has a high duty of care. Sir Herbert Bartlett set up a trust in which the main asset was 99.8% of the issued shares in the family company. On the board were two surveyors, an accountant and a solicitor. Barclays did not appoint a director on the board even though it had the power to do so.

The board decided to expand its business beyond managing property to developing property and embarked on speculative developments including the Old Bailey project which failed to get planning permission. As a consequence, the trust suffered a significant loss.

Judge Brightman J held that the bank as trustee had not discharged its duty as trustee, in failing to supervise the new ventures of the company. He held that, given the size of the shareholding, the bank should have obtained the fullest information and not rely on the supply of information it received in the ordinary course as a shareholder.

Its defence was that it honestly and reasonably believed the board of directors to be competent and capable of running the business. This was rejected.

The Judge upheld former decisions that the duty of trustees is ‘to conduct the business of the trust with the same care as an ordinary prudent man of business would extend to his own affairs’. With this then in mind is it right for a professional trustee to take on business and then indemnify itself from all liability, other than gross negligence or fraud, and for non-interference.

In Waterman’s Will Trusts [1952] the Judge said ‘A trust corporation holds itself out in its advertising literature as being above ordinary mortals. With a specialist staff of trained trust officers and managers, with ready access to financial information and professional advice, dealing with and solving trust problems day after day, the trust corporation holds itself out, and rightly as capable of providing an expertise which it would be unrealistic to expect and unjust to demand from the ordinary prudent man or woman who accepts, probably unpaid and sometimes reluctantly from a sense of family duty, the burdens of a trusteeship.’

It is inevitable that tax authorities keen to undermine a trust relationship, so that they can tax the underlying assets on the settlor, will jump on these tightly worded indemnity and non-interference clauses to argue that this is not a trust relationship, but a mere nominee arrangement.

The conundrum is that to do the job of a professional trustee properly takes time and money, which needs to be paid for through a proper fee. In many cases, however, the family can find a professional trustee who will charge up to ten times less, than it would cost a professional trustee to do a thorough job. To take an analogy, is it better to take out insurance which pays out on a claim or one which is ten times less expensive which does not?

Should the professional trustee, aware of this higher duty of care take on business for which it is being remunerated to do nothing other than collect fees and keep records. It will not be the first time that judges have looked at the level of fees to evaluate the level of advice and service being given!

But it cuts both ways. Like the case of Barclays v Bartlett, the family does not want to lose money either, and neither does the professional trustee want to get sued. The easiest way to solve this conundrum is to carry out asset audits.

Increasingly, when asked, I insist that trustees should only be given full indemnity protection if they carry out asset audits on a regular basis, and in particular where the main asset is the family holding company.

Once I started to suggest this as a solution it became so much in demand by beneficiaries eager to see; their single family offices, property portfolios, wine cellars, store of antiques, gallery of paintings, horde of jewellery, produce better returns that GFOS decided to offer asset audits across all asset classes including passion investments; yachts, wine, aircraft, jewellery, and alternative asset classes such as real estate, antiques and art.

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