As part of our series delving into the world of family offices, we talk to Crestbridge in the Cayman Islands.
As part of our series of articles looking at the dynamics shaping single- and multi-family offices, we interviewed Dominic Lawton-Smith, who is director of family office services for Crestbridge, based in the Cayman Islands. We aim to bring perspectives from different parts of the world, in the hope that advisors and clients can learn from experiences in other regions. As always, feedback is welcome: email the editors at firstname.lastname@example.org and email@example.com
The family office sector is, depending on how one measures it, as large as 10,000 family offices in total (although there is considerabloe debate about the specific figure). It continues to grow, and hotspots include regions such as Asia. In general, what’s your view on the overall health of the family office sector?
Lawton-Smith: The most remarkable characteristics of change in the family office sector in the last ten years are in its size and diversity as well as the increased sophistication of those within it.
There are lots of reasons for change including increased regulation and transparency (the end of banking secrecy in some onshore jurisdictions) driving the need for better quality, legally robust solutions that need to be regularly reviewed and the emergence of new wealth over the last 50 years, particularly in Asia which creates the need for new family offices as well as the need for more international arrangements to reflect the international nature of many wealthy families. Advisors and fiduciaries must be able to do more with less, and with more sensitivity to the needs of the family as well as the challenges that their international nature create.
These changes continue to fuel a healthy and growing family office sector although this comes at a substantial financial cost to many families, so it is incumbent on service providers to work harder than ever to ensure that there is benefit for those paying for services.
What do you think drives the creation of most family offices and are these drivers changing? If so, how?
The impetus to establish a family office is often from one or both of two sources being:
1) The perceived benefit of assembling a dedicated team of in-house asset management professionals to manage the family’s assets; and/or
2) The results of a planning process (which may or may not include an external advisor) to consider the family’s cultural values and what it wants to achieve, both for itself and increasingly often, for others.
When detailed requirements and aims have been determined any role(s) for family members can be identified and a plan for the acquisition of any employees or external service providers can be put in place. I’m not sure that these drivers have changed although the trigger points for 1) and 2) may sometimes come sooner as a result of greater international dispersion of family members and assets.
Do you think it is likely that viable FOs will continue to have higher minimum amounts of assets under management? Is regulation and complexity going to keep driving the AuM baseline higher?
After a decade of profound change in regulation and transparency, it is difficult to imagine that this trend is going to cease now; the upcoming Mandatory Disclosure Rules (MDR) will add a level of new complexity and reporting to existing CRS requirements. Inevitably, this will add some cost, although I would have thought that the marginal increase in fees from this point forward will not compare with the proportionate increases that have taken place in the last ten years.
It is noteworthy that much of what regulators and tax authorities set out to accomplish has now been implemented; it will be interesting to see whether new goals are now set out.
I would expect that the next decade will include two dominant themes:
I) The conflict between the human right to a private life (noting new data protection laws such as GDPR) versus the drive towards public registers of beneficial ownership and the implementation of MDR; and
II) With the exception of the US, it is likely that it will be increasingly difficult for jurisdictions that do not comply with CRS, Economic Substance and other new requirements to remain fully engaged as international financial centres.