As populist, anti-globalist movements begin to wield increasing power in Europe, the Americas and Asia, many entrepreneurial families are travelling in the opposite direction, becoming more and more global.
This often begins with children travelling abroad to be educated, possibly meeting partners from other countries and then starting up branches of their family business and philanthropic activities in new territories. Somewhere along the line, the family can eventually become more like a corporate entity, with tax liabilities and regulated businesses in different jurisdictions. This means strategic thinking becomes imperative.
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Leading private banks and wealth firms are very much alive to these trends, increasingly shaping their services according to the needs of the “global family”.
Swiss banks, as ever pioneers in global wealth management, have been among the first to address this dynamic. What they see today differs significantly from the rest of the post-war period. It is not necessarily the confident clans of old, spreading their tentacles globally through a new-look modern-day imperialism.
Rather, many families are diversifying away from uncertainty at home, while trying to stay under the radar and experiencing for the first time the type of emotions more common to the lower echelons of society, of fear and hesitation about the future.
Most wealthy families which use London as their hub express a fear of the next election spawning a government with Labour Party leader Jeremy Corbyn at the helm. They also fear a disorderly Brexit from the European Union, as neither prime minister Theresa May nor Mr Corbyn are advocating a European future. The picture is increasingly one of an isolated Britain, cosying up to far-flung rivals, rather than enjoying barrier and tariff-free trade with nearby partners.
The largest families and their bankers don’t want to be seen be panicking, even if they are having nervous moments behind closed doors.
“For the biggest clients, the impact of Brexit is non-visible, because they have been preparing for this for so long and have made arrangements,” suggests Joe Stadler, Zurich-based head of ultra-high net worth clients for the world’s largest wealth manager, UBS. “That would be unprofessional if they are surprised by these events. There is no panic amongst our clients about Brexit.”
In most cases, assets have already been diversified to plan for contingencies. Many UBS clients have already made a “short-term” killing from Brexit, suggests Mr Stadler, taking advantage of the weak pound.
But there is an element of bravado here. Few families are as sanguine as UBS would lead us to believe. In essence, their priorities have become similar to global businesses that weigh up international risks and commitments. UK investment house M&G has moved funds and resources from London to Luxembourg. Asian car manufacturers Honda and Nissan are reducing numbers of workers in the UK. Those families which have used the UK as a major hub will be no different, with political uncertainties set to remain for some time.
“Families are considering what life would look like outside the UK,” says Alan Hooks, London-based head of wealth planning at Swiss bank Julius Baer. These clients need other options, perhaps including family residency in Portugal, Spain or Italy.
This is a conversation foreign finance professionals working in London have been having for many years. Now it is the British families, who have created and grown their businesses here, that are looking for diversification and bolt-holes if things get too unwieldy.
Such a dynamic changes the rules. Relationship managers need to be different animals. Previously, some product and market knowledge was probably enough. Today, private bankers must appreciate changing mentalities, next generations and the new investing dynamic which encompasses direct opportunities in sustainable energy and high-impact projects.
A banker, essentially a door opener between client and wealth manager, must be able not only to bring the correct experts to the table for each investment class and opportunity but also be able to discuss jurisdictional, political issues.
This relationship manager must also be able to build links not just with the head of the family, but with all members and branches. This presents a new challenge. “We always used to talk only to the head or key decision maker of the family to create the investment profile,” admits Julius Baer’s Mr Hooks .
Today the view of the spouse takes almost equal weight, before even beginning to look at new generations’ influence on investment thinking. Family governance is crucial for smooth decision making. Work in this sphere can include the banks organising family meetings, bonding sessions or teach-ins on tax and investments. Bankers to global families are no longer just portfolio managers, but facilitators of networks and inter-generational relationships
The problem for many private banks is that the next generation wants a different type of wealth firm, not the cosy boardroom chats their parents used to enjoy. This means the bank’s relationship manager must start the conversation with the youngsters at an early stage and convince them the bank is also changing and has advisers that understand the changing mentality of the evolving global family.
Banks must realise that selling portfolio management skills will no longer cut the mustard. Clients know that when they lift up the bonnet, the parts are similar in most investment engines. It is the approach to service, social issues and bringing clients together into a network, often a digitally-facilitated one, which can differentiate one private bank from the next.
Clients value sharing their experiences with those who have a similar world view, who are concerned about the same threats and who are more likely to trust a peer group entrepreneurial family than an investment bank charging high fees. Clients are not always looking for financial solutions, but just as often empathy and understanding from somebody with a shared experience.
A successful banker, in this realm, is one who can bring together global families who have similar experiences. No matter how professional or experienced a global family may be, the comfort of knowing they are not alone can be one of the most valuable benefits of all.
