Q & A with Jan van Bueren and Thomas Ming of UBP’s FOSS Family Office Services Switzerland
There are three principal situations in which families consider setting up or using a family office for the first time: an abundance of liquidity in the family business; the family business is being sold; or one of the first two situations arises in combination with a growing number of family members wanting to be engaged with the family wealth in some way.
Why is this first step towards using a family office often such a challenge?
Jan van Bueren (JvB): It’s actually not just one but several challenges which a family faces when they consider setting up or using a family office for the first time. Managing free investable wealth is a completely different ball game than managing a family business. The type of services sought by the family need to be defined, it’s important that the family stakeholders establish which goals they are actually seeking to fulfil through a family office, and the family needs to find out if a single-family office (SFO) or a multi-family office (MFO) is the right solution. There are a lot of different issues that all come together at the same time.
Thomas Ming (TM): A lot of wealthy families also have latent needs. They’re not aware of all the services a family office can offer and which requirements will need to be covered by the family office. At the start of the process it’s often unclear to them which role ‘their’ family office should fulfil and which role one or more of the family members will have.
How wealthy does one need to be?
JvB: That’s a question we’re often asked, but, as there are so many family office flavours it’s impossible to answer. It would be better to carefully consider which services you really need and how much you’re willing to spend on those services. You can find MFOs that are prepared to take clients with a global wealth of EUR 20 million, which I personally believe to be quite low. Most families using an SFO have at least several hundred million dollars in assets.
What family office trends are you seeing?
TM: As most players in the industry, we’re seeing ever-increasing interest from affluent families in family offices. On top of this, there’s an ongoing trend of new MFOs launching their services. This is happening on a weekly basis and is taking place all around the world, although we do feel that South and Central America are lagging behind a bit.
Do you expect this trend to continue?
JvB: Yes, definitely. Our conviction that this trend would continue was one of the main reasons for launching our dedicated family office advisory service in 2014. An increasing number of international families are considering setting up some type of SFO, and Switzerland alone already has more than 450 MFOs, and new providers are constantly entering the market.
Why did Union Bancaire Privée, UBP SA, launch a family office ‘advisory and selection’ service?
TM: Through conversations with numerous families, we learned that almost every family considering an SFO solution struggles with finding experts to support them with the first steps in that direction. The families who try to hire an MFO find the market exceedingly opaque. Most MFOs are defined by their discretion and it’s therefore not an easy task for a family to find and select the proper provider. Contrary to the insurance market, where it’s common practice to use an insurance broker for larger contracts, independent guidance in the MFO sphere didn’t exist. As there was clear demand and no conflict of interest (UBP itself doesn’t offer family office services to its clients), we decided to launch this sort of advisory/intermediary service ourselves.
You focus on the Swiss market. Can you tell us a bit more about the specificity of MFOs in Switzerland and why you focus on this market?
JvB: There are several reasons why we started with a focus on the Swiss market. After the US, Switzerland is home to the highest number of MFOs. What sets Swiss MFOs apart from most jurisdictions is the fact that a very high number of those providers focus on international clients from outside the jurisdiction, instead of only on Swiss clients. The experience and expertise offered by Swiss wealth management professionals is among the highest, if not the highest, compared to any other part of the world.
TM: Since exiting the start-up phase of our service, we have also begun to advise families on establishing SFOs and we’re adding foreign MFOs to our database. Lastly, we’re also advising families on selecting a suitable MFO in their home jurisdiction.
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