Estate planning

The three types of UHNW clients and how to serve them


There’s rarely a quiet time in the legal and financial professions, but it’s clear that the past several years have been some of the busiest in memory for professionals focused on high-level service. Very high net worth clientsaccording David Janepartner and team leader of the US Weathers practice.

This is due in part to a confluence of high-level organizational and economic factors, says Jin, but also to the fact that Family offices It is now estimated that they oversee assets worth tens of trillions of dollars globally.

Simply put, there is a lot of work to be done when it comes to managing such a huge amount of accumulated wealth in an efficient and compliant manner – especially when a client has relationships with multiple countries and different jurisdictions to deal with.

And as Jin confirmed on a recent call with ThinkAdvisor, in addition to supporting the huge volume of investment activities that family offices carry out today, advisors and lawyers are also used to provide a wide range of services.

Jin explains that this applies both to single-family offices that focus on the wealth needs of a single family, and to emerging multi-family offices that provide a growing range of specialized services.

Ultimately, it’s a challenging but rewarding time working in this area of ​​the law, Jain says, and he encourages financial advisors with high-net-worth and ultra-high-net-worth clients to be aware of emerging trends.

Those who fail to provide responsive and cutting edge services to their clients – and those who fail to keep their clients on a solid legal footing – risk losing this coveted business.

Thinkadvisor: Do you think a lot of your clients are relatively similar in terms of the challenges and opportunities they face?

David Gwynn: I would say that they share some general characteristics, but they are divided into several different groups.

First, there is a group of clients who still have their primary wealth tied to a going concern. They are running a business and dealing with financial investments on the side, which is challenging for them.

The second group of clients has at some point shifted from their wealth primarily confined to operating companies to being held primarily as financial assets. This obviously means that they have a different set of issues and needs.

And then we also have what we call the founders’ practice, if you will. One of the things that is showing up a lot out there, with the markets freezing up a bit, is looking for ways to create liquidity.

These are people who might have expected to actually go public and sell their shares in their company to make their money, but with that kind of activity slowing a bit with the broader economy, their support is about trying to find ways to create liquidity.

Is it fair to say that providing liquidity to this group of founders at this current moment is relatively difficult, given some of the anxiety and uncertainty we have seen with lending in this economic environment?

Well, it’s interesting, because I think in this area it’s hard to provide liquidity, in general, but there are also financial brokers out there that are focused on servicing this market, and they’ve been more active than you might expect.

But yeah, going out and finding a private equity buyer for a closely owned company, for example, is harder today, and so is getting a regular bank loan against your shares. This is also probably more difficult now, yeah.

However, there is still a dynamic liquidity market that we can help our clients take advantage of, and there is always the ability to close deals within a particular company. For example, if one of the founders wants to create some liquidity, you’ll often find another investor in the company who wants to increase his stake.

Going back to the other two customer groups that you mentioned, what are the challenges faced by the operator’s customers?

Above all, they need help and support to maintain their growing personal fortunes, so they can stay focused on the success of their core business.

Another thing we’re trying to advise these clients on is to create a kind of firewall around their standalone assets versus their operating company. Doing so may become more difficult as their independent assets grow and require more time and resources to manage them effectively.

We have certainly had experience with new clients coming to us, seeing that they have been effectively running their family office out of their operating company. This is definitely not a best practice.

If you have other shareholders, in particular, this could create a conflict of interest, and if you do eventually go to sell the company, try to explain to the acquirer which expenses and things were personal and which ones were from the company – get all explained they could be real trouble.

As much as possible, we try to help our customers keep these worlds as separate as possible. Sometimes it’s harder, other times it doesn’t make much difference, but it’s always important to think about it.


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