In an interview with MintGenie, Rajmohan Krishnan, Principal Founder & Managing Director, Entrust Family Office talks about their approach to wealth management, succession planning and managing risks.
Edited excerpts:
Can you provide some guidance on the triggers or key indicators that suggest an individual should consider engaging a family office for their financial needs?
Engaging with a family office is a significant decision that individuals typically consider when their financial situation becomes more complex and requires a more comprehensive approach to wealth management. Here are some scenarios/ triggers that suggest when an individual should consider engaging a family office for their financial needs:
Significant wealth accumulation: When an individual or family has accumulated substantial wealth, managing diverse and complex assets can become challenging. A family office can provide expertise in handling large investment portfolios, real estate holdings, and other high-value assets.
Multigenerational wealth transfer: If there is a need for comprehensive estate planning and wealth transfer strategies to pass on assets to future generations efficiently, a family office can help design and implement strategies that align with family values and objectives.
Complex financial structure: As financial situations become more intricate, involving various investment vehicles, trusts, and legal structures, a family office can coordinate and manage these complexities, ensuring effective financial governance.
Business ownership and succession planning: Individuals with substantial ownership in private businesses may require specialised assistance in business succession planning. Family offices can facilitate the transition of ownership and provide guidance on optimising wealth during this process.
Global financial footprint: For individuals with assets and interests in multiple jurisdictions, managing international tax implications, regulatory compliance, and currency risk can be daunting. Family offices with international expertise can navigate these complexities.
Personalized financial planning: Family offices often offer personalised financial planning services, taking into account not only investment strategies but also lifestyle considerations, philanthropy, and other aspects of a client’s unique situation.
Risk management: Families with significant wealth often face unique risks. A family office can help identify and manage these risks, including market risks, cybersecurity threats, and other challenges associated with wealth preservation.
Concierge services: Some family offices offer concierge services, assisting with non-financial aspects of a client’s life, such as travel arrangements, kids’ educational needs and other lifestyle needs.
Privacy and confidentiality: High-net-worth individuals often value privacy. Family offices can provide a discreet and confidential environment for managing financial affairs.
Before engaging a family office, it’s essential for individuals to carefully assess their needs, goals, and preferences. Family office engagement is a significant decision, and individuals should ensure that the chosen family office aligns well with their unique financial circumstances and objectives.
Can you share specific examples of how you have successfully addressed unique financial problems or goals for individual clients?
Let me share an instance where we assisted a high-net-worth individual in estate planning. Our client was keen on transferring wealth to their next generation in the most efficient manner possible. To address this, our family office developed a comprehensive estate plan. This wasn’t just any plan – it involved a careful integration of trusts, strategic gifting, and a keen focus on optimising tax implications.
The goal was clear, ensure a smooth and tax-efficient transfer of assets. It’s about aligning our client’s vision with the practical aspects of wealth transfer, ensuring that their legacy is preserved and passed on in the best way possible.
Startup exits: Now, let’s talk about another interesting scenario involving an entrepreneur planning to exit their business. This individual was not just looking at the exit; they were also eyeing a seamless transition into retirement. Our role? Quite instrumental. Our shared CFO team was deeply involved in guiding the founder through the exit process. We helped them prepare for everything, especially the tax implications post-exit. But our involvement didn’t stop there.
Understanding their investment objectives, we crafted a comprehensive investment plan. And today, we continue to manage their investments. Our advisory extends beyond financial matters, ensuring a holistic approach to their post-exit life.
International wealth management: Moving onto international wealth management, we once had a business family with assets and interests spread across multiple countries. This brought up a complex mix of international tax and regulatory considerations. Our approach with Entrust was to help them navigate the intricate web of international tax laws. Managing cross-border investments and ensuring compliance in various jurisdictions was the key. Our focus was to optimise their global financial position, addressing the unique challenges that come with international wealth management.
Setting up a family trust for a special needs child: Finally, I’d like to share a very sensitive and important case. We worked with a family in South India who needed to set up a family trust for their special needs child. This wasn’t just a financial engagement; it was an emotional journey. The family had diligently created and set aside wealth for their child’s current and future needs. However, they were concerned about the management and protection of this wealth after their lifetime, especially since their other child, who lived abroad, couldn’t be the immediate caretaker or legal guardian. Our role was twofold.
Firstly, to ensure that the assets set aside for the child were protected from external influences or creditors. Secondly, to manage the investments made into the child’s trust optimally. Our focus was always on ensuring the care and well-being of the child, catering to all her needs throughout her lifetime.
What sets family office services apart from traditional financial planning and wealth management services offered by banks or financial advisors?
Family office services differ from traditional financial planning and wealth management services offered by banks or financial advisors in several key ways:
Comprehensive and integrated approach: Family offices take a holistic and integrated approach to managing the financial affairs of high-net-worth individuals and families. They provide a wide range of services, including investment management, estate planning, tax optimization, philanthropy, and lifestyle management.
Traditional financial advisors often focus on specific aspects of financial planning, such as investment management or retirement planning, and may not provide the same level of comprehensive services as family offices.
Customization and personalization: Family offices tailor their services to the unique needs, goals, and values of each client. They often offer highly personalised solutions, taking into account the individual circumstances and complexities of high-net-worth families.
While financial advisors aim to provide personalised advice, their services may be more standardised, and the level of customization may not be as extensive as that offered by family offices.
Lifestyle and concierge services: Many family offices go beyond traditional financial services to offer concierge services that address non-financial aspects of clients’ lives. This can include travel planning, educational consulting, and other lifestyle management services.
Traditional financial advisors typically focus solely on financial aspects and may not provide the same level of lifestyle-related services.
Independence and objectivity: Family offices can operate as independent entities, providing objective advice that is not tied to specific financial products or services. This independence can enhance their ability to act solely in the best interest of the client. Advisors associated with banks or financial institutions may have affiliations that could potentially influence their recommendations.
Focus on high-net-worth clients: Family offices typically cater to high-net-worth individuals and families, allowing them to specialise in addressing the unique needs and complexities associated with substantial wealth. Financial advisors associated with larger financial institutions may serve a broader client base, including individuals with varying levels of wealth.
Long-term relationship and generational planning: Family offices often focus on building long-term relationships with clients and may be involved in generational planning to ensure the continuity of wealth management across multiple generations. While some traditional advisors emphasise long-term relationships, the emphasis on generational planning may not be as pronounced as in family offices.
How do you tailor your services to meet the different objectives?
Let us see how we serve Ultra-High Net Worth Individuals (UHNIs) in detail.
Customised wealth management: The cornerstone of our services is customised wealth management. Here, we craft an investment strategy uniquely tailored to each client. This involves a deep understanding of their risk tolerance, financial goals, and the time frame they’re working with. Asset allocation isn’t a one-size-fits-all; it’s carefully aligned with the client’s financial objectives, their comfort with risk, and the ever-evolving market conditions. It’s a dynamic process, one where we’re constantly fine-tuning to stay aligned with our client’s vision.
Estate planning: Estate Planning is another critical area of our expertise. We assist in creating and implementing comprehensive estate plans. This isn’t just about drafting documents; it’s about setting up trusts, strategizing tax planning, and succession planning to ensure a seamless transfer of wealth. Additionally, we develop strategies for wealth protection, incorporating insurance and other risk mitigation measures. Our goal is to safeguard our client’s legacy, ensuring it endures and thrives through generations.
Tax planning and compliance: Navigating the complex world of tax planning and compliance is a significant aspect of our services. We implement tax-efficient strategies tailored to reduce our client’s tax liability. This involves a thorough understanding of current tax regulations and an eye on potential changes in tax laws. Moreover, we ensure strict compliance with all relevant tax laws and regulations, keeping our clients clear of legal complexities and aligned with best practices.
Philanthropy and social impact: For clients keen on making a difference, we offer guidance in philanthropy and social impact. This includes helping them with charitable giving strategies, like establishing and managing charitable foundations or trusts. Beyond this, we integrate socially responsible and impact investments into their portfolio, aligning their wealth with their values and the change they wish to see in the world.
Legal and regulatory compliance: Lastly, legal and regulatory compliance is an area we emphasise greatly. We engage with legal professionals to ensure compliance with both local and international laws and regulations. Keeping abreast of changes in financial regulations is crucial, and we adjust strategies as needed to remain compliant. This proactive approach ensures that our client’s wealth management strategies are not only effective but also adhere to the highest legal and regulatory standards.
In essence, our family office services are designed to be as unique as each UHNI client we serve.
In terms of estate planning, can you explain how a family office works with individuals to create a comprehensive plan that aligns with their values and ensures the smooth transfer of assets to heirs?
Sure. Here’s how we go about it.
Understanding client objectives and values: Our initial approach involves conducting in-depth discussions with our clients to thoroughly understand their financial goals, family dynamics, and core values. It’s crucial for us to identify their specific objectives regarding wealth transfer, philanthropic aspirations, and legacy preservation. This understanding forms the bedrock of our planning process.
Structuring the estate plan: Based on this understanding, we then develop a customised estate plan that considers the client’s unique circumstances and goals. Our team recommends appropriate legal structures, such as wills, trusts, and family limited partnerships. The aim is to optimise tax efficiency and asset protection, ensuring that the plan reflects the client’s wishes and financial objectives.
Wealth transfer strategies: We implement tax-efficient strategies to minimise estate taxes and facilitate the smooth transfer of wealth to heirs. Advising on gifting strategies is also a part of our service, ensuring that wealth transfer is aligned with the client’s intentions and the beneficiaries’ needs.
Education and communication: A critical aspect of our role involves educating family members about the importance of estate planning and the specifics of the established plan. We facilitate open communication among family members to minimise potential conflicts and ensure a smooth transition of wealth and responsibilities.
Asset protection: Our team implements strategies to protect family assets from potential creditors, lawsuits, and other risks. Advising on the use of trusts and legal structures that offer asset protection benefits is part of our comprehensive approach to safeguarding our clients’ wealth.
Coordination with legal and tax professionals: Collaborating closely with legal and tax professionals is key to ensuring that the estate plan complies with all relevant laws and regulations. We coordinate efforts to address complex legal and tax issues related to wealth transfer, ensuring a seamless and compliant process.
Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.
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Published: 09 Feb 2024, 09:42 AM IST