Where to locate your Family Office

“Location, location, location”. To real estate investors those three words are a favored mantra, however to the principals of wealthy families and heads of family offices they represent a question of significant importance, one that might just be keeping them awake at night.

With family offices assuming many roles (organizer, steward and advisor to name a few), selecting an address that complements them all is a complicated task. So where should families locate their family offices?

Once upon a time the answer was as simple as choosing a location close to the family’s principal residence. Today as family members increasingly move and live across continents – along with their assets and investments – they must weigh many factors when deciding where to locate their family office, not just their current postcode or zip code.

Dynamic geo-politics, fluctuating market conditions and increasing regulatory scrutiny means that where to locate the family office is not exclusively a question for those looking to establish a new family office. There is now a growing trend in the number of existing family offices that regularly revisit the question to ensure they are properly managing issues ranging from attracting the best talent to optimal administration, tax efficiency and the dynamic nature of the families they look after.

Although historically a family office may have been located close to the family for convenience, this is not necessarily true today. With the needs of wealthy families changing dramatically over the past decade – as their interests and holdings stretch across hemispheres and complexity and regulation increases – many families are discovering that other locations, or even other business models better suit their needs.

As the requirements of families have changed, so too have the tools for them to leverage. Video conferencing and secure electronic networks make it easier for a family office to provide a combination of different functions which are capable of being located across a number of physical places. Rather than families balancing the requirements of all their different needs to choose one family office location and making inevitable compromises, hosting different functions in different locations (adopting a best of breed mentality) can increase ease and effectiveness across all the different hats the family office wears.

Take for example the different questions the family office will need to ask itself around location when considering three different areas:

• Lifestyle: Where does the family reside, work, study and travel, so that functions can be readily accessed by family members?
• Administration: What structures, staff and processes will enable the family office to operate most effectively, match the family’s goals, and satisfy issues such as strong governance and tax efficiency?
• Finances: What types of financial assets does the family hold and where? Do the family’s financial holdings and investments dictate certain locations or access to professional talent to manage the assets?

The answer to these questions will often suggest very different locations for each area and, in today’s world, this need not be an either/or decision. For example, an ultra-high-net-worth family might access concierge services in their home city, select investment advisors in a financial capital, and create the family office structure in a tax neutral location to help juggle the various jurisdictions where family members reside.

Naturally, one size does not fit all, and while the often-chimed slogan, “everything under one roof” may not match the requirements of some families, others may find that it does meet theirs, for example, if they feel loyalty to their current location or community. What is best practice in one family may not meet or suit the objectives and the values and purpose of another family.

Families should spend time determining their needs and when they’re comfortable that they know what they want, they should quite literally map this out to locations. While there are no set locations for family offices, there are some places that are more popular than others and this itself ebbs and flows as some countries respond and react to the needs of global families and compete in an attempt to be the location of choice.

Once a family office has been established, families may be tempted to put the question of location to bed. However, reviewing the location at regular intervals can keep the family office operationally efficient and aligned with the family’s changing needs.

A common trigger point can be succession planning to ensure the family office will suit the next generation, but a strategic review at any time can be an invaluable risk management exercise to ensure that their long-standing arrangements still fit and benefits still apply and to verify that the family is keeping pace with changing regulations across their global footprint.

Consulting tax advisors with global reach is recommended. Whilst the options for locating your family office are international, tax regimes remain domestic and the interaction of differing tax regimes and jurisdictions is a complex and ever-evolving area. Advisors with global reach can offer an impartial overview of the consequences of locating in a particular jurisdiction, or of the interaction of taxes across a number of jurisdictions.

In mulling over the question of “location, location, location” in the small hours, families need to remember that a single location may not suffice, one location does not fit all, and the ideal placement may change, as the family, and the world around them, continue to evolve. Hiring advisors that understand this and have the expertise and global breadth to assist them might also help them catch some precious rest.

Greg Limb
Head of Family Office & Private Client
KPMG International

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