Helie de Cornois (Stonehage Fleming Corporate Services Luxembourg)
Strong values and governance are crucial for families navigating a post-pandemic world
The Covid pandemic has highlighted a number of issues around family cohesion, prompting many to question their purpose and values. As a result, it is more important than ever for family offices to identify the underlying trends and challenges that families face. Explanation with Helie de Cornois, Head of Family Office Luxembourg, at Stonehage Fleming Corporate Services Luxembourg.
Mobility of people and assets
The growing mobility of people and assets is an important factor. Until relatively recently, wealthy families would typically move between countries which were geographically and culturally close to each other. Today, however, families are much more likely to have an international outlook, with various members living, working or studying in several locations around the world including the US, Australia, Asia and the Middle East. Each country is subject to different legal regimes. In those subject to Roman law, ownership is split between usufruct (the right to use and receive income from a property) and bare ownership (the right to sell it or to modify its nature). Anglo-Saxon countries use trusts through which a person transfers assets and grants control to a third party for the benefit of the beneficiary. Combining the two concepts often represents a challenge for estate planners whose clients’ affairs straddle both worlds. Specialist knowledge is required to identify the issues and come up with an integrated planning solution that works for all.
“The experience acquired by a Multi Family Office with long experience of dealing with multiple generations can be of great benefit to others”
In structuring family governance, advisers must focus on the identification of the different functions. Generally speaking, a company founder is the owner, the manager and the keeper of the family's long-term vision. The more generations involved, the less well the relatives tend to know each other and the more likely they are to come from different backgrounds. Establishing a long-term family vision around common objectives is essential, therefore. Creating those objectives can be done through various means including regular family council meetings, running next generation education programmes or creating whole-family philanthropic projects. Shareholding structuring is another important thing to get right for family businesses. One of the main sources of conflict is the insufficient circulation of information. Good communication, therefore, is key. Family charters or agreements can help to avoid many of the pitfalls in this regard. Lastly, the careful planning and management of company operations – including appointments, reappointments and remuneration policies – is crucial. Identifying the challenges of each dimension is the first step in moving towards an overall solution.
In order to support families properly, family offices require a thorough understanding of what a family stands for and what they want to achieve over a specific time horizon. As the proverb says, “le temps ne respecte pas ce qui se fait sans lui”. The challenges facing 6th or 7th generation families like the Fleming family vary a good deal. Other families may be in the 13th generation. The experience acquired by a Multi Family Office with long experience of dealing with multiple generations can be of great benefit to others. While always allowing a family to follow their own path, it allows them to share in the practical wisdom of years of experience – both the challenges and the many successes.