Johan Lindberg, managing director for global client coverage at RBC Investor & Treasury Services in Luxembourg, says the country’s Family Office Act offers a wealth structuring model particularly suited to wealthy families whose members are spread across different countries.
How is RBC Investor & Treasury Services involved in family office business?
As a group, RBC has worked with family offices for a long time, both in wealth management and capital markets, in Canada, the UK and in the USA. At RBC I&TS we have started to see family offices seek our services for wealth structuring vehicles, which are similar to those used by the private equity and real estate sector. Since the introduction of Luxembourg’s Family Office Act of December 2012, structuring has become increasingly important to the sector; the Luxembourg partnership model is particularly suited to families that may have members in different countries and who become limited partners in the structure. A structure with general partners would fit families where independent decisions on investments and strategic wealth management are made by the GP board often involving the family head and the CEO of the family office.
“ Activities that previously were completed solely within private banks are being outsourced to the asset servicing industry.”
Which trends do you see in this sector?
We have witnessed an increase in institutionalisation of family offices, using more sophisticated investment products including the use of funds to render the management of family wealth more efficient, which began with Luxembourg’s SIF legislation in 2007 but has become more pronounced since the passage of the Family Office Act, with the fund structure replacing accounts at a private bank. This means that activities that previously were completed solely within private banks have been outsourced to the asset servicing industry, driven by a favourable structure for sophisticated investments, cost efficiency and preparation for future succession within the family. As family offices become more institutional in the way they manage assets, they are adopting institutional practices and as a result are treated like institutional managers. These practices include consolidating assets into a single structure, enjoying buying power with investment banks and other service providers, as well as gaining easier access to more sophisticated products. We are responding by adopting a regionalised approach – I look after the Nordic region – with coverage officers who are close to our clients and speak their language. While family offices may feel nervous about leaving their comfortable relationships with private banks, they will find we provide the same comfort and regional expertise.
How do you see family office servicing evolving over the next five years?
As the asset servicing side of RBC’s business in Luxembourg, we expect the family office segment to grow significantly and anticipate a surge in the number of partnership structures created for families. Following Luxembourg’s example, other fund jurisdictions such as Ireland are looking at partnership legislation, so Luxembourg will see more competition in future. But, RBC´s service model is domicile agnostic between Luxembourg and Ireland in the same way as with managers establishing private equity, real estate, infrastructure and debt investment structures. RBC I&TS will be well placed to advise family offices on vehicles and on the selection of partners to manage structures in the Grand-Duchy. For example, family offices will often need tax services, so the Big Four firms are usually involved in fund structures, and they can benefit from our network of relationships there. We help the client create the ecosystem surrounding the fund alongside providing key functions such as depository / custodian – as an AA-rated bank, we offer families risk mitigation – alongside other core services such as administration. We also provide access to wider group businesses as RBC Capital Markets and RBC Wealth Management.