Review of HIGHVERN’s Private Wealth Roundtable

HIGHVERN recently hosted a Roundtable lunch event at Samphire Restaurant in Jersey, bringing together some of the most prominent and highly regarded UK wealth advisory practitioners.

HIGHVERN was represented by Naomi Rive, Richard Joynt, Philip Carlton and Emma Furzer and they were delighted to welcome Matthew Braithwaite (Wedlake Bell), Marianne Kafena (Harbottle & Lewis), Beatrice Puoti (Burges Salmon), Iain Younger (EY), Sangna Chauhan and Dominic Lawrance (both from Charles Russell Speechlys.

The lively discussion focused on the key issues facing private wealth practitioners today.

Should advisers act as a moral guide to their clients?

Richard recalled that Sangna had chaired a conference late last year and, in her closing speech had posed the question as to whether it is incumbent on private client advisers to encourage their clients to think about responsible investing and responsible financial / tax practices. Is it right to try to impose our view on the client?

Dominic made a distinction in terms of values versus personal views: “we can and should attempt to act in accordance with our firms’ values however, we cannot enforce our personal views.” Beatrice said: “we also need to be mindful of sanctions. If there is a piece of business relating to a restricted country I may struggle morally and therefore I cannot do the best for that client if I am against their views in this way.”

Sangna said: “sometimes people surround themselves only with those who agree with them, so they are never encouraged to stop and consider whether they continue to hold their original view / beliefs.”

Iain posed the question as to how to proceed when a fellow partner takes on a client that another finds problematic and does not agree with morally. Marianne pointed out that it is always possible for individual professionals to decline to advise a client where there is a serious disagreement, whether on moral or other grounds.

Sangna wondered whether it is possible for this to be taken firm-wide: “if an individual client does not align with the firm’s values, is it correct for the entire firm to decline to act?  After all, each firm is an entire entity, made up of more than the individual professionals.”

When asked whether it is right for advisers to address something that is potentially morally questionable Marianne said: “I would always say let’s just think this through: you are able to make decisions freely and in an informed way. Clients often talk about preserving family harmony as a long-term goal. One of the important aspects of our profession is to advise constructively and, by reference to the overall goal of family harmony, ask what future generations might agree with the views and values we are expressing now. How might they react to how clients are planning and structuring their wealth now? The legacy is more than just wealth.”

Beatrice agreed: “we have to be mindful of where decisions can be enforced or could be attacked nowadays, and how public those jurisdictions will make their judgments.”

Beatrice concluded with her view that “ultimately we can never tell someone what they should do with their wealth, we can only advise them to the best of our practice.”

How is the ESG agenda affecting our work?

Naomi opened the discussion with a technical Jersey trust law point: “within Trust Law you cannot have a trust which acts contrary to public policy but the real issue for trustees is what this term means from time-to-time. Is it now anti-public policy for example to have a charitable trust that benefits white people only or a discretionary trust that restricts distributions in the case of a same sex marriage. Comparing this to ESG, will an ESG focus eventually become “public policy” within a fiduciary setting, and it be seen as anti-public policy to have no regard for ESG matters?”

Richard stated that: “generally, philanthropy is understood and has been a theme for many years however ESG is still relatively new and it was unclear what it means for each individual client. It is also unclear how this fits in with the trustees’ statutory duty to preserve and enhance the trust fund.”

Sangna also felt that that it was also possible to lose the big picture: “what if we focus too much on the E and not the S and the G?”

Matthew wondered whether the ESG movement would be self-fulfilling whether trustees make conscious decision or not – “companies with ESG credentials are endemically pervading the wider investment world.”

Matthew also wondered about inter-generational changes: “as views can change over generations, the angle on these themes taken by one generation may differ to the next.  It could also cause tensions with the trustees as the clients’ views could be at odds with yours and this can change through generations.”

Dealing with respect towards cultural differences whilst looking for the best solution

Sharia legal principles were discussed and the extent to which these are baked into family values.  Sangna said: “cultural values can differ between generations, for example beneficiaries brought up in the United States and United Kingdom may not have the same principles and views as their GCC-based elders and therefore may feel equality of inheritance is key.”

Marianne said although it was important to respect cultural differences: “whenever I earn a high level of trust with a family, I tend to feel comfortable raising sensitive issues with them. I am half Arab and believe that if there is an issue that needs to be raised, the family would expect me to bring it to their attention.  For example, there are times when different generations of one family may ask me to raise sensitive questions of succession with other generations, to facilitate a discussion that may otherwise not occur. This has to be done with particular care and respect when faith, wealth and international planning intersect.”

Iain said: “to give tax advice we need to understand our clients and what the right answer is for a particular family. It is all on a case-by-case basis.”

Philip said: “I had a client who was Indian, and his daughter was in a same sex relationship.  I had known this client for many years therefore I was able to have an honest conversation with them and sit down to ask them do you love or care any less for your daughter because of whom she chooses to be in a relationship with? This can be a real cultural issue in some jurisdictions.”

Advising our clients how to be financially responsible

Beatrice opened this part of the discussion by saying: “it is important that we, as advisors, make sure that our clients are financially aware, independent and responsible. Some clients need budgets as they are not used to handling such amounts of wealth. It is part of our job to ensure that clients are able to deal and preserve their wealth.  It is often a matter of educating clients who are not used to manage their own assets, as the client may not be well educated in financial matters and are suddenly entitled to significant wealth like they have never experienced before. It is a process of education to help clients feel confident-I have done so many times with women who come to wealth through divorce or widowhood.  You can be a lawyer that gives advice as a task ordo advice because you care about the clients, I firmly believe in the latter.”

Matthew said: “sometimes the client can look to their advisor for help and guidance, they may come into new money or inherit money, having not had money before they are not used to it.  This can be quite daunting, and they require the assistance of people who can manage this in their best interests. Sometimes these clients have financial naivete, so dealing with sophisticated individuals provides guidance.”

Richard said that he was aware of non-confrontational methods of controlling client expenditure: “working for a family office client, we would ask the household budget holders to budget on the day-to-day expenditure to ensure that true picture of the spending could be attained.  As this is across all activities (including household utilities, educational, maintenance costs, as well as client discretionary spending), this makes the exercise a holistic budgeting process rather than a rebuke on spending to the wealth owner.”

Philip said that he agreed but that: “we are not in the same world that these clients live in, sometimes you need to put yourself in their shoes with regards to budgeting and expenditure, what may be normal for them may seem extravagant for us.”

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