Room for manoeuvre – Family offices managing global mobility
Balancing the conflicting objectives of protecting core assets and facilitating individual freedom of action in an international family environment.
Family-run businesses are estimated to contribute a significant share of the world's GDP. Sources suggest that family businesses generate at least some 70% of global economic activity. The increasing international mobility of family members can bring many opportunities and benefits to family businesses. And family offices with their professional networks are a key building block for successfully harnessing these opportunities providing customised services and specialised management expertise for multi-generational wealth preservation and growth, also contributing to risk management, as well as to intra-family conflict management.
International mobility allows family businesses to expand their operations into new markets, to exploit the potential for increased revenues and growth, to diversify their business activities and investment portfolios, and to allocate funds to international markets and assets.
Access to different markets enables family members and family offices to identify and explore unique investment opportunities that may not be available in their home country, thereby helping to mitigate the risks associated with regional dependencies. Structuring personal and business affairs across borders can also lead to benefits from favourable tax regimes and incentives in different countries.
International mobility also brings a number of benefits beyond the purely financial or economic, enabling family businesses to attract and retain talent and skilled workers from diverse backgrounds and regions to further drive innovation and competitiveness. Furthermore, living and working in different countries provides family members with valuable cultural insights and international experience. This exposure can lead to a deeper understanding of global markets and consumer preferences. In addition, international mobility facilitates the development of a broad network of contacts, both personal and professional, across various regions. These connections can open doors to new business opportunities, partnerships, and collaborations. Younger family members can gain access to high quality international education, which is valuable for personal development and for preparing the next generation to engage in global business endeavours, contributing to their development as future leaders.
As some regions are known for their innovation hubs and technology ecosystems, international mobility can provide access to these hubs, fostering innovation and competitiveness. Especially in times of accelerated change, intellectual flexibility and structural adaptability become more important to businesses. For example, international mobility promotes the development of adaptive strategies as family members navigate different regulatory environments, economic conditions and consumer behaviour. Ultimately, this leads to improved crisis preparedness, as globally active family wealth and businesses may be better equipped to respond to unforeseen disruptions.
While international mobility offers many opportunities and benefits, it can also pose various threats and challenges to affluent families and individuals. These threats can affect their financial, legal and personal well-being.
International mobility can expose individual assets as well as the entire core family wealth to increased risks, including legal actions, creditor claims and lawsuits, especially if asset protection strategies are not adequately implemented or recognised in multiple jurisdictions.
In addition, moving across international borders often results in complex tax situations where different countries have different tax laws, treaties and reporting requirements, which can lead to potential liabilities and compliance challenges. Estate planning is also complicated when family members have international connections or when family members and their businesses are scattered around the world, making it difficult to create an effective and tax-efficient estate plan. Investing in foreign markets carries additional risks, including political, economic and regulatory uncertainties that can affect investment portfolios and financial goals. And holding assets in different currencies exposes individuals and families to exchange rate fluctuations that can affect the value of their assets and regular income.
Beyond economic impact, ensuring that children receive a quality education aligning with the family's standards can be a challenge when moving between countries with different education systems. Furthermore, access to healthcare may vary significantly between countries, which can be a concern for individuals with specific medical needs. Living in different regions can expose individuals and families to different security risks, including personal safety concerns, political instability, and to natural disasters while global events, such as pandemics or political conflicts, can lead to sudden changes in immigration policies and travel restrictions, potentially affecting mobility plans. In some countries, individuals and their families may also face reduced privacy protections, including increased financial transparency and the risk of sensitive personal information becoming public.
Moving around the world can also mean leaving behind established social and professional networks, and possibly even loosening close family ties, which can affect personal and business opportunities. As beneficial as adapting to new cultures and languages may ultimately prove to be, it can also be challenging and have a major impact on personal and professional relationships, potentially leading to misunderstandings or conflicts within the family and the family business, especially if family members develop different preferences about where to live or how to conduct business.
In the context of the increasing globalisation of family wealth and businesses, as well as affluent families’ mobility, business aviation is an indispensable part of the international transport infrastructure that supports global expansion. Despite the concerns and current debates, and beyond the purely economic benefits of increased efficiency and productivity, business aircraft are essential assets to ensure the mobility of family members regardless of where they actually live. Owning and implementing business aircraft offers greater flexibility in travel schedules, enabling family members to balance their personal and business commitments more effectively.
It also facilitates regular face-to-face contact between the various generations of family members and business activities which is crucial for building strong relationships, fostering trust, and discussing important family and business matters in a personal and private setting. This allows sharing ideas and experiences, a constant infusion of innovation, as well as a close alignment of individual and business objectives and strengthening the sense of belonging to the family and the business to prevent strategic approaches, fundamental concepts and opinions from drifting apart. While business aviation offers numerous benefits for family businesses and their unity, it's essential to manage these resources prudently. Proper governance, cost control, and adherence to safety and regulatory standards are crucial to ensuring that the use of business aircraft aligns with the family's and the business's goals while maintaining financial sustainability.
When it comes to managing the many complexities of cross-border wealth and asset management, achieving tax efficiency and navigating legal systems while securing the necessary financial legroom for individual family members and their business activities, trust structures can offer several significant benefits to affluent families and family offices operating in an international environment with family members and business interests spread across the globe. Trust structures provide a legal means of protecting family assets from various risks, including creditors, litigation and unstable political or economic conditions in different countries. Assets held in trust are typically shielded from personal liabilities and can be managed to mitigate these risks.
Trusts can be tailored to meet the family's specific needs and objectives. They can accommodate different types of assets, investments and family businesses, making them versatile structures for international families with diverse holdings. By simplifying the ownership structure and providing centralised administration, family offices can help their clients streamline decision-making and asset management, while ensuring compliance with various international laws and regulations, especially when family members are geographically dispersed. In particular, trusts allow for the specification of how and when assets are distributed to beneficiaries, which can help to ensure that the use of assets is in line with the family's overall objectives or even for specific purposes.
In this respect, sound family governance that combines core wealth protection structures and measures with the necessary international mobility to provide room for manoeuvre while ensuring a common ground and understanding among family members is paramount, and family offices with their professional network are well equipped to manage these complexities across borders, as well as effectively balancing the potentially positive and negative effects of global mobility on family wealth and affluent families.
The information included in this article is considered true and correct at the date of publication; changes to rules and regulation made after the time of publication may impact on the accuracy of the information referenced or inferred to in this article. The information in the article may change without notice and Martyn Fiddler Aviation is in no way liable for the accuracy of any information printed or stored or in any way interpreted and used by the user. This article or the information contained in it is not provided or intended to be used as advice of any form.
If you have any doubts or would like to discuss any aspect of this article, please do not hesitate to contact one of our experts who will be happy to discuss your individual circumstance.