Tatler: Why UHNW families need independent advisers
A Sanctuary in Complex Times: here Sally Tennant, founder of Acorn Capital Advisers discusses why UHNW families need independent advisers
This article appeared in Tatler Address Book in March 2024.
Managing significant wealth presents a unique set of challenges for UHNW individuals and families. They typically work with a network of advisers and service providers including wealth and investment managers, lawyers (tax, wills, Trusts, property), Trust companies, tax advisers and accountants, insurers, and property managers. They may also need additional specialist advice for philanthropy, yachts and aviation, art and other real assets.
Families need to grapple with complex legal and tax issues, investment portfolios covering diverse investment strategies, multigenerational wealth transfer considerations, and the emotional intricacies of immense wealth. Most wealth managers, with their product-driven business models, and tax and legal service providers struggle to meet all these requirements.
This is where independent advisers add substantial value. They help clients navigate the complex financial landscape, explore investment options, understand complex structures, the opportunities as well as the risks involved. The adviser acts as a trusted partner, ensuring the family feels empowered and in control, supporting them in making well informed decisions. Here's why and how independent advisers are invaluable:
Unbiased advice
From investment managers to Trust companies, many companies exist to sell their own product. How do you know that you are getting the best available option? Independent advisers, without their own products or additional services to sell, can objectively scour the entire financial landscape to identify the best solutions that align perfectly with your specific needs and goals. Ultimately, independent advisers are your sounding board and wise counsel.
Independent advisers can act as your gatekeeper when you are approached by friends and acquaintances for philanthropic donations or early-stage investments. They can objectively consider how these requests fit into your investment and philanthropic strategies, rejecting inappropriate requests to save you any embarrassment.
Independent investment oversight
To be truly independent, advisers must not manage nor sell their own products, or have a financial relationship or partnership with a wealth manager. Independent advice is especially important for those with several investment managers who may not want each manager to know their total net worth. Advisers can add an additional lens by overseeing the portfolios in aggregate, monitoring asset allocations and parameters, ensuring that managers complement each other, and returns have been achieved through skill rather than taking excessive risk or relying on luck.
Independent advisers do this by engaging regularly with managers, analysing, and reviewing the drivers of the portfolios’ performance, establishing an investment policy statement, organising and chairing investment committees, as required. They sit on your side of the table and help you to get the best out of your managers by ensuring:
• Transparency in fees: they check that investment fees are appropriate and transparent. Most clients are happy to pay a higher fee if they achieve higher returns. But why pay more for active management if the same strategy and performance can be achieved at a lower cost? Equally, it is not advisable to focus solely on fees because service is important. Independent benchmarking gives you confidence that you are getting value for money.
• Robust investment practices: Independent advisers ‘look under the hood’ by reviewing the track record and tenure of the investment team. What are their investment principles, are they fit for purpose, and do they align with your risk tolerance and liquidity requirements?
• Product suitability: Because they do not have their own investment products, they prioritise finding the right solutions for your needs from the universe of investment managers. They look out for and avoid overly complex products with excessive jargon and fees, and ensure clear communication.
• Guidelines: Some clients wish to include environmental, social and governance factors in their portfolios, more and more want to see a positive societal impact from their investments. Independent advisers help identify 'greenwashing' and measure the impact achieved. They identify the money managers who 'walk the talk' on ESG and are not just box-ticking.
Holistic Wealth Management
Beyond financial investments, independent advisers consider your entire financial picture encompassing estate planning, tax strategies, and philanthropic endeavours, ensuring a cohesive approach to your wealth management. Like air traffic controllers, independent advisers ensure that advice is well-coordinated and well-communicated.
Many UHNW families hold their investments in Trusts. Trustees are required to evidence that they are fulfilling their fiduciary duty, including that they have set appropriate investment objectives and risk levels for the beneficiaries and that the investment managers are delivering the performance required. Advisers who are experienced fund managers support Trustees in fulfilling these obligations with periodic reviews of the portfolios.
Supporting succession
Succession is much talked about among advisers but families often struggle with when and how to introduce their children to wealth. Independent advisers are a useful emissary to ensure that different generations and members have a confidante and are prepared for these conversations. Independent advisers fulfil the role of educating the next generation so that families can feel confident that they are equipping their children with the tools to be responsible wealth stewards.
In conclusion, independent advisers provide UHNW families and family offices with a level of service that falls outside the bandwidth and business model of most service providers. Their independence, objectivity, holistic approach, and expertise in navigating complex financial landscapes make them invaluable partners for those seeking a secure and successful future.
Advisory, Tatler’s trusted network of influential private client experts, all at the pinnacle of their profession. From Family Law to Property, our hub of elite practitioners have the gilt-edged expertise necessary to advise UHNW and HNW individuals. Find out more about Sally here.
