Global Family Offices: An Ibero-American perspective

 

Thanks to Iñigo Susaeta, general director of Arcano Family Office for his thoughts on the evolution of the family office in the Ibero-America region and how a movement toward more holistic models is emerging.

Go here for the Spanish version.

Over the past few years the Ibero-American region has become one of the regions with the greatest economic growth worldwide — thanks to, among other factors, the good working practices of business owners and their companies. This has generated an increase in wealth, both the amount and volume of large private assets, and therefore, the desirability of professionalizing family wealth management through private offices, also called “Family Offices.”

However, in contrast to what, for example, could occur in the United States or Europe, most of these Ibero-American Family Offices are not only located in the original site of the private wealth, e.g., Brazil, Colombia, Chile Peru, but due to the relocation of family members, these offices have become global. Nonetheless, most of them are managed from their country of origin (either as a single-family office or through the expert advice of a multiple family office, or from other areas of influence, such as Miami, Genève, London or Madrid).

Family Offices are increasing in demand and sought by persons with large private assets who value being able to rely on proper consulting, not only to preserve and increase their wealth, but by having a “360 degree vision” of their wealth that will allow them to take care of fundamental elements needed for both the family and the wealth’s future, e.g., successorship, family relationships, family governance — an approach much more independent and comprehensive than the habitual advice they were receiving from their banks as overviewed in the book entitled “The Complete Family Office Handbook” edited by Bloomberg, in which I had the pleasure to participate.

What do these owners of great family wealth see in the Family Offices of Madrid or Miami? Fundamentally, they see equipment, expertise and infrastructure that is still difficult to identify in some of the Ibero-American countries — in addition to the ability to carry out operations from diverse geographical areas where there is a greater level of security.

Despite this tendency, there still remains a long path to professionalizing private wealth management in the Ibero-American region, especially with respect to independent consulting.

Thus, the inevitable question arises: How to ascertain if a consulting service is really independent? In order to explain this, I usually resort to the metaphor of the family doctor (multi-family office) and the pharmacist (financial entities). Both are excellent professionals, but each has a different role. To mix them, however, is usually a problem. The bank (pharmacy) will necessarily seek to place its products among its clients, generating a clear conflict of interest in the factor of independence. It is impossible for the bank (pharmacy) to offer complete and objective advice (even when having a financial consulting department available for its clients with the greatest assets).

On the other hand, the advantage of the doctor (multi-family office) is that the main objective of the doctor is to know the client, the objectives of the client, and to develop a proper program to achieve said objectives. To do this, he/she (the doctor) may resort to the market, seeking products and assets offered by the market independently from the financial entity that supplies them. It is very important that the consultant has no conflict of interest at the time of choosing a product from one or another entity, or that he/she chooses the product because it will pay him a commission for “introducing” the product into the market. The consultant can only charge a fee to the client, if he/she is not receiving commissions from third-parties that could induce him or her to enter into a contract with a specific entity.

Considering the aforementioned premises, I am convinced that the path to the professionalization of wealth management shall move forward in Ibero-America with the same success and outcome as the model is achieving at the international level.

About the contributor

Iñigo Susaeta is partner and general director of Arcano Family Office in Madrid. He holds FFI Certificates in Family Business and Family Wealth Advising and can be reached at [email protected].