A holistic approach to private wealth

The Ten Domains model published by The UHNW Institute offers clarity of thought for private client practitioners.

The Institute is a non-profit independent Think Tank focusing on thought leadership for ultra-high net worth families family offices their advisers and those serving those families more generally. The Institute believes that this model encapsulates everything advisers need to consider when assisting families to address their needs. Joanna Caen agrees.

For decades private client practitioners have focused on the financial legal and tax and other regulatory and compliance risk areas. Encouragingly over the last decade or so there has been a real shift among those who aim to be industry and thought leaders to considering other aspects. However it is still hard to raise health and well-being or even family dynamics with families.

The Ten Domains model reminds us that the key issue to be addressed first and most deeply with families is building the adviser-client relationship. The Institute calls this the core process domain and Cindy Radu TEP calls it the central organising domain¹.

Cindy's description is apt because it reinforces the idea that this is the pillar around which the rest of the model operates. If that domain is as strong and developed as we would all hope i.e. if we have the true trust confidence and faith of the family we are working with then we should not feel we would be overstepping by mentioning difficult topics like those above.

The model also tells us that all the nine spokes of the model the content domains in the Institute's language or technical domains in Cindy's language are equally important. Again Cindy's language is helpful because it indicates that all these domains require technical expertise to address. None of us are or ever could be experts in all of them. However if we have the trust of the family and a basic understanding of the issues arising for all domains we can help families address the issues they may face.

Useful in practice

Using this framework will help private client practitioners understand how to really become a family's trusted adviser by making sure we consider all issues not just those within our subject matter expertise. If used correctly it will show we care about the family's holistic needs not just those from which we make our fees. It will demonstrate true commitment to the family.

Second it highlights some of the risks advisors/trustees face when dealing with families. For example are the trust assets held e overly concentrated in certain assets without sufficient good reason?

Holding significant stakes in family companies may be in accordance with a settlor's wishes (or mandated by exercise of their reserved powers) but even with an Anti-Bartlett provision it is incumbent on private wealth professionals to review the asset holding from time to time and at least raise concentration risk with the family. Another issue the industry is increasingly facing with an aging population is mental capacity. If this can be raised with the settlor in a careful sensitive way and at an appropriate time it can guide conversations about health family dynamics and transition and estate planning among others.

Mitigating risks

Using a set framework in this way also ensures that we are mitigating risks for our business where we can. When our primary contact with a family is through one of their advisers or a member of a younger generation we do not always know the true wishes of the founder generation/power holders. By making ourselves trusted advisers of the family not just those with whom we deal the most frequently hopefully we can be informed of and aware of any issues before they arise. The flip side of this is that when we are seen as the family's advisers not those of the settlor or other individual then other family members will be less likely to see us as partisan and therefore may be more willing to engage with us for the longer term. We have all seen examples of the second generation changing the family's service providers after the first generation passes away because of perceived (or actual) bias against that second generation.

A universal model?

It is dangerous to generalise about how people from different countries or generations will want to develop their relationship with their trusted adviser and seeing this framework as a positive resource is not the same as electing to take the model to any family and saying I've come across this great resource let's sit down and study it together. However we can use it to ensure consistency across all family client relationships. We should use the model to guide and structure our thinking in our conversations with families. For example prior to an annual review with a family you might think about issues arising from leadership and transition planning that were beginning to arise during the last annual review and consider how to address them this time around.

When using the model with families the key is to have many communication skills and styles at hand. As we know some people prefer direct communication others want a discussion. Some want to drive the conversation some want us to. The ability to be linguistically flexible will help us all in our discussions with families whether they are about or driven by the model or otherwise. Sometimes even simple vocabulary changes help a conversation progress. For example if a settlor is uncomfortable talking about their own mortality it may be better to talk about their legacy planning rather than estate or succession planning.

Widening our expertise

The 'Ten Domains' model is part of a growing recognition within our industry that we cannot simply focus on financial legal or tax planning for our clients. Instead while we can be subject matter experts in those areas we need to know how to identify other issues which may be concerning families. We must be ready willing and able to discuss all of the technical domains of the model with families to ensure we are best serving their needs. While many professionals are trusted to advise on our traditional areas of expertise what we need now from families is their trust that we can identify needs that may be more focused on their health and happiness than their financial needs and that we can bring relevant expertise in to help navigate those issues. The process should be as intuitive for the family in areas such as governance social impact and health and well-being as it is in financial and legal matters. When it is then we will know we are truly families' trusted advisers.

For further information please contact Joanna.

¹ See Cindy Radu The ten domains of family wealth STEP Journal Issue 1 2021.

Please note that this article is intended to provide a general overview of the matters to which it relates. It is not intended as professional advice and should not be relied upon as such. Any engagement in respect of our professional services is subject to our standard terms and conditions of business and the provision of all necessary due diligence. © Praxis 2023