Home is where the heart is

Downton Abbey was an historical TV drama released on 26th September 2010. It centres around the aristocratic Crawley family who live in a Yorkshire country estate between 1912 and 1926 and depicts the lives of the Crawley family and their domestic staff.

In the sixth and last series, we see the rise of the middle class and the decline of the aristocratic way of life as taxes are raised and the costs of running large estates increased. Many aristocratic families went bankrupt and were forced to sell off their land and possessions to pay off their debts.

Set in the 1920s their problems seem very quaint, but the lessons of history as they relate to large estates are often repeated.

I have advised many families over several decades and see the same problems cropping up repeatedly. The traditional way to own a substantial estate is…

…for the eldest male to inherit both the house and the business – such as a farm, and for the other children to make their own way in life

But this format is often resisted by families who want to treat their children fairly – but if families want to keep the mansion for the children to share or leave it to one without the funds to maintain it, disaster will ensue.

The Johnson family decided to leave the house to the eldest son and the substantial farm to the second. The result was that the house fell into disrepair as Arnie the eldest son who inherited the house struggled to maintain it without sufficient income to support it. Meanwhile the second son, Archie, who lived in a modest home but had considerable income lived in comparative luxury.

In another case, uncle Anderson left the mansion and its possessions in trust for his nephew John, the eldest son who worked hard all his life to build up significant reserves to fund the maintenance and repair of the house which was his pride and joy. On the death of Uncle Anderson John inherited the house, but his wife of many decades declared that she was not prepared to live in the mansion because it was uncomfortable, cold and draftee. She issued a divorce petition.

The divorce was protracted and messy, but ultimately the Judge declared that the house was John’s, even though it was held in trust, so he was unable to sell it, and the significant funds he had accumulated to pay for the upkeep of the building and its maintenance should go to his wife!!

 The same problems crop up everywhere in the world.

Patrick bought an estate in Mexico which was his pride and joy. He and his wife, Mary would visit at every opportunity and when the children were young would take them there for long holidays with their friends.

Patrick assumed – like so many founders of fortunes with substantial estates, that ‘happy days’ in Mexico would continue for the family and so he left the estate to his wife and three children, Matt, Jen and Damien.

But by the time Patrick died his three children were married with children of their own and each had a very different attitude to the Mexican estate, one wanted to keep it, one wanted to sell it and one wanted to sell part. Mary, Patrick’s widow was distraught to see her family so divided and it pained her that they could not bear to be in the same room, let alone the same estate.

Then of course there is the tricky topic of taxation.

I was instructed by Mubarak and his wife Jane to review the ownership of their three homes in London. He bought his Mayfair home twenty years ago and it had gained in value by six million pounds, the second home was in Knightsbridge which he had bought last year, and this had not gained in value and the third was in Kensington which he was about to acquire.

I told him that under UK tax law, there was a relief from capital gains tax at 28% on the gain on a home which was a main or only residence, but this relief was only available for people who were resident in the UK.

Patrick had two daughters living in London and he was happy to transfer the ownership of a home to each of his daughters, provided they could not sell them. However, if he gave his Mayfair home to his daughter capital gains tax would be payable on the gain as if it had been sold at market value. He could however keep it and avoid capital gains tax if he still owned it on his death.

However, the entire value of the property would then be subject to inheritance tax at 40%. This could be avoided if he then left this home to his wife in trust. After his death the home could then be sold the proceeds taken offshore and the tax avoided since there is an exemption for gifts between spouses and for property gifted which is outside the UK if the settlor was non-UK domiciled at the time.

The other two houses could be given one to each daughter in trust, so they could not sell it and provided he lived seven years, no tax would be payable on the capital value of the properties on his death. Tax planning is still possible, legal and well worth the exercise.

The third area in which value can be haemorrhaged out of homes is in paying excessive fees for their maintenance and upkeep. It is not unusual to see staff or administrative personnel charge excessive fees, take backhanders from contractors, steal or in other ways take advantage.

This is where good governance comes in.

Jacob had a stunning chalet in Switzerland and a villa in Portugal. He appointed a local firm to maintain each one and they contracted with third parties to clean, maintain and provide domestic staff when Jacob and his family came to stay.

Jacob’s personal assistant Josh was reviewing the accounts of the homes one day and was surprised to see that the cost of maintaining and running the Portugese home was considerably more than the cost of the Swiss home. I was appointed by Josh to review the outgoings and contractual arrangements.

It was clear from a review of the accounts that the Spanish contractors were being paid considerably higher fees than the contractors in Switzerland.

We reviewed the contracts and put the work out to tender using local private client professionals which we drew upon from our extensive network of private client professionals in Caroline’s Club. Through our network we were able to find an independent property manager to review all the works and services which were required on an ongoing basis and to make sure that each was operated in a professional and honest manner.

Good governance is the monitoring and review of every professional involved in the management of each asset class through effective contracts and regular reporting. Done well it can save millions and lead to considerable peace of mind.

If you would like to promote your services and skills to our network of private client professionals and join our Culture of Care click here to find out more and if you would like to join Caroline’s Club simply register here where you can see what we are up to and if you would like to join simply upgrade your membership.

If you would like to find out more simply register here

Work from home – should it be a legal right?

HSBC plans to cut its ‘global office footprint’ by 40% by requiring its staff to work from home. Is this strictly true? Their employees will still be expected to sit at a desk, with a computer and a telephone – it’s just that the office, computer and phone are in the employee’s home and not in the office of HSBC.

This will be a massive cost reduction for HSBC in terms of rents, building maintenance and business rates, as well as cleaning staff, canteen savings, and window cleaning.

Lloyds Bank has been less prescriptive telling its staff that they can choose where to work. But it expects 80% will opt to stay at home at least part of the time.

What I want to know is exactly who wants to work at home and who wants to go to the office? I suspect that it is the young who live in cramped accommodation, possibly with young children who want to go back to the office. They don’t mind the commute and like the social comradery of office life. It is also important to them to learn the skills of their profession how to deal with tricky situations and people. They want to impress the boss to advance their career and get noticed by their seniors. It is easier when in the same office to make sure that instructions are properly understood, and any queries ironed out quickly.

However, the senior professionals have larger homes with possibly one or two rooms which they can adapt into an office, they have older children who are more often out of the house and do not revel in the social life of the office as much as the junior members of staff.

But with the juniors wanting to go to the office and the seniors wishing to work from home – how will this affect the career progression of the employees?

The boss of Goldman Sachs has said ‘remote working is not conducive to an innovative, collaborative, apprenticeship culture’

And what about Professional Indemnity Insurance – will claims not be allowed due to a lack of supervision?

Then there will be a whole host of other insurance issues as well. What happens if an employee trips on a computer cable and injures themselves while working from home? Is this a domestic or office accident? Which policy – if any will take the claim?

Then there is the tricky issue of whether the right to work at home should be made a statutory right and if granted how will it affect travel industries. We have had enough intrusion into our working and daily life I am not sure we want any more rules and rights. Furthermore how can you define the difference between hairdressers and bankers?

Even more worrying was a comment made by Tony Blair – if firms find that jobs can be done as well remotely, they may decide to outsource them to cheaper locations in the north – good, but overseas – bad!

And then there is the impact of working from home on an employee’s mental health.

More people will worry as to their long-term prospects if they do not get regular feedback; social chat with the boss over the coffee machine, the gentle smile of a colleague who sympathises with another acknowledging a ‘hospital pass’ of a difficult matter or impossible client.

Picking up on mental health issues won’t be so easy to detect if the staff are working half the time at home.

Other issues which could be affected could be cross referral of work. Spotting a colleague from the real estate department in the corridor may trigger a thought about a client’s real estate issues which may otherwise have been overlooked.

Of course, like with every shift in habits, new things emerge as old ways of doing things are challenged.

Cross referral of business across an organisation has always been tricky. However, the members of my professional network, Caroline’s Club are finding new ways to use the tools we provide for purposes such as cross referral of business. They sign up for a panel session and then invite colleagues from different departments or jurisdictions to share client stories for the members of our network. The Club records these sessions for YouTube, but the recording can also be used for internal cross referral purposes.

We encourage our members to tell client stories (and give them a useful Template to follow) because they are 1,227% more memorable and one of the four ways to avoid the innate fear of the influence of strangers – or the resistance to product push.

Where a member hosts a panel session, we encourage each panellist to record an interview for Apple I Tunes and Spotify which we then promote on our newsletter which we send to our 8,000 professional subscribers. For each interview we provide accurate feedback on open rates, click throughs and website visits. Some members have suggested offering a prize to the professional who has the highest open rate and suggests they link their recorded interview onto their email signature to increase the open rate by sharing it with all their colleagues, contacts and clients to whom they send an email.

If you would like to promote your services and skills to our network of private client professionals and join our Culture of Care click here to find out more and if you would like to join Caroline’s Club simply register here where you can see what we are up to and if you would like to join simply upgrade your membership.

If you would like to find out more simply register here

Hugely enjoyable

Jane Gilbert is an insurance broker and a member of Caroline’s Club. She attended one of our meetings last week and said ‘I clear my diary to attend your meetings because they are hugely enjoyable’

What makes them so much fun? It is because the meetings understand human nature. We have all been to networking events where we have been cornered by a fellow professional eager to ‘push product’ and wished we could move him off to talk to someone else.

This resistance, which we all hate, is called the ‘innate fear of the influence of strangers’ which I write about in my book ‘Reimagining the role of the private client industry’ post lockdown.

There are four ways to get around this innate fear – and the most powerful is client stories.

So, at our meetings we simply share client stories – which as Jane says are hugely enjoyable but they are also 1,227% more memorable.

At our meetings I give a three-minute introduction and then we have a panel of private client professionals which is hosted by a sponsor and each panellist shares their client story with the attendees. 

This is followed by a question-and-answer session which is recorded with the panel session and uploaded onto YouTube on our ‘How to keep your Money’ series.

We then break out into network bubbles of about 8 private client professionals where each shares a client story with other professionals.

But the aim of Caroline’s Club is not just networking, it is to win business.

 Fist we segment our audience into 4 different meetings which are held at different times of the day to reflect the different time zones in the world the Americas, Europe, Middle East and Africa, and Asia and our private client professionals are encouraged to go to the meetings where their clients have interests

Martin Territt a professional lobbyist living in Ireland was a panellist in our meeting last week. He said he ‘won significant business from another member after just two meetings.’

This is not an isolated occasion, Joe Field a lawyer with Pillsbury in New York was immediately after the meeting contacted by Charles Garland of Claremont Corporate Services our meeting sponsor and I know John Cross a banker in Switzerland with Mirabaud has also had discussions with Charles.

I made the distinction earlier between networking and winning business, because although networking with other private client professionals is fundamental to winning new private clients – it is not the only way to win business which Caroline’s Club recognises.

We encourage our members to share what they do for their clients in a recorded interview which can be uploaded onto their profile in our directory, but it can also be linked to their email signature. I have a video link to what I do and the benefits of Caroline’s Club linked to my email signature and enjoy watching how often it is opened and watched by my contacts, clients and colleagues.

At Caroline’s Club we carefully craft and record an audio interview to show our members off to best advantage which can be seen by anyone at any time

The other area of concern from many private client professionals is how to cross refer business. When I was at Simmons & Simmons we were flown around the world to meet other lawyers in different jurisdictions for partners meetings, but very rarely was business discussed in any detail – so this expense in time and money, produced only a low return on investment, because of a failure to understand the innate fear of the influence of strangers – and how to overcome it.

Caroline’s Club can also be used by our members for cross referral of businesses by asking our professionals from organisations with many different departments such as a large law firm or firm of accountants to host a panel session and to invite colleagues from different disciplines or jurisdictions to share a client story of what they do for clients. They have then not only shown our network their strength in depth but have also got a link to client stories from colleagues which they can use for internal marketing purposes.

Of course, Caroline’s Club would not have happened but for the pandemic, because although we had the ability to connect remotely, we did not, we were used to jumping on planes and staying in grim hotels – simply because we did not know how else to win business – but now there is another way.

Caroline’s Club provides an effective and efficient way to network, cross refer clients and win business which saves on time and money on travel, hotel bills and events.  We can now reserve our trips and face to face meetings to client – who can then decide when and how to engage with their adviser and whether they are prepared to pay for a personal face to face service

 We therefore invite you to join Caroline’s Club. In the club you will learn how to create client stories (we have an excellent template for those who want it), join our meetings to network, craft your own audio brochure to link to your email signature and host a panel session to display your strength and depth. Not only has the Club proved to be an effective and efficient way to win business but it saves the organisation huge costs on travel and accommodation by enabling the professionals to connect with others from the comfort of their own home or desk.

If you would like to promote your services and skills to our network of private client professionals and join our Culture of Care click here to find out more and if you would like to join Caroline’s Club simply register here where you can see what we are up to and if you would like to join simply upgrade your membership.

If you would like to find out more simply register here

G7 Great Rhetoric but what does it mean?

The G7 countries of the US, the UK, Canada, Germany, France, Japan and Italy met in Carbis Bay in Cornwall for a three-day meeting which ended last Sunday, 15th June 2021

Ahead of the summit, the G7 finance ministers agreed to tackle tax avoidance by multi nationals and tech companies to pay more tax in the countries where thy sell their goods and services and to a minimum global corporation tax rate of 15%

Chancellor Rishi Sunak described the deal as ‘historic’ and ‘seismic’, but if it was that much of a shift why were the big tech stocks not much moved by the announcement?

The truth of the matter is that although the Campaign group Tax Watch estimates that tech giants avoided £1.5 billion of UK taxes in 2019 the changes announced will not necessarily see this sum finding its way back into the Treasury’s coffers.

The tax changes only affect the top 100 biggest global companies with profit margins of at least 10% which means that Amazon which does not make 10% profit is not included and then only have to pay tax on the next 20% in the countries where they make the sales, rather than where they are tax registered or resident.

What is possibly of greater importance is the agreement to have a minimum corporation tax rate of 15% on overseas profits, which together with over anti-avoidance measures should make it unattractive to shift profits from a high tax jurisdiction to a low tax jurisdiction.

Again, this is not as dramatic as it may appear, since within the OECD club of rich nations only Ireland (12.5%), Chile (10%) and Hungary (9%) have a corporate tax rate lower than 15%

The biggest winner of course will probably be the US which would will receive increased revenue form its tech giants and other US multinationals.

What is however seismic is that these G7 countries have agreed to give up a little of their tax sovereignty to tax their resident individuals and companies and line up behind Biden to co-operate and tackle global issues.

Taxing corporations according to where they were registered or tax residence – which is usually determined by where the high-level decisions affecting the company were taken was fine in the past because the high-level decisions were usually taken where the company made its profits – but as multinational businesses have grown they can use these now well understood rules of tax residence to set up where the company can pay the least tax. For many people these global companies should not be allowed to pay such little of their profits in tax by basing their companies in tax havens or low tax jurisdiction.

It is unfair, but don’t forget that a director of a multi-national organisation is under an obligation to maximise the returns for his shareholders, and this means reducing the tax burden wherever possible.

Attempts have been made over the years to make it harder for such multi-national companies to set up where they chose and to book business through these low tax jurisdictions – by making ‘brass plate’ entities ineffective in the tax avoidance plan To be effective the company must now have ‘substance’, real employees or administrative staff doing real work.

The introduction of the ‘substance’ rules was great for these tiny offshore jurisdictions since is meant more work for the islanders – and not just the trust and company administrators but also the accountants, lawyers, hospitality and travel industries. So, these jurisdictions could be very hard hit by these announcements.

One concern which has been voiced but which I think is a red herring, is that the higher tax rates will mean higher prices for the consumer, this is unlikely since what is being proposed is currently very modest – and is more than likely to be offset by significant savings as Directors around the world look into ways of saving costs through scaled down office space as workers continue to work from home and reduced travel budgets as employees are encouraged to use digital ways of communicating rather than face to face meetings.

 The G7 Club emerged organically in the 1970s as an informal forum. The countries then accounted for some 80% of global GDP but with the rise of China it accounts for only 40%

However the proposals will need to be passed by the G20 it Italy next month when other big nations including China, India, Brazil and Russia will take part – and then it will need to be put to the 135 countries of the Organisation for Economic Co-operation and Development – but I would suggest it will be introduced before the year is out.

If you would like to promote your services and skills to our network of private client professionals and join our Culture of Care click here to find out more and if you would like to join Caroline’s Club simply register here where you can see what we are up to and if you would like to join simply upgrade your membership.

If you would like to find out more simply register here

Billionaires

If you look at the accounts of any substantial financial services firm, whether a bank, law firm or firm of accountants, the three most significant costs are staff, marketing initiatives and office accommodation.

Lockdown has been a massive exposure of the wastefulness of two of these costs; office space and marketing initiatives– as lockdown eases, we will not be returning to normal because boardrooms will want to focus on what they can learn from lockdown, to increase profits, reduce office overheads and cut wasteful marketing costs

I predict that within five years we could see very different working practices and if Boris is lucky, we may even get a greater levelling up between South and North

In this blog I look into my crystal ball based on my research for my book ‘Reimaging the role of the Private Client Professional’ post lockdown and put forward some ideas as to how I think this could happen

The pre-lockdown way of working had many flaws; lengthy commutes, technical superiority, unacceptably high lockup days, poor client feedback, extensive travel to other offices to meet colleagues and prospective clients, huge marketing budgets with poor monitoring and a low Return on Investment.

In the beginning of my book ‘Reimagining the Role of the Private Client Industry’ post lockdown I give the example of Mr Hartley who thirty plus years ago used to go to his Club, every day, for a boozy lunch to ‘win business’. This type of ‘marketing behaviour’ is now a thing of the past – most professionals rarely leave the office for lunch let alone drink alcohol in the middle of the working day and I believe that in less than five years extensive travel, attending events and visiting colleagues across the globe will be considerably cut down.

My recommendation for all private client professionals is to focus first on the experience of the Client – this is where the opportunity lies.

In a survey I carried out with some professionals from a range of financial services firms, 100% of clients asked for more feedback from their private client professionals. Furthermore, the average lock up days for the payment of fees (where there was discretion) was 183 days – which means that the client is delaying payment for up to half a year, - this usually indicates a dissatisfaction as to service provided.

Both these concerns can now easily be fixed given the digital advancement in sophisticated Client Relationship Management Systems. It also means that teams can work together without being in the same office and can be accessed by the client in real time – so the team and the clients can get accurate up to date information as to who is doing what, what progress is being made and how much it is going to cost.

Private client professionals should also focus on building trust with their clients. In my book I go into how to build trust. In essence it boils down to looking at the wider concerns of the client and finding solutions which invariably mean making good and considerate professional recommendations.

I was speaking to a private client professional recently who said ‘I always give property work to Chris’ and ‘US work to Joe’. What sort of property work; development contracts, conveyancing, rights to light, enfranchisement, and all US work; what sort of work and where? Firms spend considerable time and cost in recruiting and training their staff but next to no time in making sure the professionals know what other professionals even within the same firm are doing in different departments so they can make well considered recommendations let alone from different disciplines across their network.

Marketing departments have improved a lot in recent years’, but it wasn’t long ago when they were referred to as the ‘guardian of the firm’s logo’ and the ‘publisher of the firm’s brochures.’  New business in most case is still expected to be won by the professionals who are also expected to do the work and are given little or no training in what to do, so they adopt tribal learning which is to do what everyone else does – jump onto aeroplanes, attend events and pick up business cards which are then put into a drawer and rarely looked at again.

In a survey I carried out some years ago on private client professionals 80% said their efforts at winning business had only a 10% return on investment, and yet most had significant marketing spend.

In the past year during lockdown financial services firms have proved to themselves that a lot of their office overheads is a waste of money, their marketing spend has been futile and the opportunity to focus back on the clients using digital technology is an opportunity which Caroline’s Club can assist you with.

If the mood of the era is grasped and possibly even encouraged by governments to relocate professionals north – leaving only meeting rooms in London we could see a totally different working landscape in a very short space of time

I set up Caroline’s Club post lockdown because I saw lockdown as an opportunity; the time was right. It builds on my extensive research over many years on how to use psychologically proven techniques to bring business back into networking rather than leaving it to wasteful (albeit enjoyable) social chit chat- using education, aggregation, gifts and client stories which will not only win trust, but foster a Culture of Care, care for clients, care for contacts and care for colleagues, this builds trust, gets bills paid and reduces overheads

If you would like to find out more simply register here

If you would like to promote your services and skills to our network of private client professionals and join our Culture of Care click here to find out more and if you would like to join Caroline’s Club simply register here where you can see what we are up to and if you would like to join simply upgrade your membership.