Last winter, my son persuaded me to take the family to an exclusive beach resort in Mauritius where some of his friends were staying on holiday. I carefully picked and packed a skimpy Brazilian bikini, worrying slightly whether the bikini would be better suited to a young lamb, rather than the mutton for which it was bought. I need not have worried. Not a single eye on the beach was looking my way: they were all agog at the Russian women adorning the white sands.
Each had made the very best of themselves, from platform heels to cascading hair. Each was razor-sharp in her determination to marry money and live happily ever after. One young Russian exercised her skills on one of my son’s young friends, who was so captivated that he spent his entire Christmas allowance — not an insignificant sum — on buying her jewellery. She, for her part, gave him little more than a kiss and was never seen again.
But what really happens when the fairy tale becomes reality and you are rich beyond your wildest dreams? From my twenty years’ experience giving legal advice to ultra-wealthy families, they, like Alice, enter a Wonderland where nothing is what it seems and all the rules are different.
Whatever your expertise, when you first make a substantial fortune, you will be ill-equipped to deal with the tricky terrain of investing across different asset classes, cross-border succession, ruthless fund-raisers and illogical taxation.
Wealth is like fire: if controlled, it provides heat, warmth and energy, but uncontrolled it can destroy or be destroyed absolutely. The difficulty is getting it under control. You will need advisers, but deciding who to choose, how to instruct, monitor, evaluate and pay, is not an easy task.
I recently lost a client. When she first came to me, I told her that I could only provide her with the level of service she required at a reasonable price if she were to engage a team with a blend of expertise. I told her that I would provide direction and take instructions, a senior lawyer would research and advise on difficult areas of law, and a junior would draft the documents for checking by the senior lawyer and myself. But she didn’t want a team, she wanted only my attention.
As a result, she became frustrated that I was not available for her whenever she needed me and irritated by the level of fees for what she thought was a poor level of service. If she had taken the team, as advised, she would have received first-rate service for lower fees and the relationship would have remained. She now has to pay fees all over again while her new lawyers familiarise themselves with what we have done before they can begin to provide her with any value.
Another client of mine, worth many billions of dollars, is not interested in the complexity of cross-border interaction of laws. As a result, he fails to understand the difficulties we face with ill-conceived legislation — often, Parliament has spent little time harmonising it with the laws of other countries. He also fails to appreciate the structure we have prepared for him to enable him to preserve his wealth and his business empire for all members of his family. He calls me ‘dear’ Caroline because of my fees, which are less than the cost of running one of his yachts for a year. Our work involves preserving his life’s work and wealth for his family. Surely this worth more than just one yacht?
Another of my clients is worth many, many billions. He is interested in the detail of the law and fully appreciates the difficulties caused by bad legislation. His response to ill-conceived legislation is to recognise that bad law needs to be changed, which is precisely what we are now in the process of doing on his behalf. Personally, I would like to see a lot more legislation changed in this way.
In recent years, legislation across the world has been drafted to elicit information from ultra-high-net-worth families under the thin guise of money laundering and anti-terrorism initiatives. This is not the primary aim for this legislation, given that no terrorists have been caught and money laundering continues unabated. The primary aim, I would suggest, is to tax undisclosed wealth to fill the ever-diminishing coffers of Western countries.
The concern, however, is that this will not be enough. We are already seeing governments turn their attention to finding new ways of taxing these families. In the UK, we now have onerous inheritance tax on trusts, the abolition of business relief for capital gains tax, and an income tax charge on pre-owned assets, none of which was properly discussed or thought through.
If these UHNW families are to resist what I perceive to be an ever-increasing likelihood of attack through ill-conceived legislation, they should unite to do something about it. The website FamilyBhive.com is designed to facilitate this. Its aim is to unite families in confidence and privacy to discuss some of their difficulties as they take responsibility for their wealth. It will assist them in finding and using advisers efficiently but it will also represent these families. It will give this small but important community a voice with which to stand up to excessive regulation and taxation.