2015 FOX Fall Forum

FOX 100 Resource Center A Roundup of Leading Industry Knowledge

amily Office Exchange (FOX) is pleased to present this year’s F selection of articles, reports and white papers devoted to the issues of most concern to owners and family office executives globally.

To assist in locating information of particular interest, Resource Center material once again is grouped by subject area:

• Trusts, Tax and Estate Planning Page 2

• Security, Technology, Family Office Page 4 and Lifestyle Issues

• Family Matters (Legacy Planning) Page 9

• Investment Page 11

• Family Office Issues Page 17

Soon after the conclusion of the Fall Forum unless noted as “print only” all Resource Center material will be available at: https://www.familyoffice.com/learning-events/forums/2015-fox-100

Presented in the Grand Foyer Lobby, JW Marriott

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TRUSTS, TAX AND ESTATE APPLICATION OF THE 2-PERCENT FLOOR TO TRUST AND ESTATE EXPENSES PLANNING McGladrey LLP Though the IRS issued the final regulations for INBOUND WEALTH PLANNING FOR THE section 67 in May 2014 to require the GLOBAL FAMILY unbundling of a fiduciary's integrated fee, Northern Trust corporate fiduciaries and tax planners continue Determining exactly whose income, gains and to struggle with designing and implementing is subject to the U.S. Federal tax system procedures to ensure that the directive is is a daunting inquiry that requires a properly accounted for on returns during the comprehensive approach without shortcuts. upcoming tax filing season. And, just when the general rules of international tax principles under the Internal Revenue Code While most corporate fiduciaries have moved on (the Code) and related treasury regulations have to the task of applying the regulations to their been reviewed and applied, an applicable trusts and estates, some commentators still international tax treaty or a new tax law can contend that the regulations misinterpret the change everything. U.S. Supreme Court decision in Knight v. CIR, 552 US 181, 128 S. Ct. 782 (2008), and should Understanding the U.S. Federal tax system is of be challenged. particular importance due to the extraordinarily high level of inbound wealth to the United States. It is estimated that private wealth from For high-net-worth individuals, estates and offshore into the United States exceeded $500 trusts, the stakes are high. Many of these trusts billion annually in recent years, originating and estates are subject to the alternative principally from Latin America and Asia-Pacific. minimum tax (AMT).

This article unravels the complexities of the This article discusses the potential for increasing ever-evolving nature of international tax, and tax lability since the new rules for calculating provides fundamental, international tax income tax now eliminates many deductions and principles for non-U.S. residents, non-U.S. credits. citizens and their advisors with activities in the United States. SHOULD YOU KEEP A TRUST (SILENT) FROM BENEFICIARIES HOW DO I PRIORITIZE MY PERSONAL South Dakota Trust Company, LLC WEALTH PLAN DURING THE SALE OF MY Wealth transfer to younger generations is one of BUSINESS the biggest concerns for families today. Many CTC/myCFO families feel that the younger generations aren’t Individuals and families considering a business ready to handle the wealth they’ll receive; in fact, sale typically face a daunting intersection of only one-third of wealthy parents have fully planning issues. These may include deal disclosed their wealth to their children. The structure decisions, legal and regulatory perceived unpreparedness, along with a concern considerations, income tax minimization, - for privacy and wealth preservation or sufficiency analysis, wealth transfer and protection, are philanthropic goals. As a deal approaches the closing stage, an owner’s attention will be MYTHS ABOUT TRUSTS AND INVESTMENT focused on getting the deal done—and rightly MANAGEMENT: THE GLASS IS HALF FULL! so. Yet, it is equally important that business South Dakota Trust Company, LLC owners not lose sight of the impact a company Trusts have gained enormous popularity over sale will have upon their personal wealth profile. the last 20 years. The top 1 percent of the wealthy have 38 percent of their investment To ensure that personal wealth planning doesn’t assets in trusts, and the next 4 percent have 43 take a backseat to the company transaction, this percent of their investment assets in trusts. This article provides several action items that should powerful trend is largely due to the fact that the be considered first. modern trust can provide a family not only with powerful tax and asset protection advantages, but also with the flexibility and control of several 2

2015 FOX Fall Forum key nontax trust functions, including investment owners will be looking to plan their exit from the management. This article provides some of the companies they have established, it is important key investment management factors contributing that planners prepare for their role in the to this growth. succession planning process. We’ve compiled a list of ten steps planners should adopt as their SUDDEN WEALTH standard approach to attaining the perfect Abbot Downing balance between pleasing the family and The white paper, “Sudden Wealth: Managing the protecting the business. Transition,” provides helpful guideposts for handling new wealth, regardless of the TAX BASIS OPTIMIZATION STRATEGIES circumstances – whether the wealth represents USING TRUSTS a recent windfall (the immigrant experience) or Warner, Norcross & Judd having control of a large amount of for The American Taxpayer Relief Act of 2012 the first time (the inheritor’s experience). The reduced the top marginal estate and gift tax rate paper highlights common examples of steps to to 40 percent. In addition, the Act provides for a take and to avoid, the typical reactions and $5,000,000 per individual lifetime estate/gift tax emotions experienced by the suddenly wealthy, exemption, adjusted for , known as the and a recommended timeframe for making “basic exclusion amount”. The 2015 basic decisions that focus on important personal exclusion amount is $5,430,000. This article priorities. For anyone experiencing sudden explains changes to the current estate and gift wealth, an exploration of what to expect can tax law and provides insight into various tax minimize potential adverse consequences and strategies. foster confident decision making that is aligned with your personal values and goals. CHALLENGES FACED BY WEALTHY, MULTI- GENERATIONAL FAMILY REAL ESTATE 678 TRUSTS: PLANNING STRATEGIES AND ENTERPRISES PITFALLS FTI Consulting The Blum Firm, P.C. Families who have created wealth over time A 678 Trust is a unique vehicle that (i) eliminates through real estate development and ownership estate tax on trust assets, (ii) protects trust have even greater opportunities, but very assets from creditors, (iii) allows the client to different challenges, when their focus shifts to stay in control of the assets, (iv) allows the client preserving that wealth. In many instances, using to direct where the assets pass at death, and (v) appropriately trained professionals to guide in has multi-generational “dynasty” benefits— the process and electing to create a single protecting heirs from creditors, divorce, and family office, or retaining the services of a estate tax when the heirs die. specialized multiple family office organization, will enable a family to maintain its legacy as new CASE STUDY: ESTATE PLANNING WHEN generations emerge. SELLING A FAMILY-OWNED BUSINESS The Blum Firm, P.C. This useful article discusses whether wealth When it comes to planning for the sale of a owners should consider opening a family office. business, the end goal is simple: maximize sales price and minimize taxes. While maximizing ARE YOU POSITIONED FOR GROWTH? sales price results from carefully preparing the Plante Moran business for sale, minimizing taxes results from In his seminal guide to combat strategy, “The Art creating a structure that increases the amount of of War,” Chinese military general Sun Tzu wrote, the proceeds you actually get to keep. “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise BUSINESS SUCCESSION PLANNING before defeat.” Great advice, except many ROADMAP: A PLANNER’S TEN-STEP GUIDE companies tend to confuse tactics with strategy. The Blum Firm, P.C. They know strategy is important, but they Business Succession Planning Roadmap: A consider it an exercise — something performed Planner’s Ten-Step Guide quickly, sometimes even haphazardly, without Family-run enterprises make up a significant assembling the baseline information necessary portion of businesses within the United States. to develop an effective growth strategy. In the Because it is clear that many of these business-

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end, they end up with a series of vague goals MONEY IS NO OBJECT: UNDERSTANDING without a concrete plan of how to achieve them. THE EVOLVING CRYPTOCURRENCY This article lays out the components needed to MARKET develop a sound company strategy for growth. PWC It has been called one of the “greatest WANT TO SELL YOUR BUSINESS? THE technological breakthroughs since the SKY’S NOT FALLING YET Internet.”1 It also has been called “a black hole” Plante Moran into which a consumer’s money could just Thinking about selling your business? disappear. Conventional wisdom in the investment banking community says you’d better do it soon — that The subject at hand is cryptocurrency—a the market will soften sooner rather than later. medium of exchange created and stored Corporate experts have a different view electronically, and using encryption techniques — that businesses have 24–30 months to to control the creation of monetary units and to finalize any deals. verify the transfer of funds. Bitcoin, perhaps the most widely known example, has been a media While the sky’s not falling yet, it’s still important sensation and an investment fad. But so far this to prepare your business for its eventual sale. new way of storing and spending value has The good news is that your focus will be on inspired more debate than actual commerce. sound business practices that companies should be doing anyway. This article discusses the risk This article discusses the cryptocurrency market facts involved when selling your business. and what merchants and consumers, tech developers, investors, financial institutions, and regulators can expect from this emerging market SECURITY, TECHNOLOGY, in the years to come. FAMILY OFFICE, AND EVOLUTION OF THE MUTUAL FUND LIFESTYLE ISSUES TRANSFER AGENT: EMBRACING THE CHALLENGES AND OPPORTUNITIES THE DEPARTMENT OF JUSTICE AND SEC PWC PROVIDE GUIDANCE ON HOW TO PREVENT Evolution of the mutual fund transfer agent: AND RESPOND TO CYBERSECURITY Embracing the challenges and opportunities THREATS Kobre & Kim The mutual fund industry has grown In response to an ever-growing number of tremendously in both size and complexity during malicious and costly cyber-attacks on U.S. the past 30 years. The variety of mutual fund companies, both the Cybersecurity Unit of the structures and products has expanded, along Computer Crime and Intellectual Property with the diversity of investors. Section of the U.S. Department of Justice and the Division of Investment Management of the According to the 2015 Investment Company Securities and Exchange Commission recently Fact Book published by the Investment published reports providing guidance on how Company Institute (ICI), from 1984 to 2014 the private sector companies—both large and number of mutual funds offered increased small—can minimize the risk of a cyber-attack 537%. This growth led to changes in the way the as well as the resulting harm should an attack industry operated and, consequently, in occur. shareholder services and the role of transfer agents. This report provides a useful overview of steps private entities can take now to mitigate the risk This article discusses the current growth of and consequences of cybercrime. “intermediated” accounts and the significant events that led to the evolution of the transfer agent in the mutual fund industry.

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FAMILY BUSINESS CEO SUCCESSION As with any trust, a trustee is designated to PLANNING protect the interests of the beneficiaries and to PWC manage the trust’s assets for their benefit, while Succession planning’s goal is to provide the overseeing the administration of the trust itself. least amount of disruption to your business and For ILIT trustees, these responsibilities may be to give you the widest possible choice of more challenging than they sound, especially if qualified candidates before you make that the trustee does not possess the knowledge and decision. While the process may consider experience to evaluate and manage the complex candidates from outside the family and the financial instrument that is a life insurance company, in many cases it focuses on policy. Read more about the potential pitfalls managers who are already with the company. when using life insurance in an ILIT. This publication discusses the board’s role in succession planning, which includes: PROFESSIONAL LIABILITY RISK MANAGEMENT • Ensuring that succession planning is on HUB International Personal Insurance the board agenda When your business and reputation are on the line: Know your professional liability risk – For • Preparing an emergency succession high net worth individuals who invest their time plan and resources for lifetime causes, losing business and personal assets can be • Advising the founder/owners when devastating. Read this paper to understand how selecting the next CEO to protect HNW individuals from frivolous • Helping set the new CEO’s lawsuits that can threaten their life’s work and compensation package savings.

• Assisting with the leadership transition UNDER LOCK & KEY – CYBER SECURITY MANAGEMENT FAMILY ENTERPRISE RISK INDEX HUB International Personal Insurance Crystal & Company Smart phones, tablets and wireless networks are This study by Crystal & Co is based on a survey risky tools for high net worth individuals who are of family enterprises and focused on how often targets of identity theft and social media families think about certain areas of risk. One attacks. This paper highlights the unique threats finding of the study reveals a significant to HNW individuals and outlines protective disconnect between the strategic risk measures against such crimes. management planning conducted by family enterprise executives and the inclusion of the HOW CAN OUR FAMILY BEST EXECUTE family itself. Overall, the study showed that most SUCCESSFUL AND PRODUCTIVE FAMILY family enterprises are employing common MEETINGS? practices and not best practices. The top CTC/myCFO performers excel at setting priorities, making risk Many wealthy families desire a seamless management decisions, and creating processes transition of their wealth and a perpetuation of and plans that span the entire enterprise. their values for multiple generations, but many struggle with how to accomplish these goals FIDUCIARY RESPONSIBILITIES FOR effectively. Successful families typically take TRUSTEES OF TRUST-OWNED LIFE intentional steps to create family meetings that INSURANCE foster communication, education and Crystal & Company engagement, in order to promote collaboration One of the most common wealth transfer and and trust among family members. estate planning techniques is to use an irrevocable life insurance trust (ILIT) to own life This article provides a number of key elements insurance policies. This structure enables to consider when developing a successful family individuals and families to direct the transfer of meeting. assets in a tax-efficient manner from one generation to another for the benefit of the trust’s beneficiaries.

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THE DEVIL IS IN THE DETAILS: ADAPTING KIDNAP & RANSOM ISSUES TO CONSIDER TO THE EMERGING RISKS FACING THE Marsh Private Client Services HIGH NET-WORTH CLIENT Perhaps related to unsettled politics and radical Pathstone Family Office groups in various countries, Kidnappings of With great wealth, comes great responsibility, foreign nationals worldwide have increased by and given the complexity of risks faced by the more than 60% in the past five years. The risk of high net worth individual, even greater due a kidnap and ransom (K&R) situation is a very diligence is required to protect against financial real risk for some families, particularly those with loss and emotional distress. high public visibility, who hold a position of power, or who live abroad or frequently travel While many high net worth individuals assess internationally. It could prove vital for families to and protect physical assets, often they overlook examine the issue and have a plan in place. In protecting against loss from liability exposures this piece, Marsh Private Client Services that can be devastating financially. Coverage for touches on some key considerations to help risks involved in the hiring of domestic staff, protect families or individuals in danger. along with protecting against the growing cyber security threat are often excluded under CYBER RISK AND IDENTITY THEFT: traditional personal insurance policies, and the PROTECT YOUR LIFESTYLE exposure to such losses should be reviewed as Marsh Private Client Services a part of a client’s overall risk management With nearly 13 million victims each year, strategy. cybercrime is a growing personal concern. Because of the amount of personal information Civil litigation and cyber-crime are multi-billion stored and shared on electronic devices and dollar industries, and each target high net worth social media platforms, falling victim to these individuals due to what can be seen as the crimes – including identity theft, credit card potential for a high return versus a relatively low fraud, and social networking scams – is investment. becoming easier. In this white paper, Marsh Private Client Services shares steps clients can Loss prevention steps can be taken to reduce take to protect themselves, preserve their the exposure faced by high net-worth identity and their credit, and avoid being individuals, and insurance may be purchased to deceived by a fraudulent scheme. recoup financially through carriers who offer specialty coverage for losses typically excluded WOMEN IN LEADERSHIP: THE FAMILY under traditional personal insurance policies. BUSINESS ADVANTAGE This article explores why a periodic review of Ernst & Young liability limits and coverage should be part of The first in-depth exploration from our global high-net individual’s asset protection strategy. family business survey, “women in leadership” shows that family businesses believe in the CYBER (IN) SECURITY value of women in leadership overall, not only Abbot Downing women family members. The Internet has brought incomprehensible changes to our world over the last 20 years. WHEN ADDICTION SURFACES IN Technology is so prevalent in our society that BENEFICIARIES AND CLIENT OFFSPRING: A whether or not you personally shop online, use NEW APPROACH BASED ON HIGHLY apps, or conduct web-based banking, you could SUCCESSFUL PROGRAMS FOR find yourself a victim of a cyberattack. This issue PHYSICIANS of Abbot Downing Perspectives “Cyber O'Connor Professional Group (In)Security” addresses how we reached the Estate planning and involve point where high profile breaches are somewhat the founder’s goals, family and assets. commonplace, best practices for prevention and Unresolved substance use disorders (SUDs) will detection of attacks, and steps to take if you’ve undermine the best plans and intent in all three been hacked. areas. However, trustees and attorneys frequently overlook clients engaging in addictive behavior because they are unaware of the symptoms of the disease, don’t know what to do or don’t believe it’s their role to become

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involved. This article is a practical guide for TAMING THE RAPIDLY RISING TIDE OF trustees and professionals on how to identify RECORDS AND INFORMATION: THERE’S and respond to clients with SUDs, based on the MORE AT STAKE FOR FAMILY OFFICES highly successful recovery programs for THAN YOU MIGHT THINK physicians and pilots. Warner, Norcross & Judd The volume of information in businesses is AVOIDING A DATA BREACH IN FAMILY doubling every two years, creating significant OFFICES challenges for businesses of all types and sizes, Novack and Macey, LLP including family offices. Besides the cost of Some data security disasters make news storage, the information in records and data can because they involve household names -- pose risks that may surface in audits and Target Stores, Sony Online Entertainment and litigation. One way to successfully tame the Home Depot, among others. While other data rising tide, is to implement a Records and breaches make headlines because they reveal Information Management (RIM) program. This embarrassing information -- e.g., Ashley article discusses the benefits of implementing Madison. the proper records management system in order to minimize risks and liabilities at the family But that does not mean that family run offices, office. which may be less well-known and/or possess “less interesting” data than hacking victims in the THINGS TO CONSIDER WHEN CREATING news, should get complacent. If hackers find EXECUTIVE PROTECTION SERVIECES FOR their way into your network and steal or corrupt WEALTHY FAMILIES data, personal information may be exposed, and Warner, Norcross & Judd confidential business information or trade Sidney Reso, president of Exxon Company secrets may be made public. Repairing the International, was kidnapped from the driveway damage — and your business’s reputation — of his home and ultimately murdered in 1992. can be time-consuming and costly. As a result, Edward Lampert, one of the nation’s wealthiest family run offices need to be proactive in investors, was kidnapped in the parking garage protecting their data and know what to do if a of his offices in 2003 and was released after breach occurs. promising $5 million to his kidnappers. These are only a few examples, but events such as There is currently not a comprehensive federal these have led to an increased use of executive data-security law that applies to all industries, protection services by wealthy families in order but many states have enacted statues requiring to better protect and safeguard themselves, their all businesses that own or license personal loved ones, and their property. This article offers information of the state’s residents to adhere to advice into the options that exist for executive certain standards. This white paper discusses protection services and what family offices those standards and also provides advice on should look for when hiring an executive what you can do now to secure your family office protection professional. data. INNOVATIONS IN PRIVATE WEALTH HERE’S HOW TO BECOME A STANDOUT TECHNOLOGY & REPORTING BROKER AMONG WEALTH MANAGERS Archway Technology Pure Insurance While advances in technology continue to Knowing what Wealth Managers find crucially contribute to operational success in most important when structuring insurance solutions industries, the private wealth community has for their clients can help you differentiate fallen significantly behind in effectively deploying yourself amongst this highly influential group of advanced technologies and corresponding best trusted advisors. The insights in this article can practices in the management and support of help you strengthen your referral network and core business functions. increase your pipeline of UHNW business. The same enterprise-wide accounting and finance platforms that other industries employ have not historically satisfied the unique information and reporting requirements of private wealth management firms. This white

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paper discusses the current private wealth point for navigating this increasingly common technology and reporting trends. journey.

CASE STUDY: CWP MANAGEMENT Externalit CWP Management, Inc., is a busy family office FAMILY MATTERS (LEGACY based in Chicago, Illinois. They look after the PLANNING) financial affairs of 10 households and 31 family members across 3 generations, but an ageing IT ADVISORY BOARDS: AN IMPORTANT STEP infrastructure was weighing down on its IN TRANSITIONING THE FAMILY BUSINESS president’s time and budget. When disaster Ascent Private Capital Management struck and their data center was compromised, “I’m wondering if it’s time for us to add outside CWP used the opportunity to migrate to a experts to our advisory board,” Julie Jacks secure, hosted cloud desktop. CWP’s case mused aloud to her cousins. “Experts who would study shows how migrating IT to the cloud was bring fresh ideas and who would have some an incredibly effective solution for this family gravitas around here.” Julie and her cousins office as they were able to save money while were gathered at the brown-bag lunch session getting the service, support and built-in levels of they held each week in order to connect, share security and disaster recovery they needed. ideas and concerns, and offer updates on their various lines of business. Since last year’s CLOUD COMPUTING CHECKLIST FOR leadership transition to their generation (the FAMILY OFFICES third), they’d used this casual forum to strategize Externalit how to work most effectively together as the Cloud computing continues to transform the way next generation family leadership team. They felt businesses work. But not all clouds are they had been able to solve some important equal. We’ve collected the key features of cloud problems and had headed off a number of computing for family offices into a others via their weekly tête-à-têtes. straightforward checklist and added explanations of what they are and how they Now, however, they were facing increasingly matter to family offices. We’ve also highlighted erratic behavior and peremptory decisions made by Barry, former CEO and second generation what to look out for when a family office is ready family member. Though Barry had voluntarily to make a decision. assumed a secondary title (and role, ostensibly) in the company, he was still seen by some CARING FOR AGING PARENTS employees and managers as the point where Altair Advisers the proverbial buck still stopped. This, plus his Modern medicine has enabled far longer own habit of taking charge, was causing lifespans than ever before. While this is an confusion and consternation among employees overall positive development, it also means that and managers alike, and it was concerning to many of us will spend years as a caregiver of this next-gen leadership group. parents and aging loved ones or as a recipient of that care. Regardless of the strength of a This article discusses the evolution from inside- family’s relationships or the extent of their only board membership (family members and resources, the associated legal, emotional, key managers) to developing an advisory board medical and financial issues involved can be with non-family and non-management “external” overwhelming. One of the hardest aspects is the advisors (from outside both the family and its sense of isolation and loneliness that often business). accompanies aging and caregiving. The good news is that none of us are alone in this BEYOND “COHESION:” WHY TERMINOLOGY process. The number of organizations, books, MUST EVOLVE THROUGH THE websites and professionals assisting across GENERATIONS PITCAIRN many different aspects of aging continues to Complex multi-generational families evolve over grow. This useful resource guide was created to the years, and cohesion may not be the most help caregivers and recipients find a starting important goal at every stage of family development.” Family Council Chair Andrew

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Pitcairn and co-author Joshua Nacht, PhD look RE-ENERGIZE WITH ENTERPRISE at the evolution of family cohesion across Ascent Private Capital Management/US Bank generations in an article published in the Family wealth is notoriously difficult to maintain May/June 2015 issue of Family Business across generations. Without a powerful strategic Magazine. vision, the statistics show that family wealth is bound to dissipate. One useful strategy in STAYING POWER: HOW DO FAMILY nurturing a legacy is to foster an entrepreneurial BUSINESSES CREATE LASTING SUCCESS? culture to provide opportunity for family Ernst & Young members and regularly recharge the wealth for EY teamed with Kennesaw State University and future generations surveyed the world’s largest family businesses with a focus on seven success factors: HELPING YOUR CHILD BECOME succession; women in leadership; governance; FINANCIALLY SELF-SUFFICIENT communication and resolving conflicts; branding; Ascent Private Capital Management/US Bank corporate social responsibility, and Parents play an integral role in helping children sustainability; and cybersecurity. learn financial self-sufficiency. Providing ample opportunities for children to use money, make WEALTH TRANSFER PLANNING: choice about how to spend that money and then STRUCTURING TRANSACTIONS TO to live with those choices is important work for ENHANCE FINANCIAL RESULTS parents. Abbot Downing Wealth transfer planning is a complex process HAVING THE TALK: HOW TO PREPARE THE with an ever-changing set of risks, opportunities, NEXT GENERATION FOR SIGNIFICANT and regulations. The white paper, “Wealth WEALTH Transfer Planning: Structuring Transactions to Hemenway & Barnes Enhance Financial Results,” helps explain how How and when should wealthy parents educate subtle changes to wealth transfer techniques their children about their assets and potential can dramatically increase the likelihood of trusts? Having “The Talk” about wealth is a topic success. This in-depth paper starts with the that provokes uncertainty and delay. Avoiding basics of investment theory, explores commonly the exchange, however, only compounds the used risk management and sophisticated difficulties. Anxiety and reluctance about "The planning strategies, and introduces a concept Talk" are understandable given the many risks we feel will become more common in the near associated with inherited wealth. Without the future. right guidance and values, this is a valid concern. Wealthy children are raised in an I AM THE COBBLER environment that naturally provides them with Video Family Biographies advantages over competitors, which can cause “The cobbler’s children have no shoes,” refers to self-doubt even in the most talented and well- the phenomena where people who are grounded of maturing adults. successful at doing something spend so much time on their own professions that they neglect Here are a few central guidelines to making "The to take care of business close to home. In the Talk" an effective and positive experience for folktale, the cobbler’s children had holes in their both generations: shoes because he was so busy repairing the - Keep the emphasis on values shoes of other people that he neglected his own - Be proactive – and timely children, writes Robert Jordan, Jr., CEO of - Don’t go it alone Video Family Biographies. INTRA-FAMILY LOANS: OPTIONS FOR This first-person account by Jordan discusses FRIENDLY TERMS ABOUND IN A LOW-RATE the importance of commemorating the history of ENVIRONMENT family members through creating a family video Hemenway & Barnes biography that will preserve and protect their The low interest rate environment presents a own family legacy for generations to come. number of opportunities to advantageously move assets between family members, including the currently popular practice of intra-family lending. It may seem as if lending within the

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family can be a casual affair, but those who rates have begun to creep up and the possibility explore the option should be sure they are of significantly higher interest rates looms, we taking the right steps to truly create a “win-win” believe it is important to reexamine the effects of scenario. interest rates on wealth transfer. The following is a review of some of the effects of interest rates - Do it by the book on estate planning and family wealth transfer in - Investigate creative loan options particular, as well as the opportunities offered in - Make the most of existing trusts both low and high interest rate environments.

GOING GLOBAL: THREE KEYS TO THREE IMPORTANT ESTATE PLANNING EXPANDING BUSINESS INTERNATIONALLY IDES FOR 2015: FOCUS ON WHAT IS MOST Hemenway & Barnes IMPORTANT IN ESTATE PLANNING It’s a small business world – and getting smaller Hawthorn PNC Family Wealth every day, which opens up new pathways to Although tax mitigation is almost always global expansion. Indeed, mid-sized companies significant, it may not be as valued as other are more and more frequently finding that family goals. A couple of the ideas in this article international trade is a critical component for include: growth. Launching a foreign presence invites a heavy dose of risk. Forethought, planning, and - Design Trusts to Empower Your Legacy an understanding of the local environment can help improve the odds substantially. Business Families should regularly revisit their estate owners should consider three crucial elements plans and related documents, particularly those as they look for international opportunities: provisions and documents that can be modified, such as wills and revocable trusts, as well as - Corporate structure and tax law carefully review design options for new trusts - Labor laws with their advisors. - IP protection - Preserve Tax Basis in Concert with ARTWORK AND YOUR LEGACY: Estate Tax Mitigation Strategies IMPORTANT CHOICES FOR STEWARDSHIP OF YOUR COLLECTION Rather than focusing primarily on reducing the Hawthorn PNC Family Wealth size of one’s taxable estate to reduce federal You have curated your art collection with estate tax exposure, the potentially conflicting passion and care. The collection, whether it objective of retaining appreciated assets until includes paintings, sculpture, fine antiques, or death to obtain a stepped-up basis must be other treasured objects, is a source of pride and considered as well. enjoyment not just for you but also for those who view it. Over the years, your collection has WHO’S PLANNING THE FUNERAL? become an important part of your LHT Consulting legacy. Although many art collectors may No one is comfortable discussing the day of their choose to pass on artwork upon their death, funeral, but taking control of that inevitable other available options may be more aligned conversation and organizing a principal’s final with your legacy goals. Ownership of art, wishes is simply the right thing to do for their antiques, and collectibles presents unique family, their legacy and their enterprise. Making challenges and opportunities when creating an arrangements after the loss or, preferably, overall financial and estate plan. preparing an end-of-life plan in advance, involves some of the more challenging personal WEALTH TRANSFER IN A RISING INTEREST choices one will ever make. Often handled by RATE ENVIRONMENT the Family Office, comprehensive memorial Hawthorn PNC Family Wealth event planning not only ensures that final wishes The current low but rising interest rate are fulfilled and the burden of making tough environment has created challenges and decisions is alleviated, it also establishes a opportunities for both investors and advisors communications apparatus to aid the when addressing several financial areas, organization during a sudden or major event. particularly estate planning and the transfer of Will your response to this certain departure be assets to subsequent generations. As interest well planned, or will it be an emotional guessing

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game? This brochure highlights the importance This article spells out useful tax planning tips of the family office to plan ahead to memorialize that should be taken into consideration when it a loved one in the event of a death in the family. comes to preventing tax liability risks.

INVESTMENT INTRODUCING THE IMPACT INVESTING BENCHMARK ECONOMIC GROWTH: SLOW SAILING Cambridge Associates AHEAD? While the impact investing industry is still in an Deutsche Asset & Wealth Management early stage of development, it is poised for This strategic article forecasts what the global growth. One of the chief barriers to industry economy will look like in the next 12 months. advancement remains a paucity of robust Key market drivers include an expected research on financial performance. disruption of official rates and the very first interest-rate hike by the Federal Reserve. This comprehensive analysis covers the financial performance of market rate private CNY DEVALUATION: MORE THAN THE equity and venture capital impact investing funds MARKET EXPECTED and serves to guide both existing and future Deutsche Asset & Wealth Management impact investors to better identify strategies that This article reviews the latest 1.9% devaluation are best-suited for their desired social, of the Chinese yuan (CNY) reference rate and environmental, and financial criteria. identifies the three factors that prompted the currency move and the potential long- and short- MAKING WAVES: THE CRESTING CO- term implications for Chinese and global asset INVESTMENT OPPORTUNITY classes. Cambridge Associates Co-investing is gaining popularity and PIECE BY PIECE: PUZZLING OUT FISCAL theoretically offers investors cost advantages INTEGRATION and higher return potential. This report Deutsche Asset & Wealth Management discusses the opportunities and common pitfalls This detailed analysis offers 9 key insights into of co-investing, leveraging our aggregated data the latest global economic trends that include: on co-investments and funds generating co- investment. - Weak U.S. growth is expected to be a temporary phenomenon UNDERSTANDING CURRENCY RISK: A EUROPEAN FAMILY PERSPECTIVE - Better consumer confidences signals Cambridge Associates stronger growth in Japan Currency risk is a fact of life for European families. Today even the simplest diversified - Additional Monetary policy stimulus is portfolios include foreign currency exposures. driving the Chinese stock markets Many investors find it tempting to ignore currency risk, believing that it will all “even out in - Stronger credit growth is pointing to a the end.” But this is not an option for most Eurozone upswing families who need to draw down funds from the portfolio to meet distributions to beneficiaries. USING MID-YEAR TAX PROJECTIONS IN Even for families with no current spending INVESTMENT PLANNING needs, it is still prudent to manage the portfolio’s Kanaly Trust currency exposures in line with its likely long- As mid-year approaches, it is important to do term liabilities. various tax projections to determine if certain investment planning strategies can be FOCUS ON WHAT YOU CAN CONTROL implemented or improved. Often, this reveals Northern Trust potential tax liability reductions that would have Market volatility can serve as a reminder of what otherwise been overlooked. investors can and can’t control. What is information, and what is noise? What is predictive of the future, and what is just the past? Long-term investors should focus on what

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they can control and stay the course – provided negotiations. This investment strategy brief they are on the “best” course. provides strategic insight into what is at risk with your investment portfolio while carefully The best course is the result of a plan that monitoring the Greece debt crisis as it unfolds. incorporates goals and risk preferences, along with implementation that captures the fullest MARKET INSIGHTS – Q2 2015: THE SLOW share of available capital market returns. Read EXPANSION AND ITS DISTORTION about how these three foundational concepts Glenmede can help investors understand what they can Market analysts believe that the current and cannot control in an uncertain market. economic expansion might be one of the slowest on record. This commentary takes a look at the DETECTING TRUE ALPHA IN HIGHLY pros and cons of the global economy and how COMPETITIVE MARKETS its sluggish recovery is changing monetary Northern Trust policy within the central banks, creating a low The efficient markets hypothesis says that rate of return on investments, and making the financial markets incorporate all available value of higher-risk assets on the international information in real time to price securities market more attractive to investors. competitively, eliminating opportunities to earn excess return. The Nobel Committee split its A BREACH HAS OCCURRED… NOW WHAT? 2013 prize for Economic Sciences between Ballentine Partners, LLC proponents of both sides of the market efficiency With cyber theft often in the headlines, it might debate. For investment practitioners, the real seem as though it’s not a question of whether question is whether there are skilled investment your personal information will be compromised, managers who can capture risk-adjusted excess but when. For example, you have likely seen return (alpha) net-of-fees, and how to identify CNN’s estimates that over 100 million them. To investigate this question rigorously, Americans have had their personal information one must employ methods that can attribute stolen and exposed over a one year period. This performance to risk, skill or luck. may leave you wondering, “How safe is my money?” While the question seems PUERTO RICO DEBT straightforward, the answer is complicated Glenmede because it varies based on the answers to There exists this notion that over 70 percent of several questions. How did the breach take outstanding municipal securities are held by place? What information was compromised? individual investors through mutual funds or How quickly was the issue identified and individual holdings. It has been reported that resolved? Here are just some of the best over 50 percent of those mutual funds have practices on what you can do today to mitigate some level of exposure to Puerto Rico or its your risk. public corporations. ARE THE EMERGING MARKETS IN This commentary and outlook tackles the TROUBLE AGAIN? possibility that Puerto Rico’s debt Crisis may Ballentine Partners, LLC have broader market implications than first The Russian Ruble has collapsed. Its economy expected. appears to be headed into a recession. Oil prices have plunged. The US Dollar (USD) has GREECE: OUR TAKE ON THE “NO” VOTE surged. Emerging markets debt has grown Glenmede significantly since the “Great Recession.” Are we Greek voters sent a clear message by voting on the verge of a repeat of 1997 and 1998 when “no” to European creditor proposals. we saw a surge of defaults by the countries Greece’s Prime Minister, Alexis Tsipras, collectively called the “Emerging Markets?” responded by stating, “I am fully aware that the mandate here is not one to break with Europe, This commentary discusses whether the but a mandate to strengthen our negotiation emerging markets should remain an important position to seek a viable solution”. long-term investment despite these difficulties.

Moreover, Greek Finance Minister Varoufakis stepped down, paving the way for further

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2015 FOX Fall Forum

INVESTORS PROFIT FROM A SHRINKING LESSONS LEARNED – AVOIDING COSTLY BANKING SYSTEM MISTAKES Ballentine Partners, LLC Wilmington Trust The 2008 US Credit Crisis that resulted in the Conventional advice may be harmful if you’ve European Banking and Sovereign Crisis accumulated significant wealth. Avoiding critical exposed major weaknesses in banking mistakes in asset allocation and family regulation and oversight. The reaction from communication, as well as working with a policymakers and market participants set about trusted advisor in a collaborative environment sweeping reforms that will permanently alter the are key best practices for ultra-high net worth system as we know it. This paper discusses the individuals to pursue. This article provides some massive regulatory change that will create of the most common errors high-net-worth substantial investment opportunities for investors make when they apply conventional investors in the years to come. wisdom to their unconventional wealth.

INVESTMENT UPDATE: SEPARATING THE REAL ECONOMY SIGNAL FROM NOISE McGladrey LLP BNY Mellon The positive supply shock to the economy It’s a bit early for Halloween, but the equity created by the increase in U.S. oil production markets have been scary over the past few has policymakers reconsidering this country's weeks and months. Fear is problematic, four-decade-old oil ban on exports. From a pure particularly when it comes to investing in economics standpoint, exporting domestically- equities. produced oil would benefit both producers and consumers and increase overall efficiencies in There are currently two macro-driven events the domestic energy market. affecting the equity markets: the impact of the Greek debt crisis on the Eurozone’s recovery This article discusses how middle market firms and implications of China’s stock market rout for with links to oil extraction, energy, transportation global growth. This article separates fact from and construction could disproportionately benefit fiction and alleviates some of the fears investors if the decades-old ban on oil is lifted. have in the current state of the equity market. SHOULD I HEDGE THE CURRENCY A FORK IN THE ROAD EXPOSURE WHEN INVESTING IN GLOBAL BNY Mellon FIXED INCOME? Jeff Mortimer’s latest Investment Update McGladrey LLP discusses what branch of the road the market Investors have several decisions to make when may take, how the market correction served to investing outside of the United States. Some of reset investors’ views on risk and return and those questions include which countries they how we’re managing the opportunities and/or want to be exposed to and whether they want to risks. be exposed to equity or debt instruments within those countries. This white paper provides SHOULD I DIVERSIFY THE NUMBER OF insight into the currency decision as it relates to ADVISORS I WORK WITH TO MINIMIZE RISK investing in global fixed income. AND MAXIMIZE MY PERFORMANCE POTENTIAL? IMPACT INVESTING: A PRIMER FOR FAMILY CTC/myCFO OFFICES Challenging conventional thinking: Investors are World Economic Forum typically taught that diversification of portfolio Impact investing has become a popular topic of assets is the prudent approach to preserving discussion, not only with the mainstream media and growing wealth. Yet the majority of the but also with mainstream investors. Yet while families we serve appreciate that this tenet impact investing has entered the mainstream doesn’t necessarily apply at the advisory level. mindset, many investors with the enthusiasm In other words, diversifying across multiple and means to engage meaningfully in impact advisors without integrating their strategies may investing lack the informational resources to do result in unintended consequences. This article so. For most investors today, impact investing explains those consequences and how it can still needs to be translated from a compelling hinder your investment strategy.

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2015 FOX Fall Forum concept into a sound strategy. This situation is flabbergasted when they went low; when they especially true for family offices. went negative in Europe – I’m really flabbergasted. How can I be an expert in Family offices can and likely will play a unique something I never even thought about that and important role in bringing scale to the impact seems so unlikely? It’s new territory..." investing sector in the coming years. The goal of this report is to help family offices ask the right This commentary analyzes the impact low and questions as they contemplate their path into negative interest rates have had on the global impact investing. investment landscape and when and if there will be a market resolution. THE ANATOMY OF GIVING: DRIVES BEHIND PHILANTHROPIC GIVING CHASING BASIS POINTS SEIC Nease, Lagana, Eden & Culley Inc. The protracted wrangling over deficit reduction In the wealth management world, basis points and tax codes in Washington in recent years has mean everything. Hedge funds may charge 100 raised concerns about the negative impact on to 200 basis points plus a performance fee. charitable giving. Would the elimination of tax Fund of funds typically charge 50 to 100 basis deductions act as a disincentive for the wealthy points plus a performance fee. The model for to give, possibly crippling the nonprofit sector? wealth management firms could be 50 basis points for managing a $10 million portfolio. Such fears appear unfounded, according to recent research from SEI. Taxes are not the Based on our observations, we know wealthy main driver behind philanthropic giving, at least individuals and families pay close attention to among the wealthy. Multimillionaires share their basis points. We have all seen administrative wealth because it’s part of who they are. It platforms trying to find greater efficiencies for defines them as individuals and gives purpose to their business model so they can lower their their wealth. In fact, most wealthy individuals basis point charges. It is not uncommon for an would give even more if they could develop a asset manager to be fired over 5 to 10 basis strategic approach to their philanthropy and see points – either via performance or administrative clear evidence their gifts are having the costs. The bottom line is this: basis points matter appropriate impact. This research paper and life insurance is no exception. provides keen insights into how and why wealthy individuals share their wealth. This article discusses the opportunity to have meaningful basis point reductions in a life THOUGHTS (BUT NO PREDICTIONS) ABOUT insurance policy and the impact lower basis THE CURRENT ENVIRONMENT point charges can have on this asset class and Cook & Bynum Capital Management, LLC how to take advantage of the possibilities it At a Daily Journal annual meeting in Los proposes. Angeles earlier this year, Charlie Munger – the 91-yearold Vice Chairman of Berkshire IT’S WALL STREET VS. CHINA – HAVE YOU Hathaway – shared his opinion on the THOUGHT ABOUT HOW YOUR PORTFOLIO investment landscape when asked about IS POSITIONED? negative interest rates in Europe and Dillon Gage persistently low rates in the United States: Wealthy American investors should welcome a rational conversation on the real benefit of gold "This has basically never happened before in my as foreigners understand, particularly in China, whole life. I can remember 1½ percent rates. It Asia, the Mideast, Russia and most of the certainly surprised all the economists. It developing world. Gold is beautifully surprised the people who created the life uncorrelated to the dollar. This is tough to argue insurance industry in Japan, who basically all against as not even Wall Street’s biggest bull went broke because they guaranteed to pay a would suggest the dollar will go on in its current 3% interest rate. I think everybody’s been supreme state forever – after all, nearly 100 surprised by it, including all the people who are countries are now trading outside of the dollar, a in the economics profession who kind of pretend tell-tale sign when a sole reserve currency is in they knew it all along. But I think practically decay as we have seen on numerous occasions everybody was flabbergasted. I was in global finance already.

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2015 FOX Fall Forum

more beneficial than others. The article And if the extraordinary benefit of gold as dollar examines those strategies. diversification were not enough for Americans, an added benefit of gold is that gold is also FEDERALISM, REGULATORY ASSETS attractively uncorrelated to stocks and bonds in UNDER MANAGEMENT (“RAUM”), AND the modern era, noteworthy in itself with those VOLUNTARY REGISTRATION WITH THE SEC widely owned asset classes at historic highs. AS AN INVESTMENT ADVISER – PART ONE This article discusses asset and portfolio Perkins Coie allocation and why gold is still a viable asset As a matter of Federalism, Congress cannot class in our current economic environment. require the several states to adopt laws regulating investment advisers, but it can THE FOLLY OF JEREMY SIEGEL & MODERN prohibit “small” investment advisers from AMERICAN PORTFOLIOS registering with the SEC unless they have a Dillon Gage sufficient amount of RAUM. For the last two As the autumn winds begin to gust in 2015, decades, Congress has been slowly but Jeremy Siegel’s disciples seem ubiquitous continuously removing “small” investment across the world of institutional investing. advisers from the SEC’s jurisdiction. Allocations to equities are massive with the mentality being “of course we all know a Section 203A was added to the Investment correction is coming but I would rather suffer Advisers Act of 1940 by the National Securities through a correction than miss the next leg up.” Markets Improvement Act of 1996 (“NSMIA”), Eager to buy into Siegel’s mantra that endorse and it allocated to states the responsibility for higher fee assets, Financial Advisors are registration and oversight of investment advisers aggressively talking down any semblance of real with less than $25 million of assets under portfolio diversification, merely shuffling management. As a result, the SEC has long allocations between correlated paper assets. been alert to situations where investment Advisors invariably reference the Siegel mantra advisers sought to register with the SEC even either by name or in practice implying: long term though they are not eligible to register. Some investors have no place to go but “Stocks for the types of investment advisers can face serious Long Run”. challenges in attempting to achieve eligibility for registration with the SEC. In this article, Dillon Gage debunks several faulty assumptions that misrepresent the equity This white paper discusses the implications of outlooks, understate the latent growing risk in RAUM and voluntary registration with the SEC American portfolios and more. and what that means for investment advisors.

THE CHANGING BENEFITS OF ADDING GRESHAM PARTNERS WEIGHS IN ON THE HEDGE FUNDS TO TRADITIONAL ASSET FIDUCAIRY STANDARD DEBATE ALLOCATIONS Gresham Partners, LLC Drexel Morgan This white paper addresses one of today’s most There are two reasons for including hedge funds discussed and divisive topics involving investors, in a traditional asset portfolio. First, their betas investment advisers and brokers: What legal with respect to the S&P 500 are often standard of responsibility and conduct should substantially less than unity, which makes them apply to firms and individuals who provide attractive diversifiers. Second, they may provide advisory services to investors? an additional source of return and risk after adjusting for their exposure to the U.S. equity This question is receiving a lot of attention from market, which has been called a structural, or the SEC, the Department of Labor, the President allocation, alpha. and organizations that would be affected by changes to the existing standards of conduct This analysis takes a look at the diversification applicable to investment advisers and brokers. It benefit of investing in various hedge fund also was addressed in a recent Supreme Court strategies by measuring structural alpha and decision. downside beta. While an overall allocation to hedge funds has had a positive impact on a Topics discussed in this white paper include: 60/40 portfolio, certain strategies have proved

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2015 FOX Fall Forum

• Three actions we believe the SEC should between $93 and $118 per barrel. What are the undertake now; causes of the rapid change in sentiment around • Our reasons for making these oil? How have capital markets reacted? What recommendations; and, will be the impact of lower priced energy for • The regulatory landscape over the last 80 economies both here and abroad? And, how years, which provides further insight into the are our recommended equity and bond fiduciary issues being debated today and our managers responding to the present challenges recommendations. and potential opportunities presented by lower oil prices? These and related questions are ENGAGING THE NEXT GENERATION addressed below. Federal Street Advisors, Inc. Fostering strong advisory relationships with IMPACT REPORT younger investors (often our clients' children) is North Sky Capital a particular focus at Federal Street Advisors. In We face tremendous challenges today. The this article, we are pleased to share our forces of globalization and modern consumerism approach to helping the next generation address are straining our planet’s resources. As their unique financial needs and become production efficiencies increase through experienced investors. technology and human experience, prices As baby boomers enter retirement, young adults decline thus enabling consumption of more have emerged from college, started their own goods by more people worldwide. In developing careers, and taken control over significant sums countries, as people migrate from farms to cities, of assets. Whether the wealth has come from their demand for food, water, housing, prior generations or through self-creation, we transportation and electricity increases advisors are challenged to adjust our advisory dramatically. models to serve this burgeoning demographic. As the global population grows and as we IMPACT INVESTING: FINDING THE CLEAR consume more of everything worldwide, we PATH produce more waste and pollution. Examples of Federal Street Advisors, Inc. man’s negative impact on the Earth abound: the According to a Norwegian linguist, the Sami nuclear disaster at Fukushima, the life- people living in northern Russia and threatening smog routinely blanketing Beijing, Scandinavia have 180 words for snow and ice. It the oil spill in the Gulf of Mexico. We must find seems that there are nearly as many terms for and implement cost-effective, easy-to-adopt, investment strategies designed specifically for free-market solutions to these problems. This societal impact. A few of the terms being used report measures favorable investment returns today include: “socially responsible investing,” for companies who have invested in renewable “ESG investing,” and “mission‐related investing,” energy infrastructure and the positive impact etc. Unlike the Sami’s 180 terms, each of which these investments have had on our has a very specific meaning, there are no widely environment. accepted definitions for impact investing and no dictionary to guide us. This useful white paper IMPACT INVESTING BECOMES dispels some of the investment terminology MAINSTREAM “noise” and distinguishes the various impact North Sky Capital investing strategies from one another. Impact investing has taken many forms over the years. In its earliest form, religious pension OIL – WHAT’S HAPPENED AND WHAT’S plans used negative screening to avoid sin NEXT? stocks. Later, environmental and political Federal Street Advisors, Inc. activists would use shareholder proposals to In a year of notable financial developments, demand that companies reduce pollution or perhaps the most far-reaching and visible of this otherwise improve their operations. Today, Wall group is the sharp decline in oil prices in the Street and investors of all types are embracing second half of 2014. Crude has dropped more impact investing. than 50% since June and is now trading below $50 per barrel. This precipitous decline stands This report takes a look at the total assets under in contrast to a prior four years of relative price management in the U.S. and what it means to stability when oil traded in a fairly narrow range

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2015 FOX Fall Forum

private equity investors for the first quarter of SCM, a private markets research firm 2015. headquartered in Zurich, Switzerland.

RESPONSIBLE, SUSTAINABLE AND IMPACT THE FAMILY OFFICE PLAYBOOK: CORE INVESTING: DOING WELL BY DOING GOOD BELIEFS AND KEY ASSET ALLOCATION Atlantic Trust Private Wealth Management RECOMMENDATIONS SUMMARY An approach to investing called RSI— The Wellington Management Company “responsible, sustainable and impact investing”— In this paper, Cara Lafond explores family office seeks to create both financial return as well as characteristics and makes recommendations for positive social or environmental impacts that are asset allocation strategies that ensure growth of actively measured. This white paper explains how assets and preservation of capital and families can connect philanthropic vision with purchasing power, two goals that have been investing strategy through RSI. identified as important to most family offices. She emphasizes the importance of downtown FINANCIAL MARKETS MONITOR risk mitigation and argues that seeking Atlantic Trust Private Wealth Management consistent returns and avoiding losses is more Chief Investment Officer David Donabedian important than pursuing outsized gains. recaps the first half of 2015 and provides an outlook for economic activity and financial The author recommends that as taxable markets in the third quarter of the year. investors with a lengthy time horizon, family offices should consider strategies that focus on BROADER OPTIONS, FEWER taking long term positions in companies that CONSTRAINTS: A FRESH LOOK AT HEDGE allocate capital wisely as these often have FUNDS favorable tax treatment and fit within the long Atlantic Trust Private Wealth Management term framework. Finally, Ms. Lafond argues that While once considered “mysterious,” integrating alternatives into the overall asset characterized by investor misconceptions and allocation structure and evaluating them against thoroughly debated after the global financial traditional return drivers and risk exposures can crisis, hedge funds at their core remain a fairly provide clarity about the roles they play in the simple structure with a flexible investment portfolio, and result in better asset allocation mandate. This white paper debunks myths about choices. hedge funds and explains how they generate profits. FAMILY OFFICE ISSUES

HEDGE FUNDS IN THE CURRENT EXIT WITH STYLE: PRIVATE BUSINESS ENVIRONMENT OWNERS PLAN FOR ‘LIVING TRANSITION’ CAIS Group Kanaly Trust Hedge Funds in the Current Environment: Whether public or private, successful Mercer believes that now is a good time to businesses share some of the same concerns. consider (or reconsider) hedge fund investing. Attracting and retaining talent, balancing growth This article explores the case for hedge funds and risk with profitability and adapting to with a focus on the current environment. Mercer economic changes are all essential. But the also offers some thoughts on choosing the best owners of private businesses face unique hedge funds and how to build robust portfolios. challenges, particularly when they decide to make changes in the ownership or management RESEARCH PERSPECTIVES of the business. CAIS GROUP Mercer’s Research Perspectives covers a wide Owners of family businesses often intend to variety of investment topics. This edition pass on their companies to the next generation. includes a discussion on liquid alternative Whatever the case, the issues surrounding investments, actively managed global small-cap these "living transitions" are often highly equities, features our new study on climate complex. The best solutions are holistic and change, introduces the Chinese bond market focus on the long-term needs of the business and closes with an interview with Stefan Hepp owner. who joined Mercer through the acquisition of

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2015 FOX Fall Forum

This article describes strategies for integrating potential civil liability risks. These parties often business, personal and financial issues into a seek to minimize potential civil liability by comprehensive and executable business creating a sole-asset company to own and transition plan. operate the aircraft, which is in turn owned by the individual or the operating company that is TRANSFERRING YOUR WISDOM AND the “real” aircraft operator. The consequence is WEALTH that such a structure may well place the real Kanaly Trust operator in the worst liability position and it’s Successfully transferring wealth to your heirs is illegal under commercial aircraft aviation a challenging but priceless undertaking. It is the regulations. result of careful, thoughtful planning and should not be taken lightly. The following article This article explains the general compensation discusses some of the more important things to rules that apply to aviation in the United States consider while making these valuable decisions. and how and why these rules lead to potential regulatory and related civil risk issues, REDISCOVERING ETHICAL WILLS particularly with sole-asset companies. Wilmington Trust Transferring more than material wealth has THE (STATE) TAX MAN COMETH: SO BE become increasingly important in today’s world. SURE TO PLAN FOR STATE TAXES WHEN Ethical wills are a key tools that enable you to BUYING YOUR AIRPLANE transmit your values to the next generation with Shackelford, Melton, McKinley & Norton peace of mind. These kinds of wills may include While it’s tempting to focus only on federal tax your personal beliefs and philosophy, and even issues when buying a personal or business-use important family history. aircraft, state taxes need to be considered as TO SELL OR NOT TO SELL: well, because many states impose various types CONSIDERATIONS OF FAMILY BUSINESS of sales, use and property taxes that can be GenSpring Family Offices significant. And many states are becoming much The decision to sell or continue ownership of a more aggressive in tracking down these aircraft family business is complex. Business owning in order to assert those taxes against the families who recognize early the importance of owners. This article focuses on the importance both the financial and non-financial of taking a closer look at the state tax considerations of a potential sale are more likely ramifications before purchasing an airplane. to make good transition decisions. FLIGHT OPERATIONS IN RVSM AIRSPACE EMPLOYING DOMESTIC STAFF FOR YOUR FAA, AIRCRAFT OPERATOR TEAM UP FOR HOME FUEL EFFICIENCY Marsh Private Client Services Shackelford, Melton, McKinley & Norton Clients often hire domestic staff for help One issue aircraft operators face, which is managing a large family and household. But for arcane on the surface but has enormous safety the affluent homeowner, there are significant and cost ramifications, is the authorization risks associated with retaining employees such required from the Federal Aviation as babysitters, elder-caregivers, and Administration (FAA) to fly in what is known as housekeepers, to name just a few. When hiring Reduced Vertical Separation Minimum (RVSM) domestic workers, it’s important to consider and airspace – the airspace between 28,000 feet address the risks involved, which are discussed and 41,000 feet. This authorization is important in this article from Marsh Private Client Services. because these are typically the altitudes where jet aircraft are the most fuel efficient. In recent DON’T PUT YOUR CLIENT’S SHINY NEW years, the FAA has recognized, however, that CORPORATE JET INTO A SOLE-ASSET LLC improved technology has made it feasible to (UNLESS YOU REALLY WANT TO CREATE safely condense vertical separation to 1,000 feet AN AIRLINE) at cruising altitudes above 28,000 feet. This Shackelford, Melton, McKinley & Norton article serves to answer what aircraft operators One area of concern arises from large or multi- can expect when they try to get the proper engine jet aircraft owners and operators — or authorization from the FAA to cruise at this their counsel — who focus solely on the altitude.

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