Eight Key Factors to Consider When Choosing a Family Office Location

Selecting or reviewing the location of your family office is a complex and challenging exercise. One that can raise issues spanning reputation, regulatory frameworks, tax regimes, access to skilled professionals, political and economic stability, access to professional services, quality of infrastructure, and more.

To help you make the right decision, there are eight key attributes to consider when assessing different locations–and why they matter. 

1. The regulatory framework

What is it? 

A jurisdiction’s regulatory framework sets out the ground rules and legal regime within which family offices located within its borders must operate. The framework generally oversees aspects like reporting, governance and ownership. Failing to comply with the regulations can create the risk of having the ‘license to operate’ withdrawn by the jurisdiction’s financial regulator.

Why does it matter? The regulatory environment is fundamental to how the family office will operate. Consider the costs involved in complying with regulatory requirements, including not only the fees paid directly to regulators but also the indirect overheads of maintaining compliance. The biggest consideration should be the role that the regulatory framework will play in the security of your investments and family office structure.

Questions to ask:

1. What kind of legal regime applies: common law, civil law, Sharia, another system or a hybrid of several?
2. What are the likely regulatory costs – both direct and indirect?
3. What are the implications of the legal regime for structures such as shared ownership among family members?

2. The tax regime

What is it? A location’s tax regime consists of the body of rules, regulation and laws through which the government collects money from businesses and individuals to pay for public services.

 Why does it matter? The tax regime is a vital consideration for a family office, both from a costs perspective and because of its implications for the ability to protect and grow the portfolio of assets. The tax regimes in many jurisdictions present significant complexities to navigate. For example, the costs imposed by the local tax rules may vary between different asset classes. And while some taxes may apply to the proceeds of profits irrespective of where the assets are situated geographically, in other cases they’re applicable depending on the location. Whatever taxes are due, the resulting costs – both in terms of tax contributions and administrative overheads – have an impact on the profitability and the performance of the overall asset portfolio. 

Questions to ask:

1. How will tax (both direct and indirect) in the jurisdiction impact the performance of your family’s portfolio?
2. What approach to tax management in the jurisdiction can best help your family preserve its wealth and increase the income from it?
3. How do the OECD and other international bodies view the jurisdiction’s tax regime?

3. Access to talent and skilled professionals

What is it? Like any other business, a family office is really all about people. Its success will depend critically not only on the technical and management skills they bring, but also capabilities like language, local knowledge. The availability and cost of talent with these desirable attributes can vary widely between different jurisdictions across the world.

Why does it matter? Given your family office is – or probably will be – managing your most valuable assets and has access to sensitive and confidential information about the beneficiaries and other affairs, it is imperative that you have the right people managing it. People who not only have the right skillset, experience, and talent but also integrity and loyalty. The best family office professionals and personnel are in heavy demand, so you’ll want to set up your family office location where you have the best chances of finding and retaining the talent.

Questions to ask:

1. What specific skills are you looking for in your family office professionals and personnel?
2. How available are those skills in the jurisdiction – and how much do they cost?
3. How about language requirements and knowledge of the different cultural and business contexts?

4. Political and economic stability

What is it? When choosing a location, you want to be as sure as possible that the jurisdiction’s overall political and economic environment will remain stable for the foreseeable future. Where this stability exists, it’s possible to select a location with a fair degree of certainty that the attributes you find attractive about it will continue into the future.

Why does it matter?  To fulfill its role effectively and with confidence, a family office needs the location where it operates to have long-term stability and predictability in both political and economic terms. In cases where these aspects become unstable, or where corruption is widespread, the effects can impact all the criteria we highlight in this guide – ranging from the regulatory and tax regimes to reputation to access to talent.  

Questions to ask:

1. Are there any current or emerging trends in the jurisdiction that could lead to instability?
2. How mature and well-established are the location’s political and economic institutions?
3. Are any neighboring countries or major trading partners facing instability that could have knock-on effects on the jurisdiction?

5. Access to professional services

What is it? This criterion is about the availability in the location of all the professional and business services that a family office needs to function effectively. Today, these services range from high-quality banking, accounting and tax advice to IT support, data and server security and reliable fast internet access.

Why does it matter? When assessing a jurisdiction for a family office, it’s vital to look at the local market for the advisory and professional services that the office will rely on. Is there an organization available in the location that has the capability and credibility to act as a trustee? If there’s a private bank or banker that the family already trusts, does that bank have a branch there? How about the family’s trusted audit, accounting and tax advisers? It’s also likely that the family office will need an internationally experienced law firm to help with legal documentation going forward, so figure out which firms are represented in the desired location.

Questions to ask:

1. How mature and well respected is the professional services industry in the jurisdiction?
2. Do the family’s trusted banking, accounting and legal providers have branches or correspondent firms in the location?
3. How good is the standard of IT advice and support, and the quality of broadband?

6. Reputation

What is it? The reputation of a country is the perception that the international community has of it under a range of criteria and is often used to predict future behaviors. Different jurisdictions have widely varying reputations for transparency, fair dealing, integrity and freedom from corruption. 

Why does it matter? The political, media and public scrutiny of where and how high-net-worth individuals protect and manage their wealth has increased sharply in recent years. For example, the media storm over a number of confidential information leaks exemplified why the reputation of a family office location is important. While the wealthy individuals whose identities were revealed had done nothing wrong from a tax and legal perspective, they were pilloried in the press for choosing a location that historically had a reputation for tax avoidance that disadvantages others in society. The result was a negative reputational impact for the individuals themselves, the beneficiaries, the institutions and even the family offices based there. 

Questions to ask:

1. How does the jurisdiction rank in the main indices for transparency and freedom from corruption?
2. Have you had first-hand verification of the location’s integrity from professionals you know and trust?
3. Do you feel confident that locating your family office there will not adversely impact your own family’s reputation?

7. Immigration rules

What is it? A jurisdiction’s immigration rules govern whether someone can live and work in that location, the basis on which they’re allowed to stay, and for how long. The rules also set out the process by which people who want to live permanently in the country can gain residency or even citizenship. 

Why does it matter? The immigration rules in force in a location can be an especially relevant factor for those from countries that do not have a powerful passport, or who are looking to find a safe haven for themselves and their families outside their home country. Also in some jurisdictions there might be available ‘investment visas’ that grant citizenship or residency in return for a set level of investment in the country. These are directed towards wealthy foreign nationals who want to gain the right to live in the location by investing a substantial amount of money or purchasing a property. A further consideration is that immigration rules can change frequently as countries’ priorities evolve, so it’s vital to get the most accurate and up-to-date information and advice to inform the choice.

Questions to ask:

1. Are there any rules that will restrict your or your family’s right to visit, stay and/or work in the location?
2. Would you like to live there permanently or even get a passport – and, if so, what is required to achieve that?
3. If you want to bring professionals or staff into the location to work permanently in the family office, will that be possible?

8. Culture, living standards and connectivity

What is it? The attractiveness of a location as a place to live and work reflects a vast array of factors: societal norms, culture and customs, developed infrastructure, from street lighting to broadband to the quality of offices and housing; transport links, domestically and internationally; the level of personal safety; the quality of the education system; the availability of opportunities for leisure and sporting activities; and more. 

Why does it matter? This is probably the most subjective of the eight criteria we’re highlighting: to a degree, it’s a question of whether the location feels like a safe, comfortable and welcoming place. However, a number of the factors that make up attractiveness and quality of life can be measured objectively, and these are captured by a number of indices. For example, the World Population Review’s Living Standards Index.

Questions to ask:

1. How good are living standards in the location, judged by statistics such as per capita GDP, crime rates, and schools’ academic performance?
2. Does the location have good international transport links, making it easy to get to and from other parts of the world?
3. Does the location’s culture and societal customs align with your own values?

Learn more about PwC’s family office services: 

www.pwc.com/us/familyoffice

Contributed by:

Danielle Valkner

Private, Family Office Leader, PwC US

danielle.valkner@pwc.com