The Hong Kong Government has finished with a public consultation on its 1934 Trustee Ordinance ("TO"): http://www.fstb.gov.hk/fsb/ppr/consult/to_review.htm
Most of it is rather technical and the salient points are in the Consultation Conclusions paper:
(a) To introduce a statutory duty of care for trustees when they are
exercising their powers in relation to investment, delegation,
appointing nominees and taking out insurance, etc (Question 1);
(b) To amend the Second Schedule to the TO and the authorized
investments it contains to keep up with market needs, pending further
study on the detailed amendments (Question 2);
(c) To retain the trustee’s power of delegation under section 27 of the TO
with amendments, so that there should be at least one attorney and one
trustee or alternatively a trust corporation administering the trust
(Question 3);
(d) To provide trustees with a general power of appointing agents with
specified safeguards (Question 4);
(e) To provide trustees with a general power of employing nominees and
custodians in relation to trust assets subject to specified safeguards
(Question 5);
(f) To amend section 21 of the TO, giving trustees wider powers to insure
any trust property against risks of loss or damage by any event, and
pay the premium out of the trust funds (Question 6);
(g) To provide for a statutory charging clause for professional trustees or
trust corporations to enable them to receive remuneration for their
services under different circumstances, whether they are acting for
charitable trust or non-charitable trusts (Question 7);
(h) To amend sections 8, 11, 12 and 34 of the TO with a view to
improving the administrative powers of trustees (Question 8);
(i) To subject certain trustee exemption clauses to statutory control if the
clauses seek to exempt professional trustees, who are remunerated for
their service, from liability for breach of trust due to fraud, wilful
misconduct or gross negligence (Question 9);
(j) Not to provide any basic rules governing beneficiaries’ right to
information, and will further study the subject keeping in view the
evolution of the relevant law in other common law jurisdictions
(Question 10);
(k) To legislate for beneficiaries’ right to remove a trustee (including a
trustee who is incapable by reason of mental disorder) if the
beneficiaries are all of full age and legal capacity and are absolutely
entitled to the trust property (Question 11);
(l) To amend the Perpetuity and Accumulations Ordinance (Cap. 257)
(“PAO”) by repealing the existing rules against perpetuity in respect
of new trusts to be set up (Question 12);
(m) To amend the PAO by repealing the rules against excessive
accumulations of income in respect of new trusts to be set up, except
that charitable trusts will be allowed to accumulate its income up to 21
years (Question 13);
(n) Not to introduce legislation providing for the definition of protectors
nor for their roles (Question 14);
(o) To provide in the law that a reservation of settlors’ powers to
investment or asset management does not invalidate a trust and that a
trustee should be exempted from liability for acting in accordance
with the powers that a settlor has reserved (Question 15);
(p) Not to codify the common law principle of the governing law of trusts
and continue to rely on the current law (Question 16);
(q) To introduce legislation to the effect that forced heirship rule will not
affect the validity of trusts by following the Singapore approach
(Question 17); and
(r) Due to the complexity and controversy of the issue, need to study the
issues on non-charitable purpose trusts in greater detail before taking a
final view on the subject (Questions 18).
Before we break out the champagne, there will still be laws to draft, amended and passed (or killed). With godspeed, look at another 2 years before we have something tangible. Even then, there are still a myriad of trust and trust-related issues spanning family law, tax and wealth management that are still "lacking".
All of us owe a great deal to Grace Kwok (who probably regrets ever stepping into the arena) who has been a great trooper and did a great job in synthesizing matters for her superiors.
For those unfamiliar with the Hong Kong trust industry, it is like no other in the world and largely due in part to the legislative framework, including the TO. The TO is painfully outdated, but governs virtually every HK trustee. In the modern world, we have all types of trusts, broadly personal and commercial, and the countless splinter sub-species, most of which did not exist in 1934. The TO obviously left a great deal of uncertainty in many matters that trust providers and users sought. Down right scary uncertainty. As a result, almost all trusts, save testamentary, charitable, pension trusts or certain investment/corporate trusts, were created using a foreign law where there was greater if not exact certainty. And it follows that the trustee appointed was from the same foreign jurisdiction. It meant that few cared about the TO because the market made it irrelevant. Who knew what post-97 HK would be like? Why bother with the red tape of changing local law when you can use a foreign one? The Chinese are very pragmatic.
Whereas people in most other trust jurisdictions, say Jersey, or the Caribbean are usually setting up or administering trusts created under local laws with locally licensed trustees, most people in Hong Kong are setting up or selling or administering a "foreign" trust. Need a fund? Let's set it up under Cayman law! Need a family discretionary trust? Let's do it under Jersey law!
There are only some 50-odd local trustees in HK yet it is one of the largest trust centres in the world. And unless you were in the pension/provident fund or estate administration business, you really didn't need to be one. Hundred of players with trust people in HK are not technically "local". UBS doesn't have a HK trust license, neither does BNP or JP Morgan or Credit Suisse but how many people do they have on the ground dealing with trusts? There are more foreign trustees "operating" in HK than HK trustees!
Singapore was like that until the 90's. But Singapore used concerted tax and law changes to reverse the situation and started building an onshore trust business. Does it matter?
An useful analogy is the Hong Kong stock exchange. The majority of listed companies on the SEHK are not incorporated in Hong Kong! You list in HK because you have need to list (ie cash grab) and whether you use a HK company or Bermudian company as the legal vehicle has negligible affect on where your people are or how you actually run your business in HK. Whether you are selling a HK trust or a BVI trust, whether you are administering a HK-law trust or IOM-law trust doesn't really matter. The assets are still booked with the same banks or asset managers, you do the same transactions, you still have the same number of sales or administrators, you pay profit tax on your trust fee revenue, you pay sky-high rent on the office space in Central, etc.. Would making a HK company as better listing vehicle change the market?
Will these changes create a greater demand for HK trustees and hiring of thousands of staff? Should Singapore or other trust centres be worried about losing business? As I alluded to, it will be years before the entire infrastructure will make choosing a HK trust a truly viable option. There are more considerations than just statute. Still, it's a step in the right direction. The playing field will be a little more level but when you can pick and choose among several legally similar jurisdictions, the final decision will be based upon something else, like pricing, service, etc.
The BVI never created a zillion jobs because HK sent a lot of trust business its way. Instead, the administration and "real work" stayed in Hong Kong (or anywhere but the BVI). Of course some of the money that used to go to these foreign centres can be retained in HK but that isn't where the real money is. And I doubt we will see the same kind of impact as did the changes in Singapore. That was more of a perfect storm situation which is unlikely to repeat itself.
The people with the most to gain initially will be locally qualified lawyers, at the expense of foreign lawyers whose services will no longer be required should people start choosing HK law and HK trustees over, say a Cayman or Singapore offering.
I would say the the cost of doing business in HK is such that back office functions such as much of trust administration will eventually move on to low-cost centers and it has nothing to do with outdated law or even tax on trustees. We are starting to see Singapore outsource to Mubai and elsewhere.
Thursday, April 22, 2010
Sunday, April 18, 2010
Want a Job?
As a companion piece to "You Are Who You Hire", I look at recruiting.
Now recruitment is highly speculative process. Most jobs are really filled within a span of a month. It is really is more of being at the right place at the right time than anything else. You try to get the best that's out there at a particular moment and not the absolute best. There is no such thing as an unqualified quest for the best.
Are most jobs advertised? Not really. Here's a typical cycle:
1. An opening appears. This could be replacement hiring. It could be expansion, it could headcount freeze being lifted. The decision to go ahead to hire is usually made among a handful of senior executives or some even just one person.
2. In a bureaucratic organisation, there may be headcount request forms/business cases or it could be a simply as the MD saying go ahead.
3. Almost implicit in such a decision process is whether there is a local internal candidate that could be promoted or transferred. Most organisations prefer to move someone internally than go for an outsider. So when you see an ad, that usually means no one internally is suitable or wants the job. Tells you about the lack of succession planning in that organisation. For international organisations, cross-border transfers are a possibility but usually cost is the main impediment to this occurring often. Times have changed, it used to be that Asian companies had to give out fat "expat packages" to attract talent from the West. Now, many Westerners pay their own way. Other times, hiring managers don't want to be be saddled with people they really didn't hire. As the market for talent shifts, we saw Singapore recruit from North Asia and now more vice versa. Regardless of distance, importing labour is still often low on the agenda. For client facing roles, language and cultural skills are often cited as reasons for hiring local.
4. Next is the "secret" hiring stage. Here, friends and respected colleagues of the hiring manager are targeted. A few phone calls and lunches and they know if they have to make this hire a public one. For job hunters, here is where your network and social skills come into play. Here is where your reputation, if you have any, either works for you or against you. In some organisations, they are compelled by policy or law to advertise the post but sometimes it is just a "show", as the post has already been filled. While it may be swift, secretive and cost-efficient, hiring secretly has its drawbacks. You may not be getting the best candidate, just someone's BFF.
5. Only failing to find someone secretly, the hire becomes public. It may start with an internal memo to staff. If the hire is "sensitive" (senior or replacement or strategic) then it may go to the headhunters. I call those that don't advertise (at least not in their own name) headhunters. These are people that rely on their contacts and database and search discretely and discriminately. In today's world, as soon as the hire is out there, you can consider it public. People will Tweet and blog or scream out that they were contact by so-and-so for this-n-that. If half the industry doesn't know you're hiring by day 2 then it tells you that your people or headhunter don't know many people in the industry.
6. Next or sometimes simultaneously are the job postings. Sometimes by recruiting agencies or on your website careers section. Obviously traffic to your website is relatively low compared to the big dedicated job portals. One interesting note is that some international companies are really screwed up when it comes to their websites. Due to privacy policies/law/revenue/costs/politics, some HR departments/career sections are not utilised by the local office/branch. I'm sure this drives our HR friends mad, but in reality, most hiring decisions are not made by HR or even have their input. HR is often seen as an administrative function to get the paperwork done and not part of the culture/team/human capital building role that textbooks tell them they are. An interesting decision is made whether to advertise the company or not. There are some that want to keep the company's name or details out. Pretending to be secret. Other's see their brand as a strength. It used to be that if you used your name then it had to go through your HR and therefore create a potentially huge burden on them to screen and process applicants. Nowadays, there are various models where you can outsource some of that to the agencies.
Because of the power of the internet, an advertised job could reach hundreds of thousands of people in a relatively short time, which is both good and bad. If you place a vague, highly unrestrictive ad, then you will get thousands of vaguely qualified applicants seriously impeding your ability to screen quickly. Even if you place serious restrictions like say "10 years of experience" or "must have fluent Tamil language skills" you can still end up with a lot of under-qualified people reaching, after all what do they have to lose? It takes them a few minutes to hit the send button to gain a chance. Those recruiting in the trust industry often are vague as the skill set we require are multidisciplinary and we often find value in the jack-of-all-trades. Then there will those that won't respond because of some particular sticking point/qualification you listed. A well-crafted advertisement may save you a lot of time and trouble.
The response you get to an "all out blitz" can tell you much about the market place. It tells you who's available, who's not, how much, etc. Excellent intelligence information. Of course, the longer you fail to fill the position and continue to advertise tells the world that you have a problem. It could be your pay offer, your position or even your organisation.
Regardless of who runs the ads, this is usually a 1 or 2 week affair. That means you have to find Mr.Right or Ms.Right in that time frame. If you weren't looking or contacted in those 2 weeks, then too bad.
Even your choice of headhunter or recruiting agency may play an important role. Some firms have no expertise in this field. Others have notorious reputations. Just look at some of the local job forums and chatrooms and you soon realise that job-seekers and placement firms have a love-hate relationship. Similarly there are games between the hiring company and the recruiters and you may not get a true view of candidates available. Recruiters will present who they think are the best candidates and not necessarily all the qualified candidates. I know of a great trust manager who was given lip service by his agent and never presented for a role because he lacked a language skill which was an important criterion for the hiring company. Would you prefer a competent person with a handicap or would you prefer a marginal candidate? The choice may have never presented itself for you to decide upon.
7. Screening. Here's where the one of the more important elements of a recruitment takes place, yet who does it? Is it your recruiting agency? Is it your HR? One of your senior managers? Yourself? Everyone has biases. Everyone can interpret statements on a CV differently. For certain roles, I look for certain things, certain skills, certain qualifications. So does everybody else. You have may be 2 minutes of my time to scan your CV to find the things I am looking for. For instance, if I am looking for someone to do marketing then tell-tale signs of marketing experience must jump out of else it's in the rubbish bin. [Although I might keep 1 or 2 marginal candidates on a "maybe" list, I have never heard of anyone actually going back and searching the company database. For a major international company that means there are literally thousands of candidates which they have a record of but choose to ignore. If you don't get invited and the post pops back out in 6-months, re-submit because no one else will be looking for you. Obviously recruitment agencies and the headhunters compile databases but how much they put it to use, especially after bouts of turnover themselves, you have to ask them.] If a candidate put "marketed trusts" on their CV it will probably be shortlisted by the unsophisticated recruiting agency/HR. To a hiring manager in trust marketing, it's meaningless as they would want to know to whom, how, where? etc. but you may have caught their interest. What if the candidate put "tailored solutions for UHNWI"? That may pass undetected by computer "tag/keyword" scans yet wouldn't that candidate be interesting?
Long flowery passages, list of character traits, hobbies and personal interest mean nothing to me. It might mean something to those recruiting say at an entry level or other professions but I look for almost exclusively at whether you can market. As you will discover, 90% of hiring managers have never taken a course of "proper" recruitment but rather work off years of hit and misses. I have seen "perfect" candidates on paper turn out to be woeful employees. I have seen "3 out of 10's" excel. I have reviewed thousands of CVs and interviewed hundreds of candidates. I go by what I know and not what textbooks say should be. In other words, I really don't know what makes a good candidate. I doubt anybody does either.
And of course CVs are "historical" data. What one did in the past (or didn't do) isn't exactly a good predictor what they could or can do. Similarly, what they did do doesn't mean they did it well. We, meaning myself included, really don't spend the time we should digging into the candidates' past.
8. Interviews. Nothing you have on paper will be as valuable as how you perform at the interview. I will often overlook education/technical inadequacies if the candidate aces the interview. By the same token, being great on paper means nothing if you blow it at the interview. How to ace an interview depends on you being able to read into what the interviewer is looking for. You need an angle. You need to know if they are HR doing a general screen, or a line manager or the hiring manager. Each has a different set of what they are looking for. You need to quickly ascertain what that is and tailor your responses accordingly. Some will be looking more closely at your qualifications, some at your personality, some at your actual past responsibilities. One MD professed he was looking for "people persons", those that would be pleasant to work with rather than focus on their skills. How to present your strengths and mask your weaknesses is the difference between being hired or unemployed. A dear old friend was a well respected lawyer and trust practioner and he told me a tale of how he interviewed with a local bank for the Director of Trust role years ago. He would be on my short-list if I had such a hire to make. His first interview was with a manager (not even senior manager) from HR. He had to fill out a job application form! Then he next met with the CEO of the bank who was clueless about the trust business. It did not go well and he did not get the job. He is now head of a major international trust business. Was the bank wrong? It's easy to say yes, but maybe my friend just failed to impress during his interview. Just goes to show that how fragile and error-prone the process is.
After all that, do we end up with a good hire? I think only about 25% of hires really work out. One in 4 will end up being a good long-term contributor to the organisation. And I think that is a very high number. There will be many organisations that do a lot worse, say 10%. Why? The simple answer is that there was a mismatch between the person's skills and the position. They lacked the skills, the depth or breadth and struggled with role. They move on. The recruiter failed to pick this up or decided to take a chance. We are forever trying to get tax/legal/banking/accounting people into trust roles and rarely do they fit perfectly. Some hiring managers I know, use the "splatter" approach. They have given up on hiring close or perfect fits and just hire anyone remotely qualified or interested and hope they "stick". Costly, disruptive and time consuming but they consider it a system that works for them.
Other times, it's "bad apples". There will be those that are very negative, lazy, lack accountability and are even despicable. You may have hired one or they may end up working for a manager that is one. These people will drag the rest of the team down to their level and will eventually force you to remove them or they will drive out all the good apples. One trust-zilla I know used to know use her position of power to verbally abuse staff (including the tea lady for God's sake!) and people would leave the firm because of her. While I may get flack for this, nothing compares to how petty, cruel and insulting middle-aged Asian women can get when they decide to tee off on someone. It is not a pretty sight. It's difficult to catch these "bad apples" during the interview process as they are usually on their best behaviour during those few hours you have. However, with most senior people, they will have a reputation and here's where networking and doing some due diligence may pay off.
What about the competition? The lure of a brand name or pay increase is usually too great for junior staff to withstand. This repeats itself in most industries as people try to move up and into bigger companies but I find that by the time they have been around for a few years, money and brand means less. People start to look for stability and work environment/nature. People are less likely to move on if they are in a position or part of a team that they like and have reasonable (not necessarily top) pay. Go ahead, and ask anyone who's been in the same firm for the past 5years and they say they like it more than than the pay or prospect or title or even the firm. The walls around them could fall down but if they like their job, they will stay. It usually takes next-to-nothing to recruit an unhappy senior member but a boat-load to move a happy senior member.
Now recruitment is highly speculative process. Most jobs are really filled within a span of a month. It is really is more of being at the right place at the right time than anything else. You try to get the best that's out there at a particular moment and not the absolute best. There is no such thing as an unqualified quest for the best.
Are most jobs advertised? Not really. Here's a typical cycle:
1. An opening appears. This could be replacement hiring. It could be expansion, it could headcount freeze being lifted. The decision to go ahead to hire is usually made among a handful of senior executives or some even just one person.
2. In a bureaucratic organisation, there may be headcount request forms/business cases or it could be a simply as the MD saying go ahead.
3. Almost implicit in such a decision process is whether there is a local internal candidate that could be promoted or transferred. Most organisations prefer to move someone internally than go for an outsider. So when you see an ad, that usually means no one internally is suitable or wants the job. Tells you about the lack of succession planning in that organisation. For international organisations, cross-border transfers are a possibility but usually cost is the main impediment to this occurring often. Times have changed, it used to be that Asian companies had to give out fat "expat packages" to attract talent from the West. Now, many Westerners pay their own way. Other times, hiring managers don't want to be be saddled with people they really didn't hire. As the market for talent shifts, we saw Singapore recruit from North Asia and now more vice versa. Regardless of distance, importing labour is still often low on the agenda. For client facing roles, language and cultural skills are often cited as reasons for hiring local.
4. Next is the "secret" hiring stage. Here, friends and respected colleagues of the hiring manager are targeted. A few phone calls and lunches and they know if they have to make this hire a public one. For job hunters, here is where your network and social skills come into play. Here is where your reputation, if you have any, either works for you or against you. In some organisations, they are compelled by policy or law to advertise the post but sometimes it is just a "show", as the post has already been filled. While it may be swift, secretive and cost-efficient, hiring secretly has its drawbacks. You may not be getting the best candidate, just someone's BFF.
5. Only failing to find someone secretly, the hire becomes public. It may start with an internal memo to staff. If the hire is "sensitive" (senior or replacement or strategic) then it may go to the headhunters. I call those that don't advertise (at least not in their own name) headhunters. These are people that rely on their contacts and database and search discretely and discriminately. In today's world, as soon as the hire is out there, you can consider it public. People will Tweet and blog or scream out that they were contact by so-and-so for this-n-that. If half the industry doesn't know you're hiring by day 2 then it tells you that your people or headhunter don't know many people in the industry.
6. Next or sometimes simultaneously are the job postings. Sometimes by recruiting agencies or on your website careers section. Obviously traffic to your website is relatively low compared to the big dedicated job portals. One interesting note is that some international companies are really screwed up when it comes to their websites. Due to privacy policies/law/revenue/costs/politics, some HR departments/career sections are not utilised by the local office/branch. I'm sure this drives our HR friends mad, but in reality, most hiring decisions are not made by HR or even have their input. HR is often seen as an administrative function to get the paperwork done and not part of the culture/team/human capital building role that textbooks tell them they are. An interesting decision is made whether to advertise the company or not. There are some that want to keep the company's name or details out. Pretending to be secret. Other's see their brand as a strength. It used to be that if you used your name then it had to go through your HR and therefore create a potentially huge burden on them to screen and process applicants. Nowadays, there are various models where you can outsource some of that to the agencies.
Because of the power of the internet, an advertised job could reach hundreds of thousands of people in a relatively short time, which is both good and bad. If you place a vague, highly unrestrictive ad, then you will get thousands of vaguely qualified applicants seriously impeding your ability to screen quickly. Even if you place serious restrictions like say "10 years of experience" or "must have fluent Tamil language skills" you can still end up with a lot of under-qualified people reaching, after all what do they have to lose? It takes them a few minutes to hit the send button to gain a chance. Those recruiting in the trust industry often are vague as the skill set we require are multidisciplinary and we often find value in the jack-of-all-trades. Then there will those that won't respond because of some particular sticking point/qualification you listed. A well-crafted advertisement may save you a lot of time and trouble.
The response you get to an "all out blitz" can tell you much about the market place. It tells you who's available, who's not, how much, etc. Excellent intelligence information. Of course, the longer you fail to fill the position and continue to advertise tells the world that you have a problem. It could be your pay offer, your position or even your organisation.
Regardless of who runs the ads, this is usually a 1 or 2 week affair. That means you have to find Mr.Right or Ms.Right in that time frame. If you weren't looking or contacted in those 2 weeks, then too bad.
Even your choice of headhunter or recruiting agency may play an important role. Some firms have no expertise in this field. Others have notorious reputations. Just look at some of the local job forums and chatrooms and you soon realise that job-seekers and placement firms have a love-hate relationship. Similarly there are games between the hiring company and the recruiters and you may not get a true view of candidates available. Recruiters will present who they think are the best candidates and not necessarily all the qualified candidates. I know of a great trust manager who was given lip service by his agent and never presented for a role because he lacked a language skill which was an important criterion for the hiring company. Would you prefer a competent person with a handicap or would you prefer a marginal candidate? The choice may have never presented itself for you to decide upon.
7. Screening. Here's where the one of the more important elements of a recruitment takes place, yet who does it? Is it your recruiting agency? Is it your HR? One of your senior managers? Yourself? Everyone has biases. Everyone can interpret statements on a CV differently. For certain roles, I look for certain things, certain skills, certain qualifications. So does everybody else. You have may be 2 minutes of my time to scan your CV to find the things I am looking for. For instance, if I am looking for someone to do marketing then tell-tale signs of marketing experience must jump out of else it's in the rubbish bin. [Although I might keep 1 or 2 marginal candidates on a "maybe" list, I have never heard of anyone actually going back and searching the company database. For a major international company that means there are literally thousands of candidates which they have a record of but choose to ignore. If you don't get invited and the post pops back out in 6-months, re-submit because no one else will be looking for you. Obviously recruitment agencies and the headhunters compile databases but how much they put it to use, especially after bouts of turnover themselves, you have to ask them.] If a candidate put "marketed trusts" on their CV it will probably be shortlisted by the unsophisticated recruiting agency/HR. To a hiring manager in trust marketing, it's meaningless as they would want to know to whom, how, where? etc. but you may have caught their interest. What if the candidate put "tailored solutions for UHNWI"? That may pass undetected by computer "tag/keyword" scans yet wouldn't that candidate be interesting?
Long flowery passages, list of character traits, hobbies and personal interest mean nothing to me. It might mean something to those recruiting say at an entry level or other professions but I look for almost exclusively at whether you can market. As you will discover, 90% of hiring managers have never taken a course of "proper" recruitment but rather work off years of hit and misses. I have seen "perfect" candidates on paper turn out to be woeful employees. I have seen "3 out of 10's" excel. I have reviewed thousands of CVs and interviewed hundreds of candidates. I go by what I know and not what textbooks say should be. In other words, I really don't know what makes a good candidate. I doubt anybody does either.
And of course CVs are "historical" data. What one did in the past (or didn't do) isn't exactly a good predictor what they could or can do. Similarly, what they did do doesn't mean they did it well. We, meaning myself included, really don't spend the time we should digging into the candidates' past.
8. Interviews. Nothing you have on paper will be as valuable as how you perform at the interview. I will often overlook education/technical inadequacies if the candidate aces the interview. By the same token, being great on paper means nothing if you blow it at the interview. How to ace an interview depends on you being able to read into what the interviewer is looking for. You need an angle. You need to know if they are HR doing a general screen, or a line manager or the hiring manager. Each has a different set of what they are looking for. You need to quickly ascertain what that is and tailor your responses accordingly. Some will be looking more closely at your qualifications, some at your personality, some at your actual past responsibilities. One MD professed he was looking for "people persons", those that would be pleasant to work with rather than focus on their skills. How to present your strengths and mask your weaknesses is the difference between being hired or unemployed. A dear old friend was a well respected lawyer and trust practioner and he told me a tale of how he interviewed with a local bank for the Director of Trust role years ago. He would be on my short-list if I had such a hire to make. His first interview was with a manager (not even senior manager) from HR. He had to fill out a job application form! Then he next met with the CEO of the bank who was clueless about the trust business. It did not go well and he did not get the job. He is now head of a major international trust business. Was the bank wrong? It's easy to say yes, but maybe my friend just failed to impress during his interview. Just goes to show that how fragile and error-prone the process is.
After all that, do we end up with a good hire? I think only about 25% of hires really work out. One in 4 will end up being a good long-term contributor to the organisation. And I think that is a very high number. There will be many organisations that do a lot worse, say 10%. Why? The simple answer is that there was a mismatch between the person's skills and the position. They lacked the skills, the depth or breadth and struggled with role. They move on. The recruiter failed to pick this up or decided to take a chance. We are forever trying to get tax/legal/banking/accounting people into trust roles and rarely do they fit perfectly. Some hiring managers I know, use the "splatter" approach. They have given up on hiring close or perfect fits and just hire anyone remotely qualified or interested and hope they "stick". Costly, disruptive and time consuming but they consider it a system that works for them.
Other times, it's "bad apples". There will be those that are very negative, lazy, lack accountability and are even despicable. You may have hired one or they may end up working for a manager that is one. These people will drag the rest of the team down to their level and will eventually force you to remove them or they will drive out all the good apples. One trust-zilla I know used to know use her position of power to verbally abuse staff (including the tea lady for God's sake!) and people would leave the firm because of her. While I may get flack for this, nothing compares to how petty, cruel and insulting middle-aged Asian women can get when they decide to tee off on someone. It is not a pretty sight. It's difficult to catch these "bad apples" during the interview process as they are usually on their best behaviour during those few hours you have. However, with most senior people, they will have a reputation and here's where networking and doing some due diligence may pay off.
What about the competition? The lure of a brand name or pay increase is usually too great for junior staff to withstand. This repeats itself in most industries as people try to move up and into bigger companies but I find that by the time they have been around for a few years, money and brand means less. People start to look for stability and work environment/nature. People are less likely to move on if they are in a position or part of a team that they like and have reasonable (not necessarily top) pay. Go ahead, and ask anyone who's been in the same firm for the past 5years and they say they like it more than than the pay or prospect or title or even the firm. The walls around them could fall down but if they like their job, they will stay. It usually takes next-to-nothing to recruit an unhappy senior member but a boat-load to move a happy senior member.
You are Who You Hire
I recently received a letter from a son of an important client asking about the possibility of a summer internship. Many people get these requests and it can be a delicate situation. However, it dawned on me that I don't need to make excuses....the trust industry has no use for the inexperienced. Other than meaningless clerical work (which is what most internships are anyway), everyone from the lowest paid staff to the most senior executives have to have skills derived or developed from previous relevant employment. Virtually no one steps into the trust industry fresh out of school or from a totally unrelated field. Unless you are an accounting or legal firm, there is little to no room for fresh graduates. So for all you considering a job or career in the trust business as your first job, forget about it.
What skills or experience do you need? Glad you asked.....Let's break down a typical trustee operation. As a minimum you need 2 roles filled: a planner/designer and a administrator. Obviously it could 1 person, but as the volume, complexity and scope of the case increases, you could develop literally 100, specialist sub-roles.
The Planner/Designer - here is someone that has the technical know-how of how to apply the use of a trust to meet the client's needs. Often the face of the business. Consider a relatively simple question and often a trigger point for the "sale" of a trust: How does a trust help avoid probate? Any moron who can read could recite the answer from the Q&A section of your sales brochure/manual. Is that enough? What most people fail to recognise is that Q&As, manuals, even legal opinions are often condensed, distilled and gloss-overs of all the material things involved. When facing a sophisticated client or their knowledgeable advisor, the good Planner must know a multitude of things from testacy, heirship, probate, death taxes to estates to bank regulations on accounts of deceased persons to transfer of ownership of anything from real estate to Ming Dynasty vases. It really would take a lifetime of education and work experience to get a firm handle on things. Simply put: you need to know the rules before you can understand how to break them. It is somewhat ironic in that if the Planner is successful and puts you and others in a probate avoidance trust, then what would he really know about the probate process? Would you not wonder about a single marriage counselor?
In real life, probate is just one of the many icebergs the Planner must be able to navigate his client through, there are other icebergs like tax, spendthrift heirs, pickering partners, commercial reality, regulatory environment, etc., that affect the simplest of plans. If the Planner lacks knowledge or experience in width or depth of the issues, then the likelihood of a mis-sell or bad plan increases...exponentially. We all would love our Business Development people to go out and sell a hundred trusts a month, but how many of those trusts may blow up in your face down the road? Sometimes no business is better than bad business.
Of course, it becomes a daunting task to find people with all the necessary skills and expertise, as well fitting within your payroll budget, so you need to recognise where you have strengths, where you have weaknesses and have access to qualified help. Do you go for the gold plated or solid gold? For some roles, gold-plated is all you need. Unfortunately, it is far often that it is in hindsight and after the proverbial shit has hit the fan that you recognise that you should have went for solid gold intsead. Sometimes it is a simple as making a referral to a probate lawyer. Other times, it is hiring a in-house probate lawyer. Perhaps some business tie-in or sub-contracting?
Planners also need to know about trust instruments, that means trust deeds and trust law. A trust deed may contain some say 30 clauses or provisions. The Planner typically only works on about 5 of those clauses. Does that 20-something on the street trying to sign you up for the credit card know anything about the terms and conditions (that page of fine-print that you can't read without a microscope) of the card or do they just tell you about potential bonus points and reward gifts? Sometimes, Planners can get away with knowing a little as the need for a credit card, or the brand name of the issuing bank or simply reward gifts are enough to get people to sign up. Other times, the Planner need to know the T&C inside out as they will be challenged by a sophisticated buyer. Clearly most banks don't care about their front-line as evidenced by the number of young men and women they have on the streets, and that is because they know (or think they know) what their risk of failure is. It is an acceptable loss. Do you know what your risk is and can you cope with a failure?
Very few people actually draft trust deeds as most trustees "buy" their trust deeds from trust lawyers. But most trustees will be asked to "tailor" or amend parts of the trust deed to make it more suitable for some cause. Still, the Planner needs to know whether their trust deed will actually serve the purpose it was intended to. You will be surprised at how many times people have used the "wrong" or incompatible trust deed. Here, modern technology has made people complacent and even negligent.
No reads deeds anymore, they rely on the cover page and footers to identify it as being correct. It never occurs to them, nor feel it is their responsibility, to ensure the contents are correct. Today, most trustees have, sometimes nothing more than glorified data entry clerks, input names and addresses into the blank fields of templates and the document is generated by computer. I would be willing to bet you could replace any consecutive 19 words (so as not to affect spacing) with: "Nothwithstanding any other provision in this Deed the Trustee shall not be entitle to receive any form of remuneration." and it would go unnoticed. Then there are countless follies where people have made incomprehensible or unenforceable changes to the trust. There are cases where people have essentially converted trusts of one type, say irrevocable, to revocable by making ludicrous changes. Other times, the trust, or parts of it, become null and void because of incomplete thinking. The unexpected occur and you end up at a dead end. Typical failures often involve giving some power, duty or right to a third party, without successor rules, so when that person dies, those powers/duties/rights die with them. So do you trust your Planner or do you have some in-house counsel or do you go external?
If your Planner is not an expert, will he/she be able to comprehend what the experts tell them? Or will your Planner be able to give proper instructions to counsel? Many criticise lawyers or counsel for wanting to directly contact clients for instructions. Not only is it often required for KYC these days but it's mainly so they don't have to deal with babbling idiots that re-shape or mistake what the issues/instructions really are. Of course, there are those that misinterpret and misconstrue what counsel tells them. Then again, it may be counsel that steers you in the wrong direction. Look the the recent Canadian tax/trust case of Antle and "Justice Miller reached the “inevitable conclusion” that Mr. Antle “did not truly intend to settle shares in trust…He simply signed documents on the advice of his professional advisors with the expectation that the result would avoid tax in Canada” and “[H]e knew when he purported to settle the Trust that nothing could or would derail the steps in the strategy. This is not indicative of an intention to settle a discretionary trust." [see: http://www.mccarthy.ca/article_detail.aspx?id=4807]
Paperwork only gets you so far.
The Planner is also your front line and face of your business. They need to be able to "sell". Professionals like to think they are giving advisory, technical sales, or providing value-added service but whatever their approach, the bottom line is that they must convince people to sign on the dotted line. So who do you want for a Planner? Fresh grad? That aesthetically pleasing, smooth talker or a doom-n-gloom shark or Glengarry Glen Ross salesmen or marketing professional?
Now that the structure maybe finalised, there comes the fees. Your Planner and Administrator need to be able to negotiate and ultimately collect fees. There are those that write 6-figure checks without batting an eye. Perhaps it's saving face or they really don't care as they spend more on shoes than that or they think they got a bargain and want it settled before you change your mind. Others will fight you tooth and nail for every last cent. Some will play the 60-day credit game and drag payments until the minute you send the collection agency after them. So is this a job for a fresh grad, former WTO negotiator, debt collector or an experienced Planner/Administrator?
Once the "deal" is made, next comes the client on-boarding issues. Who does this? Could be our over-worked Planner or some specialist. Although Compliance is supposedly an external function, many operations have Compliance and KYC specialists sitting within the department to help with on-boarding issues. Still someone needs to get the passport copies and run due diligence checks. Is this clerical where you can slot in a junior clerk? Or is this an important function requiring a specialist that knows a 20-seater bar/restaurant doesn't normally make US$10m in a year? Or that understands that there are no widget factories in Labuan? Which reminds me, with the boom in compliance sector, there inevitably comes a bunch of poorly qualified compliance people. They may understand AML, audits and such, but how can they be of use when they have no idea what trusts are? How can the settlor not be the UBO they ask? Aren't bearer shares always dodgy? Bet you all the bearer instruments in my wallet that you've faced some utterly novice Compliance questions this past month. God help us all.
Next comes the transfer of assets to the trust. Who does this? Sometimes, it is also the Planner, sometimes the Administrator, sometimes some specialised unit, sometimes outside help. Depends on the assets. If your dealing with cash and securities then you need someone with banking knowledge. If you dealing with real estate than you need conveyancing people. If you're dealing with company shares then you need company secretarial/share registry people. Many trustees often create teams to handle specific items. Lends to efficiency and expertise. When you have specialised teams, a danger is that they become less in-tune with the trust. To the person in bank, opening tens of accounts a day, it almost becomes habit that the UBO is the account holder. Will they put the trust company as UBO on trust account opening form? Are your conveyancing people cognizant of the quirky rules that exists regarding trusts over land that exist in some jurisdictions? Although hard to find, there are many cases involving incomplete/imperfect/erroneous asset transfers to trusts. Most are very funny.....but not if it happens to your trust. Again I refer to the Antle case where the courts found that (despite probably adequate paperwork) there was no effective transfer of assets and the required certainty of subject matter was absent. Translation: no trust existed. Oops. So do you go with a fresh grad, someone with a year or 2 of experience or a designated professional?
Now that everything is in place, we embark on hopefully many years of recurring trust administration revenue. Enter the Administrator. Despite the unglamourous title, look closer at what this person does. They could be the primary relationship holder. They need to ensure the trust and its underlying vehicles and assets are properly registered, maintained, insured, performing, filings are made, fees paid, vendors are retained, records are kept, accounts are prepared, make changes where required, as well has dealing with requests from beneficiaries and settlors.....literally another million icebergs. What you really have is a CEO of an enterprise. It could be nothing more than a simple bank deposit or it could be the top of a multinational business empire.
Firstly, does the Administrator know the trust itself? Afterall, the trust deed and relevant trust law govern what can and cannot be done with the trust. Of the 30 clauses in the trust deed in my previous example, the Administrator typically deals with say 10 of those clauses. Another 3-to-5 in unusual circumstances. It should not surprise you that a large number of Administrators really do not understand the clauses they are invoking or relying upon. After all, it is rather technical legal stuff and how many have formal legal training? Do you know what the Deed of Mutual Covenant says about the what you can and cannot do with the flat your living in? Every so often, someone doesn't check the DMC and you end up making some "illegal" renovation or engage in some "illegal" usage such as running your "financial consulting" business from your spare room. Failure to follow the rules laid out in the trust deed or relevant trust law is usually indefensible negligence.
Many Administrators carry out duties based not on the rules but on what they've done in the past or some procedural manual. Most documentation prepared by Administrators are form documents, where they only have to fill out certain holes/blanks. This has lead to a generation of Admin people who understand how to fill-in-the-blank and not knowing the "whys?" or the implications. This of course means that every so often, there will a breach of trust somewhere meaning the Administrator exceeded his authority, overstepped some boundary or failed to exert some power. Not all breaches are fatal, most go unnoticed, some are repaired or resolved to everyone's satisfaction but some will bring costly litigation and reputation damage as well as topple some smaller/weaker trustee companies. So do you want a fresh grad or someone who can read and understand trust law and regulations and trust instruments?
Notice that of the 30 clauses in the trust deed, only about half are regularly used or referred to. What about the other remaining clauses? No one except the lawyers understands them. No one except the lawyers knows how or when to apply them. No one bothers to even read them except when it comes time for litigation.
Perhaps most mundane (and sometimes forgotten altogether), but someone needs to record the trust's activities. Often this is no more than a minute in the Trustees' Minute Book: "We resolve to pay Junior a distribution of $2M" or "We resolve to purchase 100 units of Bernie's Ponzi Fund". Not much skill involved right? Any first year Company Secretarial student could handle that right? 80% of time yes. 20% of the time it will take great insight and deft to put on paper the right amount of background and detail. What is the right amount? The right amount is the amount that will satisfy the courts of your lack of negligence, wrong doing or malfeasance. Say Junior had a brother who was also a beneficiary. He could sue you for breach of trust to him. How will you justify the payment to Junior? Any beneficiary could sue you for investment losses. In 3months, or perhaps 3years, maybe 20years time, you may need to explain why you purchased Bernie's fund. Do you have a reasonable explanation? Do you have the investment adviser's recommendation on file? One of the first things litigators will look at your minute book and other pieces of paper/email evidencing your deliberations and determinations. Why you did what you did may be more important in the judge's decision than what you did or the actual outcome of that action. Some mothers tell you to wear clean underwear as one day someone might see them. I tell you to prepare good minutes/records, as one day someone might see them. By the way, there is also a wrong amount of information. Recording that the settlor instructed you to purchase the funds may prove to be more disastrous than the monetary loss itself. I earlier wrote about a lawyer who detailed her bank's tax evasion in her file notes so too much detail may not be so good. The truth? Your defense attorney can't handle the truth. So, do you want a fresh grad, a company secretarial officer or a trust administrator or a former counter-intelligence operative? Great advice in the "Key Lessons" section from Robert MacRae, a partner of Jersey's Carey Olsen and participant in one of the most complex, lengthy and costly trust cases in recent times, the Alhamrani case involving JP Morgan [2007 JLR 44]: http://www.international-adviser.com/article/jerseys-epic-alhamrani-case-lever-arch-files-sheikhs-siblings-surrejoindersand-legal-precedents-1
Also tedious is keeping accounts. Take note that trust accounting is a specialty. Pick up any accounting textbook and there may be only 1 chapter out of 20 dealing with trusts. 90% of the time that distinction isn't very important. 10% of the time that could be the difference in a lawsuit or basis for making a wrong determination. What do you need to keep account of? One time deposit? Some PIC? 30000 trading transactions involving 12 currencies, valuations plus rental and tax from the house in Kensington, the sale of the condo in Miami? 12 Bentleys and their depreciation? Consolidation of the 30 companies and listed Holding Company that the trust owns 6% of? The interest payments on secured credit line the bank gave you to purchase their PIGS linked fund? What's the contingent liability when the share price falls below the strike price on that accumulator? Do the accounts need to comply with some foreign accounting standard like US GAAP? Are you sure that's capital and not income? Do you want a fresh grad, book-keeper, junior accountant, Chartered Accountant or trust administrator?
If the trust has cash/securities, the Administrator, in the most unadulterated scenario, has to decide where to bank, the type of accounts to open, the type of deposit/currencies to hold, the investments to make, when to buy, when to sell, when to take profit, when to stop loss. Do they understand structured products as well, if not better, than the banker/Adviser promoting them? What of the more recent socially conscious decisions? Is this investment green? Sharia compliant? So do you want a fresh grad, a trust administrator or a banker or an investment specialist or Islamic council member or Eco economist?
When you get big enough, then is there a need for an Operations person? A Treasury person? A Trading Desk? A full blown investment team? Obviously no places for fresh grads.
In a more realistic scenario, the Administrator is also given a mandate to maximize fee income and generate more business from existing trusts. That means they need to have a handle on the countless wealth products the bank offers and be persuasive salesmen too. Lest we forget they must convince you to allow them to borrow heavily on the trust funds whether warranted or prudent or not because banks make a killing on credit spreads. Leverage or die try trying. Fresh grad or Credit guy? Banker or IFA?
If the trust has property, then the Administrator, in the most unadulterated scenario, has to decide when and if to let it out, signing leases, collecting rent, paying the insurance, selling when the market is good, paying landscaping, etc... Do you want a fresh grad, a trust administrator or a property agent?
If the trust owns a private company, the Administrator, in the most unadulterated scenario, should be as any interested owner be monitoring the companies activities with a view to maximize shareholder wealth, firing incompetent directors, approving chairman salaries, attending the AGM, considering divesting, IPO, etc. Do you want a fresh grad, trust administrator, private equity expert, Sam Walton or David Webb?
Even if the trust and all its parties are strictly local, the Administrator needs to be cognizant of requirements and changes in the tax and regulatory environment. If gets really crazy when the trust and its parties or assets touch upon several jurisdictions. Where there is ownership of a listed company shares of significance (meaning exceeding some threshold such as 5% as often the case in many small, family controlled/closely held listed companies in Asia) there comes things like transaction reporting, corporate actions, etc., which the Trustee has to deal with. Sometimes, failure here means fines, sanctions and although remote, jail time. Did your trust company file the required forms with the financial regulators? Did the trust under your administration really qualify for some tax exemption? Other times, the settlor, an unknown beneficiary or a beneficiary you don't know very well could affect the tax status of the trust. So do you want a fresh grad, a trust administrator or a tax expert, compliance expert or a regulatory expert?
Since the trust has beneficiaries and often a meddling settlor, antagonist Protectors, territorial bankers, scheming lawyers, the Administrator has to deal with all these parties. Do you want a fresh grad, a socialite, a trust administrator, a family counselor/governance specialist, a ADR arbitrator or UN peace negotiator?
The purpose of many trusts, was to provide for family members before and especially after the incapacity/demise of the head of the family/bread winner/settlor. So now you need someone capable of caring for the finances of the family. This could involve a million different things from paying tuition, medical and dental bills and insurance, life insurance, kidnap & ransom insurance, security details, reimbursing guardians, paying rent, buying some accommodation or buying laptops, cars to vacations in the tropics. Some families like to set targets for beneficiaries, like they get $1M for graduating from university, $10M once they hit 35years of age, etc..Some have dates like a payment on each birthday. So now you need to get audit evidence a well have a calendar that has 100years on it. So is this a job for a fresh grad or trust administrator or family office guru, guidance counselor or nanny or domestic engineer or organizer?
That is of course if you even know who or all the beneficiaries are? Believe it or not, there are companies out there that specialize in helping trustees, executors and insurance companies find missing beneficiaries (as well as insurance coverage for trustees for the risk of not finding them). When trust draftsmen use wide terms such as "issue" or "kin" of a settlor as a class of beneficiaries instead of naming them outright (which of course has its potentially negative consequences too) then there exists the possibility of someone that there is a beneficiary and has a right to the trust fund that is unknown to the trustee. A contingent liability if you will. In Asia, there is still a generation that exists that openly have multiple wives (Example: Stanley Ho of Macau casino fame. Polygamy wasn't officially outlawed until the 1970s in Hong Kong and still permitted under Singapore Muslim law like most Islamic nations. Most nations in Asia didn't outlaw the practice until a generation or 2 ago) and of course some relations are secret or unoffical. Many settlors, never tell their children or wives or concubines/mistresses of the trust and keep it secret. Over time, the black sheep of the family run off, emigrants lose contact, disputes and hostilities mean that the "issue" that show up at your office may only be the tip of the iceberg. What do you do when Martin Guerre shows up at your office asking for his share of Papa Guerre's trust which you paid out already to his supposedly only son Frere Guerre? Job for a fresh grad, genealogist, trust administrator, private investigator or DNA specialist?
If you have been successful, then there comes a time when you need more headcount. That leads us to training and succession planning. It would not surprise me if training and "explaining the rationale of what they are doing" to be the number request or complaint from your workforce. Our industry has tended to treat people as "pieces of the puzzle", a station on the long assembly line. Few know where they and their division/team stand in the big picture. Unlike an assembly line worker who can see the fruits of the labour, very few trust people know the complete story/process behind the trust they work on and almost never know if they did a good job or not. Only when there is a problem do they get any recognition. Most are extremely curious as to what others across the room are doing. Can your Planner or Administrator train up the juniors? Some people are inherently lousy communicators/teachers. Some have no patience, some have self-preservation strategies, some have gaps in their knowledge or skill set. Just what are they teaching their sub-ordinates? Are you building a team with complimentary skills and knowledge or are you hiring and training clones? Do they spread their poison and jaded views are they inspiring the next generation of leaders? See this great blog on teams by MAGDALENA MELLER:
http://breakpointhr.blogspot.com/2008/01/teams-easier-said-then-done.html Where be your Captain, O Captain John Keating?
And of course, when it all goes bad, you will need litigation support and public relations gurus to salvage what's left of your reputation.
All be told, perhaps the most important hire of a trust company is finding the right hiring manager(s). Again, no place for fresh grads.
For all you hiring managers, Head of Fiduciary Services, MDs/CEOs/Head of WM/Head and other Head of Head of Trusts out there, consider what you are hiring. Our industry requires a lot of "task oriented" or "specialist skill" people. To fill our the multidisciplinary roles we have we require a vast range of skill and knowledge. We draw in people from many professions. Do you go for the specialist, the 1-trick pony or the generalist, can-do everything candidate? When you consider these people, are you cherry picking or just picking off the (cheap) easy prey of the old, sick, weak or wounded? Are you offering safe harbour to refugees from the West or targeting talent? Are you hiring only 2 and hoping they can cover the job of a third or do you go out and actually hire 3? Things like hope, projection, growing into a role, learning and development are risks you take when you only hire 2.
Yes, the degree of skill required differs from organisation to organisation, from structure to structure offered, to market place and market demands but somewhere along the line, you need to say quality before anything else. Aim for excellence, not competence. Stop hoping they can do the job and get someone who surely can do the job. This is no different than those long suffering supporters of the Football League (or bottom dwelling Premier League) teams as any observer of English football can tell you. Clubs never seem willing to spend to acquire the good players that can get the team promoted (or prevent the team from being relegated). Thus, starts a vicious cycle of less winning, less supporters, less revenue, less spending on players, hence you have less talent with the result being less winning. Hiring cheap is great but when you ask too much from people, it ultimately comes with risk. For football clubs, that means they risk remaining uncompetitive and perhaps bankruptcy, for you it means looming catastrophe.
To put a spin on a old phrase: A dollar saved today may mean no dollar tomorrow. It takes money to make money. Consider your payroll as insurance premiums against the risk of failure.
On the flip side, especially for those in Singapore, we all know how out-of-whack the market place had become. Occasionally see this happen in jurisdictions that suddenly become "hot". The market changes too rapidly and the increased demand forces up the compensation so that it surpasses the value of people and their skills. People here with 3-years experience are now Senior Managers or SVPs, and those with 5-yrs are Executive Directors with a US$150k+ package. Without totally disrespecting them, as some have talent and skill but most often they will pale in comparison with those with similar packages or title in other jurisdictions. Most are asked to (or expected to) run when they can barely walk. So unfortunately you are over-spending to keep up with the Joneses. There are no quick fixes or cheaper alternatives for structural distortions but from a quality perspective, but you would likely have a stronger organization if you tapped into "superior" foreign labour or outsourced part of the work to another centre. Altering the staffing pyramid may be part of the solution. In football terms, get some great forward/strikers and that (could) take pressure off your backfield, so overpay in one area can allow you underpay in another. Didn't your Strategic Planning guys tell you this was coming ? Where are your Change-the-Bank/Organisation people? Get me the Project Manager! Guess you failed to hire good people there too.
What skills or experience do you need? Glad you asked.....Let's break down a typical trustee operation. As a minimum you need 2 roles filled: a planner/designer and a administrator. Obviously it could 1 person, but as the volume, complexity and scope of the case increases, you could develop literally 100, specialist sub-roles.
The Planner/Designer - here is someone that has the technical know-how of how to apply the use of a trust to meet the client's needs. Often the face of the business. Consider a relatively simple question and often a trigger point for the "sale" of a trust: How does a trust help avoid probate? Any moron who can read could recite the answer from the Q&A section of your sales brochure/manual. Is that enough? What most people fail to recognise is that Q&As, manuals, even legal opinions are often condensed, distilled and gloss-overs of all the material things involved. When facing a sophisticated client or their knowledgeable advisor, the good Planner must know a multitude of things from testacy, heirship, probate, death taxes to estates to bank regulations on accounts of deceased persons to transfer of ownership of anything from real estate to Ming Dynasty vases. It really would take a lifetime of education and work experience to get a firm handle on things. Simply put: you need to know the rules before you can understand how to break them. It is somewhat ironic in that if the Planner is successful and puts you and others in a probate avoidance trust, then what would he really know about the probate process? Would you not wonder about a single marriage counselor?
In real life, probate is just one of the many icebergs the Planner must be able to navigate his client through, there are other icebergs like tax, spendthrift heirs, pickering partners, commercial reality, regulatory environment, etc., that affect the simplest of plans. If the Planner lacks knowledge or experience in width or depth of the issues, then the likelihood of a mis-sell or bad plan increases...exponentially. We all would love our Business Development people to go out and sell a hundred trusts a month, but how many of those trusts may blow up in your face down the road? Sometimes no business is better than bad business.
Of course, it becomes a daunting task to find people with all the necessary skills and expertise, as well fitting within your payroll budget, so you need to recognise where you have strengths, where you have weaknesses and have access to qualified help. Do you go for the gold plated or solid gold? For some roles, gold-plated is all you need. Unfortunately, it is far often that it is in hindsight and after the proverbial shit has hit the fan that you recognise that you should have went for solid gold intsead. Sometimes it is a simple as making a referral to a probate lawyer. Other times, it is hiring a in-house probate lawyer. Perhaps some business tie-in or sub-contracting?
Planners also need to know about trust instruments, that means trust deeds and trust law. A trust deed may contain some say 30 clauses or provisions. The Planner typically only works on about 5 of those clauses. Does that 20-something on the street trying to sign you up for the credit card know anything about the terms and conditions (that page of fine-print that you can't read without a microscope) of the card or do they just tell you about potential bonus points and reward gifts? Sometimes, Planners can get away with knowing a little as the need for a credit card, or the brand name of the issuing bank or simply reward gifts are enough to get people to sign up. Other times, the Planner need to know the T&C inside out as they will be challenged by a sophisticated buyer. Clearly most banks don't care about their front-line as evidenced by the number of young men and women they have on the streets, and that is because they know (or think they know) what their risk of failure is. It is an acceptable loss. Do you know what your risk is and can you cope with a failure?
Very few people actually draft trust deeds as most trustees "buy" their trust deeds from trust lawyers. But most trustees will be asked to "tailor" or amend parts of the trust deed to make it more suitable for some cause. Still, the Planner needs to know whether their trust deed will actually serve the purpose it was intended to. You will be surprised at how many times people have used the "wrong" or incompatible trust deed. Here, modern technology has made people complacent and even negligent.
No reads deeds anymore, they rely on the cover page and footers to identify it as being correct. It never occurs to them, nor feel it is their responsibility, to ensure the contents are correct. Today, most trustees have, sometimes nothing more than glorified data entry clerks, input names and addresses into the blank fields of templates and the document is generated by computer. I would be willing to bet you could replace any consecutive 19 words (so as not to affect spacing) with: "Nothwithstanding any other provision in this Deed the Trustee shall not be entitle to receive any form of remuneration." and it would go unnoticed. Then there are countless follies where people have made incomprehensible or unenforceable changes to the trust. There are cases where people have essentially converted trusts of one type, say irrevocable, to revocable by making ludicrous changes. Other times, the trust, or parts of it, become null and void because of incomplete thinking. The unexpected occur and you end up at a dead end. Typical failures often involve giving some power, duty or right to a third party, without successor rules, so when that person dies, those powers/duties/rights die with them. So do you trust your Planner or do you have some in-house counsel or do you go external?
If your Planner is not an expert, will he/she be able to comprehend what the experts tell them? Or will your Planner be able to give proper instructions to counsel? Many criticise lawyers or counsel for wanting to directly contact clients for instructions. Not only is it often required for KYC these days but it's mainly so they don't have to deal with babbling idiots that re-shape or mistake what the issues/instructions really are. Of course, there are those that misinterpret and misconstrue what counsel tells them. Then again, it may be counsel that steers you in the wrong direction. Look the the recent Canadian tax/trust case of Antle and "Justice Miller reached the “inevitable conclusion” that Mr. Antle “did not truly intend to settle shares in trust…He simply signed documents on the advice of his professional advisors with the expectation that the result would avoid tax in Canada” and “[H]e knew when he purported to settle the Trust that nothing could or would derail the steps in the strategy. This is not indicative of an intention to settle a discretionary trust." [see: http://www.mccarthy.ca/article_detail.aspx?id=4807]
Paperwork only gets you so far.
The Planner is also your front line and face of your business. They need to be able to "sell". Professionals like to think they are giving advisory, technical sales, or providing value-added service but whatever their approach, the bottom line is that they must convince people to sign on the dotted line. So who do you want for a Planner? Fresh grad? That aesthetically pleasing, smooth talker or a doom-n-gloom shark or Glengarry Glen Ross salesmen or marketing professional?
Now that the structure maybe finalised, there comes the fees. Your Planner and Administrator need to be able to negotiate and ultimately collect fees. There are those that write 6-figure checks without batting an eye. Perhaps it's saving face or they really don't care as they spend more on shoes than that or they think they got a bargain and want it settled before you change your mind. Others will fight you tooth and nail for every last cent. Some will play the 60-day credit game and drag payments until the minute you send the collection agency after them. So is this a job for a fresh grad, former WTO negotiator, debt collector or an experienced Planner/Administrator?
Once the "deal" is made, next comes the client on-boarding issues. Who does this? Could be our over-worked Planner or some specialist. Although Compliance is supposedly an external function, many operations have Compliance and KYC specialists sitting within the department to help with on-boarding issues. Still someone needs to get the passport copies and run due diligence checks. Is this clerical where you can slot in a junior clerk? Or is this an important function requiring a specialist that knows a 20-seater bar/restaurant doesn't normally make US$10m in a year? Or that understands that there are no widget factories in Labuan? Which reminds me, with the boom in compliance sector, there inevitably comes a bunch of poorly qualified compliance people. They may understand AML, audits and such, but how can they be of use when they have no idea what trusts are? How can the settlor not be the UBO they ask? Aren't bearer shares always dodgy? Bet you all the bearer instruments in my wallet that you've faced some utterly novice Compliance questions this past month. God help us all.
Next comes the transfer of assets to the trust. Who does this? Sometimes, it is also the Planner, sometimes the Administrator, sometimes some specialised unit, sometimes outside help. Depends on the assets. If your dealing with cash and securities then you need someone with banking knowledge. If you dealing with real estate than you need conveyancing people. If you're dealing with company shares then you need company secretarial/share registry people. Many trustees often create teams to handle specific items. Lends to efficiency and expertise. When you have specialised teams, a danger is that they become less in-tune with the trust. To the person in bank, opening tens of accounts a day, it almost becomes habit that the UBO is the account holder. Will they put the trust company as UBO on trust account opening form? Are your conveyancing people cognizant of the quirky rules that exists regarding trusts over land that exist in some jurisdictions? Although hard to find, there are many cases involving incomplete/imperfect/erroneous asset transfers to trusts. Most are very funny.....but not if it happens to your trust. Again I refer to the Antle case where the courts found that (despite probably adequate paperwork) there was no effective transfer of assets and the required certainty of subject matter was absent. Translation: no trust existed. Oops. So do you go with a fresh grad, someone with a year or 2 of experience or a designated professional?
Now that everything is in place, we embark on hopefully many years of recurring trust administration revenue. Enter the Administrator. Despite the unglamourous title, look closer at what this person does. They could be the primary relationship holder. They need to ensure the trust and its underlying vehicles and assets are properly registered, maintained, insured, performing, filings are made, fees paid, vendors are retained, records are kept, accounts are prepared, make changes where required, as well has dealing with requests from beneficiaries and settlors.....literally another million icebergs. What you really have is a CEO of an enterprise. It could be nothing more than a simple bank deposit or it could be the top of a multinational business empire.
Firstly, does the Administrator know the trust itself? Afterall, the trust deed and relevant trust law govern what can and cannot be done with the trust. Of the 30 clauses in the trust deed in my previous example, the Administrator typically deals with say 10 of those clauses. Another 3-to-5 in unusual circumstances. It should not surprise you that a large number of Administrators really do not understand the clauses they are invoking or relying upon. After all, it is rather technical legal stuff and how many have formal legal training? Do you know what the Deed of Mutual Covenant says about the what you can and cannot do with the flat your living in? Every so often, someone doesn't check the DMC and you end up making some "illegal" renovation or engage in some "illegal" usage such as running your "financial consulting" business from your spare room. Failure to follow the rules laid out in the trust deed or relevant trust law is usually indefensible negligence.
Many Administrators carry out duties based not on the rules but on what they've done in the past or some procedural manual. Most documentation prepared by Administrators are form documents, where they only have to fill out certain holes/blanks. This has lead to a generation of Admin people who understand how to fill-in-the-blank and not knowing the "whys?" or the implications. This of course means that every so often, there will a breach of trust somewhere meaning the Administrator exceeded his authority, overstepped some boundary or failed to exert some power. Not all breaches are fatal, most go unnoticed, some are repaired or resolved to everyone's satisfaction but some will bring costly litigation and reputation damage as well as topple some smaller/weaker trustee companies. So do you want a fresh grad or someone who can read and understand trust law and regulations and trust instruments?
Notice that of the 30 clauses in the trust deed, only about half are regularly used or referred to. What about the other remaining clauses? No one except the lawyers understands them. No one except the lawyers knows how or when to apply them. No one bothers to even read them except when it comes time for litigation.
Perhaps most mundane (and sometimes forgotten altogether), but someone needs to record the trust's activities. Often this is no more than a minute in the Trustees' Minute Book: "We resolve to pay Junior a distribution of $2M" or "We resolve to purchase 100 units of Bernie's Ponzi Fund". Not much skill involved right? Any first year Company Secretarial student could handle that right? 80% of time yes. 20% of the time it will take great insight and deft to put on paper the right amount of background and detail. What is the right amount? The right amount is the amount that will satisfy the courts of your lack of negligence, wrong doing or malfeasance. Say Junior had a brother who was also a beneficiary. He could sue you for breach of trust to him. How will you justify the payment to Junior? Any beneficiary could sue you for investment losses. In 3months, or perhaps 3years, maybe 20years time, you may need to explain why you purchased Bernie's fund. Do you have a reasonable explanation? Do you have the investment adviser's recommendation on file? One of the first things litigators will look at your minute book and other pieces of paper/email evidencing your deliberations and determinations. Why you did what you did may be more important in the judge's decision than what you did or the actual outcome of that action. Some mothers tell you to wear clean underwear as one day someone might see them. I tell you to prepare good minutes/records, as one day someone might see them. By the way, there is also a wrong amount of information. Recording that the settlor instructed you to purchase the funds may prove to be more disastrous than the monetary loss itself. I earlier wrote about a lawyer who detailed her bank's tax evasion in her file notes so too much detail may not be so good. The truth? Your defense attorney can't handle the truth. So, do you want a fresh grad, a company secretarial officer or a trust administrator or a former counter-intelligence operative? Great advice in the "Key Lessons" section from Robert MacRae, a partner of Jersey's Carey Olsen and participant in one of the most complex, lengthy and costly trust cases in recent times, the Alhamrani case involving JP Morgan [2007 JLR 44]: http://www.international-adviser.com/article/jerseys-epic-alhamrani-case-lever-arch-files-sheikhs-siblings-surrejoindersand-legal-precedents-1
Also tedious is keeping accounts. Take note that trust accounting is a specialty. Pick up any accounting textbook and there may be only 1 chapter out of 20 dealing with trusts. 90% of the time that distinction isn't very important. 10% of the time that could be the difference in a lawsuit or basis for making a wrong determination. What do you need to keep account of? One time deposit? Some PIC? 30000 trading transactions involving 12 currencies, valuations plus rental and tax from the house in Kensington, the sale of the condo in Miami? 12 Bentleys and their depreciation? Consolidation of the 30 companies and listed Holding Company that the trust owns 6% of? The interest payments on secured credit line the bank gave you to purchase their PIGS linked fund? What's the contingent liability when the share price falls below the strike price on that accumulator? Do the accounts need to comply with some foreign accounting standard like US GAAP? Are you sure that's capital and not income? Do you want a fresh grad, book-keeper, junior accountant, Chartered Accountant or trust administrator?
If the trust has cash/securities, the Administrator, in the most unadulterated scenario, has to decide where to bank, the type of accounts to open, the type of deposit/currencies to hold, the investments to make, when to buy, when to sell, when to take profit, when to stop loss. Do they understand structured products as well, if not better, than the banker/Adviser promoting them? What of the more recent socially conscious decisions? Is this investment green? Sharia compliant? So do you want a fresh grad, a trust administrator or a banker or an investment specialist or Islamic council member or Eco economist?
When you get big enough, then is there a need for an Operations person? A Treasury person? A Trading Desk? A full blown investment team? Obviously no places for fresh grads.
In a more realistic scenario, the Administrator is also given a mandate to maximize fee income and generate more business from existing trusts. That means they need to have a handle on the countless wealth products the bank offers and be persuasive salesmen too. Lest we forget they must convince you to allow them to borrow heavily on the trust funds whether warranted or prudent or not because banks make a killing on credit spreads. Leverage or die try trying. Fresh grad or Credit guy? Banker or IFA?
If the trust has property, then the Administrator, in the most unadulterated scenario, has to decide when and if to let it out, signing leases, collecting rent, paying the insurance, selling when the market is good, paying landscaping, etc... Do you want a fresh grad, a trust administrator or a property agent?
If the trust owns a private company, the Administrator, in the most unadulterated scenario, should be as any interested owner be monitoring the companies activities with a view to maximize shareholder wealth, firing incompetent directors, approving chairman salaries, attending the AGM, considering divesting, IPO, etc. Do you want a fresh grad, trust administrator, private equity expert, Sam Walton or David Webb?
Even if the trust and all its parties are strictly local, the Administrator needs to be cognizant of requirements and changes in the tax and regulatory environment. If gets really crazy when the trust and its parties or assets touch upon several jurisdictions. Where there is ownership of a listed company shares of significance (meaning exceeding some threshold such as 5% as often the case in many small, family controlled/closely held listed companies in Asia) there comes things like transaction reporting, corporate actions, etc., which the Trustee has to deal with. Sometimes, failure here means fines, sanctions and although remote, jail time. Did your trust company file the required forms with the financial regulators? Did the trust under your administration really qualify for some tax exemption? Other times, the settlor, an unknown beneficiary or a beneficiary you don't know very well could affect the tax status of the trust. So do you want a fresh grad, a trust administrator or a tax expert, compliance expert or a regulatory expert?
Since the trust has beneficiaries and often a meddling settlor, antagonist Protectors, territorial bankers, scheming lawyers, the Administrator has to deal with all these parties. Do you want a fresh grad, a socialite, a trust administrator, a family counselor/governance specialist, a ADR arbitrator or UN peace negotiator?
The purpose of many trusts, was to provide for family members before and especially after the incapacity/demise of the head of the family/bread winner/settlor. So now you need someone capable of caring for the finances of the family. This could involve a million different things from paying tuition, medical and dental bills and insurance, life insurance, kidnap & ransom insurance, security details, reimbursing guardians, paying rent, buying some accommodation or buying laptops, cars to vacations in the tropics. Some families like to set targets for beneficiaries, like they get $1M for graduating from university, $10M once they hit 35years of age, etc..Some have dates like a payment on each birthday. So now you need to get audit evidence a well have a calendar that has 100years on it. So is this a job for a fresh grad or trust administrator or family office guru, guidance counselor or nanny or domestic engineer or organizer?
That is of course if you even know who or all the beneficiaries are? Believe it or not, there are companies out there that specialize in helping trustees, executors and insurance companies find missing beneficiaries (as well as insurance coverage for trustees for the risk of not finding them). When trust draftsmen use wide terms such as "issue" or "kin" of a settlor as a class of beneficiaries instead of naming them outright (which of course has its potentially negative consequences too) then there exists the possibility of someone that there is a beneficiary and has a right to the trust fund that is unknown to the trustee. A contingent liability if you will. In Asia, there is still a generation that exists that openly have multiple wives (Example: Stanley Ho of Macau casino fame. Polygamy wasn't officially outlawed until the 1970s in Hong Kong and still permitted under Singapore Muslim law like most Islamic nations. Most nations in Asia didn't outlaw the practice until a generation or 2 ago) and of course some relations are secret or unoffical. Many settlors, never tell their children or wives or concubines/mistresses of the trust and keep it secret. Over time, the black sheep of the family run off, emigrants lose contact, disputes and hostilities mean that the "issue" that show up at your office may only be the tip of the iceberg. What do you do when Martin Guerre shows up at your office asking for his share of Papa Guerre's trust which you paid out already to his supposedly only son Frere Guerre? Job for a fresh grad, genealogist, trust administrator, private investigator or DNA specialist?
If you have been successful, then there comes a time when you need more headcount. That leads us to training and succession planning. It would not surprise me if training and "explaining the rationale of what they are doing" to be the number request or complaint from your workforce. Our industry has tended to treat people as "pieces of the puzzle", a station on the long assembly line. Few know where they and their division/team stand in the big picture. Unlike an assembly line worker who can see the fruits of the labour, very few trust people know the complete story/process behind the trust they work on and almost never know if they did a good job or not. Only when there is a problem do they get any recognition. Most are extremely curious as to what others across the room are doing. Can your Planner or Administrator train up the juniors? Some people are inherently lousy communicators/teachers. Some have no patience, some have self-preservation strategies, some have gaps in their knowledge or skill set. Just what are they teaching their sub-ordinates? Are you building a team with complimentary skills and knowledge or are you hiring and training clones? Do they spread their poison and jaded views are they inspiring the next generation of leaders? See this great blog on teams by MAGDALENA MELLER:
http://breakpointhr.blogspot.com/2008/01/teams-easier-said-then-done.html Where be your Captain, O Captain John Keating?
And of course, when it all goes bad, you will need litigation support and public relations gurus to salvage what's left of your reputation.
All be told, perhaps the most important hire of a trust company is finding the right hiring manager(s). Again, no place for fresh grads.
For all you hiring managers, Head of Fiduciary Services, MDs/CEOs/Head of WM/Head and other Head of Head of Trusts out there, consider what you are hiring. Our industry requires a lot of "task oriented" or "specialist skill" people. To fill our the multidisciplinary roles we have we require a vast range of skill and knowledge. We draw in people from many professions. Do you go for the specialist, the 1-trick pony or the generalist, can-do everything candidate? When you consider these people, are you cherry picking or just picking off the (cheap) easy prey of the old, sick, weak or wounded? Are you offering safe harbour to refugees from the West or targeting talent? Are you hiring only 2 and hoping they can cover the job of a third or do you go out and actually hire 3? Things like hope, projection, growing into a role, learning and development are risks you take when you only hire 2.
Yes, the degree of skill required differs from organisation to organisation, from structure to structure offered, to market place and market demands but somewhere along the line, you need to say quality before anything else. Aim for excellence, not competence. Stop hoping they can do the job and get someone who surely can do the job. This is no different than those long suffering supporters of the Football League (or bottom dwelling Premier League) teams as any observer of English football can tell you. Clubs never seem willing to spend to acquire the good players that can get the team promoted (or prevent the team from being relegated). Thus, starts a vicious cycle of less winning, less supporters, less revenue, less spending on players, hence you have less talent with the result being less winning. Hiring cheap is great but when you ask too much from people, it ultimately comes with risk. For football clubs, that means they risk remaining uncompetitive and perhaps bankruptcy, for you it means looming catastrophe.
To put a spin on a old phrase: A dollar saved today may mean no dollar tomorrow. It takes money to make money. Consider your payroll as insurance premiums against the risk of failure.
On the flip side, especially for those in Singapore, we all know how out-of-whack the market place had become. Occasionally see this happen in jurisdictions that suddenly become "hot". The market changes too rapidly and the increased demand forces up the compensation so that it surpasses the value of people and their skills. People here with 3-years experience are now Senior Managers or SVPs, and those with 5-yrs are Executive Directors with a US$150k+ package. Without totally disrespecting them, as some have talent and skill but most often they will pale in comparison with those with similar packages or title in other jurisdictions. Most are asked to (or expected to) run when they can barely walk. So unfortunately you are over-spending to keep up with the Joneses. There are no quick fixes or cheaper alternatives for structural distortions but from a quality perspective, but you would likely have a stronger organization if you tapped into "superior" foreign labour or outsourced part of the work to another centre. Altering the staffing pyramid may be part of the solution. In football terms, get some great forward/strikers and that (could) take pressure off your backfield, so overpay in one area can allow you underpay in another. Didn't your Strategic Planning guys tell you this was coming ? Where are your Change-the-Bank/Organisation people? Get me the Project Manager! Guess you failed to hire good people there too.
Thursday, April 15, 2010
How Dumb Can You Be?
While Australians are not known for their superior intellect, we will soon find out just how stupid some Australians tax evaders can be.
In the latest Government Gazette (GN 14 - http://www.ag.gov.au/portal/govgazonline.nsf/publications?OpenView), the ATO (Australian Taxation Office) will be requesting data on persons with overseas accounts from virtually every bank, credit card company and clearing house operating in Australia.
If you had something to hide and were dumb enough to go to your local bank to open up an overseas account then you will be caught. Remember the Golden Rule: when you go offshore, do it with somebody that doesn't operate in your home country and never mingle transactions between onshore and offshore providers.
Also in the same Gazette, the ATO will be gathering data on anyone who purchased a car worth more than A$10,000. Considering a "pedestrian" car like a Honda Civic costs like A$20K, that database will be on virtually every Aussie car owner. If your reported income seems disproportionate to the value of your Mercedes or Ferrari then expect to be investigated. You may want to consider renting or "structuring" your next vehicle purchase. You are what you drive.
In the latest Government Gazette (GN 14 - http://www.ag.gov.au/portal/govgazonline.nsf/publications?OpenView), the ATO (Australian Taxation Office) will be requesting data on persons with overseas accounts from virtually every bank, credit card company and clearing house operating in Australia.
If you had something to hide and were dumb enough to go to your local bank to open up an overseas account then you will be caught. Remember the Golden Rule: when you go offshore, do it with somebody that doesn't operate in your home country and never mingle transactions between onshore and offshore providers.
Also in the same Gazette, the ATO will be gathering data on anyone who purchased a car worth more than A$10,000. Considering a "pedestrian" car like a Honda Civic costs like A$20K, that database will be on virtually every Aussie car owner. If your reported income seems disproportionate to the value of your Mercedes or Ferrari then expect to be investigated. You may want to consider renting or "structuring" your next vehicle purchase. You are what you drive.
Monday, April 12, 2010
Sheila Needs Money? Let Me Count the Ways
Yes, the concept of trusts is odd. As a trustee, you own something but you don't. As a beneficiary you don't own anything but you do.
If there is anything more "esoteric" and more complex than trusts, then it's the taxation of trusts.
Try grappling the "final" result of the Australian tax case of Bamford: http://sites.thomsonreuters.com.au/tainsight/2010/04/12/the-bamford-case-initial-reactions-from-the-tax-industry/
Now for those with trusts subject to tax down under (whether you know it or not), have options. You can cook the books a number of ways to obtain the best tax result. "According to Peter Gell of law firm Hunt & Hunt, this judgement implies that family discretionary trust deeds should now be reviewed. The trustee should be allowed to choose income for distribution either on a trust law basis, accounting basis or taxation basis, depending on the outcome desired by the settlor. Usually this will mean grounding a present entitlement to a beneficiary, to ensure that the trust income is not taxed at penal trustee rates." Three versions of reality.
If you don't have "qualified" TRUST accountants on your team, you may want to re-visit that situation. Hate to see some Sheila sue you for failing to properly present all the options available before you made some distribution.
If there is anything more "esoteric" and more complex than trusts, then it's the taxation of trusts.
Try grappling the "final" result of the Australian tax case of Bamford: http://sites.thomsonreuters.com.au/tainsight/2010/04/12/the-bamford-case-initial-reactions-from-the-tax-industry/
Now for those with trusts subject to tax down under (whether you know it or not), have options. You can cook the books a number of ways to obtain the best tax result. "According to Peter Gell of law firm Hunt & Hunt, this judgement implies that family discretionary trust deeds should now be reviewed. The trustee should be allowed to choose income for distribution either on a trust law basis, accounting basis or taxation basis, depending on the outcome desired by the settlor. Usually this will mean grounding a present entitlement to a beneficiary, to ensure that the trust income is not taxed at penal trustee rates." Three versions of reality.
If you don't have "qualified" TRUST accountants on your team, you may want to re-visit that situation. Hate to see some Sheila sue you for failing to properly present all the options available before you made some distribution.
Saturday, April 3, 2010
Fail To Understand the Market Then You Shall Fail
An amusing article: http://www.businesstimes.com.sg/sub/news/story/0,4574,379551,00.html? (a re-post of a Reuters article?)
Basically telling the woes of the Channel Islands and how they are eying the Asian market:
"Both Jersey and Guernsey are responding by seeking new business in the fast-growing economies of Asia.
But the push to market the financial services of two micro states to the east is proving tough. Channel Island specialities such as trusts - assets held for protection by a separate legal entity - are difficult to sell to Asians like the Chinese.
'Trusts are based on a fairly esoteric branch of British law. You have to question how comfortable a first generation Beijing entrepreneur will be with the idea of handing legal title of his assets to a foreigner on an island in the Channel,' said Catherine Tillotson, head of research at Scorpio Partnership, a wealth management consultancy.
Alan Chick, a Guernsey trust professional, agrees. 'It's very difficult to persuade the Chinese to actually part with their funds. The Chinese don't understand (the trust) principle,' said Mr Chick, chairman of Guernsey-based Richmond Fiduciary Group in a phone interview from Hong Kong."
This comes off a little like a bunch of gaijin/gweilo bitching. It's the customer's fault!
Why the hell would any Asian (or persons from civil law jurisdictions) understand trusts? You have had hundred of years of selling the concept and your French and German neighbours haven't exactly bought in have they? Make a choice to go educate or sit back and watch the money flow elsewhere.
The second part is when most of the world is beckoning, why do business with the Channel Islands? Why do business with Richmond? Richmond, to me, is just a website that anyone could put up on the internet for $200. What or where is your competitive advantage?
My very livelihood (and literally a thousand others in the region and around the world) depends on me convincing Asians to settle trusts and entrust me and my organisation with their wealth. Plenty of Arabs, Argentineans, Japanese, Indonesians and Chinese hand over vast sums of money to foreigners to put into trusts - almost on a daily basis! Are these people stupid or gullible? Well some are but most are not.
Plenty of people are making a damm good living providing trust services to Asians.
So it's pretty simple: if the firms from the CI are not competitive then it's nobody's fault but your own.
Basically telling the woes of the Channel Islands and how they are eying the Asian market:
"Both Jersey and Guernsey are responding by seeking new business in the fast-growing economies of Asia.
But the push to market the financial services of two micro states to the east is proving tough. Channel Island specialities such as trusts - assets held for protection by a separate legal entity - are difficult to sell to Asians like the Chinese.
'Trusts are based on a fairly esoteric branch of British law. You have to question how comfortable a first generation Beijing entrepreneur will be with the idea of handing legal title of his assets to a foreigner on an island in the Channel,' said Catherine Tillotson, head of research at Scorpio Partnership, a wealth management consultancy.
Alan Chick, a Guernsey trust professional, agrees. 'It's very difficult to persuade the Chinese to actually part with their funds. The Chinese don't understand (the trust) principle,' said Mr Chick, chairman of Guernsey-based Richmond Fiduciary Group in a phone interview from Hong Kong."
This comes off a little like a bunch of gaijin/gweilo bitching. It's the customer's fault!
Why the hell would any Asian (or persons from civil law jurisdictions) understand trusts? You have had hundred of years of selling the concept and your French and German neighbours haven't exactly bought in have they? Make a choice to go educate or sit back and watch the money flow elsewhere.
The second part is when most of the world is beckoning, why do business with the Channel Islands? Why do business with Richmond? Richmond, to me, is just a website that anyone could put up on the internet for $200. What or where is your competitive advantage?
My very livelihood (and literally a thousand others in the region and around the world) depends on me convincing Asians to settle trusts and entrust me and my organisation with their wealth. Plenty of Arabs, Argentineans, Japanese, Indonesians and Chinese hand over vast sums of money to foreigners to put into trusts - almost on a daily basis! Are these people stupid or gullible? Well some are but most are not.
Plenty of people are making a damm good living providing trust services to Asians.
So it's pretty simple: if the firms from the CI are not competitive then it's nobody's fault but your own.
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