Managing Wealth in Transforming Horizons

For over four decades, PwC Cyprus has supported UHNW/HNW individuals, families, entrepreneurs and family offices in managing their private wealth through Cyprus and their global structures, in collaboration with its global network. PwC has a dedicated Private Wealth Services team that focuses on advising clients on crucial areas such as setting up and running a family office, ownership and leadership succession planning, next-gen participation, optimisation of technology for wealth monitoring, and digitalising operations/processes.

Servicing clients worldwide, including UHNWIs, HNWIs and emerging entrepreneurs, we have identified common priorities and concerns in the wealth management space, such as the divergence from traditional models of wealth management and asset and jurisdictional diversification.

Moreover, the increased need for family offices and the active involvement of family members and trusted individuals in wealth and family business management has resulted in increased investment in recruiting senior specialised staff or relying on external advisors, developing the next-gen and adopting niche technology.

Finally, mobility is leading to the establishment of additional family office bases in jurisdictions such as Cyprus, with geo-political stability or better tax efficiencies, business opportunities and lifestyle options.

The right time to set up a family office and its key functions

The decision to set up a dedicated family office, to transition from an outsourced multi-family office to an embedded one, or to establish a fully-fledged single family office is subjective and must be aligned with each family’s circumstances. Key triggering elements include increased wealth size and complexity, multiple jurisdictions of assets and family, complex and increased risks requiring planning, and the need for elevated, transparent, and complex corporate governance with committees and supervisory bodies.

Family offices vary in size, required functions, and jurisdictions, as they are unique to each family. Typical family office functions include legal, accounting/reporting, HR, compliance, technology, investments and concierge services.

At PwC, we utilise our Global Family Office Diagnostic to assess important areas such as compliance, governance, succession planning and strategy, in line with global best practices for family offices. This helps identify areas that require further development or action.

Typical family office structures

Trusts, companies (such as those limited by guarantee), alternative investment funds and foundations are commonly used vehicles for family offices. The choice of structure depends on the family’s existing and future needs and objectives. Trusts are suitable for asset protection and to design bespoke ownership succession plans, while funds offer advantages for co-investment with external parties.

PwC takes a staged approach, leveraging our expert lawyers, tax advisers, human resource specialists, organisational structure specialists and private wealth services team. We work closely with clients to identify their purpose, needs and objectives, to formulate a strategy, analyse legal and regulatory effects, asset protection measures, succession and tax planning considerations, operational requirements and the desired involvement of family members. Finally, we establish the necessary corporate framework.

Active monitoring and adjustment of the structure is equally important as circumstances change.

The illustration below presents a sample structure:

Cyprus as a preferred jurisdiction for family offices

In recent years, we have supported owners of large global tech companies with significant operations and staff in Cyprus in setting up their core or additional family offices. HNWIs have also relocated part of their family office teams to Cyprus.

Entrepreneurs, family office executives, etc., are attracted by Cyprus’ cosmopolitan and safe environment, its excellent educational and health facilities, EU membership, English-based legal system, socio-economic stability, strategic location, wide array of corporate and personal tax incentives, business-friendly migration regime, and options for family office, succession planning and asset protection structures (such as the Cyprus International Trust, Cyprus Funds, Cyprus CLGs, etc.). Additionally, high-quality professional services at competitive rates compared to other EU jurisdictions contribute to Cyprus’ appeal.

Over the years, PwC has amassed vast experience in setting up and supporting family offices, both in Cyprus and globally. We provide operational support in areas such as corporate and tax compliance across relevant jurisdictions, the design and implementation of state-of-the-art digital dashboards for reporting, cybersecurity testing and upgrades, and banking, support for large and complex transactions, including project management, and specialised advisory services. We work seamlessly with our network firms in relevant jurisdictions, with an outreach of more than 150 countries.

Key takeaways for effective ownership succession planning and next-gen involvement

Starting preparation for succession early is an important strategy to ensure a smooth wealth transfer. This allows the patriarch to have more influence on achieving his wishes and objectives, thus avoiding forced transfers.

Family offices should also plan for the preparation of the next generation from a young age, involving them in understanding the family wealth creation process, participating in committees and taking on more active roles after completing their university studies. PwC offers annual global programmes with top business schools such as INSEAD, Columbia and IND for the next generation, providing unparalleled development experiences.

The sooner succession planning begins, the smoother the transition will be, ensuring that the next generation will be strong enough in time to ‘fight off’ any potential challenges.

‘Popular’ family governance mechanisms

PwC works with clients to help them formulate or revisit their wealth strategy and values, engaging members of different generations to ensure alignment and cohesion. We also assist families in creating their family constitution or charter, which establishes ‘rules’ for important family processes such as employment and reward of family members and governance structures.

Use of technology by family offices

Cybersecurity and the digitalisation of family office processes remains a top agenda item. There is also a growing interest in moving beyond simple wealth consolidation through spreadsheets towards state-of-the-art platforms that facilitate consolidation and monitoring of complex wealth and families at the click of a button. Such platforms enable access to real-time data and facilitate the data-driven decision process. At PwC, we support clients’ transition to using such tools. Through our Wealth Compass service, we provide clients with high data quality control and efficient maintenance of their entire estate through automated processes, procedures and monitoring. We anticipate increased activities in generative AI technologies for family offices, both in revamping data collection processes and providing support in investment management.

By Tony Hadjiloucas, Partner, International Clients Services, Head of Cyprus Headquartering,

Phryni Yiakoumetti Mina, Director, Relocation Services, Private Wealth Services, and

Natalie Vassiliou Moustaka, Senior Manager, Legal Advisory, PwC Cyprus

(This article first appeared in the 2024 edition of The Cyprus Journal of Wealth Management, commissioned by Eurobank Cyprus and published by IMH. Click here to view the article. Click here to view the entire magazine online.)