Wealthy Families Eyeing Malta as a Family Office Location
Family offices have been traditionally used by wealthy families in order to have flexibility and privacy in terms of dealing with their own investments. A closer look shows that nowadays more and more families are considering adopting the model and it is indeed a global trend that has developed over the last few years. Wealth management and succession plans are being reconsidered to better prepare against future uncertainty.
Why Malta as a Family Office?
Since before the pandemic, Malta has been a favourite location attracting not only professionals in IT, aviation, financial services and shipping but also family principals and family offices to make this country their base. Malta is a jurisdiction that because of its climate and lifestyle appeals to families who would then establish a Malta family office as party of their migration plans.
The main thrust for family offices nowadays is that of looking at diversification in terms of what and where they base their investments leading to a search for the most effective jurisdiction. Malta being an EU country is becoming more and more sought after by non-EU nationals to base themselves in, offering a central location from which to manage their EU asset base.
Advantages of Malta as a Family Office
A Malta family office is able to enjoy the following:
- A legal and regulatory framework that responds to the changing financial markets,
- Estate and succession planning rules that are clear and that allow for various precautions to be put in place by the family for the protection of their family’s wealth,
- State of the art office facilities,
- Regulated lawyers, tax advisors, trustees and insurers,
- Good technology servicing support system with service providers who are at the forefront of technological advancements,
- Pro-business environment,
- Certainty in terms of tax legislation,
- Political and economic stability,
- Favourable lifestyle,
- Well connected to the major European cities,
- Very advanced healthcare system.
Types of Malta Family Offices
There are mainly two types of family offices: single family office or multi family office.
Malta Single Family Office
The first is a Malta single family office, which provides wealth management services similar to what private banks offer but limited to one family. This is a very structured organisation that would reflect the requirements and preferences of the family setting it up. A Malta single- family office has no requirement for a minimum amount of assets under management and neither does it have to obtain a licence in order to be able to invest in financial instruments. This is because a Malta family office would not be managing funds for third parties but only own funds.
If the Malta family office chooses to set itself up as a Malta private fund it can avail itself of a simpler authorisation process by the Malta Financial Services Authority. In such cases the Authority limits the amount of information required on the persons involved and does not assess the competence of the managers of the fund. This fund also commonly referred to as a Malta family and friends fund can have up to fifteen individual investors. The participants need to be close friends or relatives and the scheme should not qualify as a Malta professional investor fund.
Malta Multi-Family Office
The second type is a Malta multi-family office, providing the same services but extending these to various families. A Malta multi-family office is typically set-up as or incorporates in it a licensed or registered fund management company. The number of investment professionals here will depend on the value of the asset base and the number of families that have engaged with it.
What this Means for You - Considerations for the Set Up or Relocation of a Family Office
A number of considerations must be made before setting up or relocating a family office. These could be categorised into three aspects: risk control, financial control and re-prioritisation of the family needs.
Risk Control
The minimisation of risk is a topic that all setups have to deal with whether it is in the family environment or in the business environment. Management of risks which cannot be avoided is also key for the family to be able to carry out their vision and succeed over multiple generations.
Financial Control
In terms of the assessment of financial control together with their advisors the family should consider their current investment strategies and their asset spread. Costs need to be looked at with the aim of controlling these in a world where returns are looking more endangered and unpredictable. Whilst traditionally families were advised of the risk of future generations tampering with the wealth built by their ancestors and the risk of that being lost with the introduction of the second and third generations in the decision-making processes, now families are at risk of losing their wealth now because of external forces. Inflation cost should be one of the main factors under consideration.
Re-Prioritisation of the Family Needs
The pandemic has shown us that health threats can be very sudden and devastating and families have realised that preparing the next generation to take over is an ever pressing need that should be dealt with sooner rather than later. Heirs need to be trained not only in the family investment strategies but also in how to deal with major threats such as a pandemic or a war. Having access to global deals is a reality that the next generation needs to be geared up because it can pose an opportunity as much as a threat.
A family vision is at the core of leading the family office into the right direction. Having a strategic plan with goals in place would feed the achievable to the different individuals involved. The family members must be in the know of all the details including cost to income ratios, growth rates and the likelihood of new risks emerging, their likely impact and how these can be mitigated. The choice of jurisdiction and advisor is at the centre of all this and has an inevitable impact on the success of the family office.
Wealthy Families Eyeing Malta as a Family Office Location
Family offices have been traditionally used by wealthy families in order to have flexibility and privacy in terms of dealing with their own investments. A closer look shows that nowadays more and more families are considering adopting the model and it is indeed a global trend that has developed over the last few years. Wealth management and succession plans are being reconsidered to better prepare against future uncertainty.
Why Malta as a Family Office?
Since before the pandemic, Malta has been a favourite location attracting not only professionals in IT, aviation, financial services and shipping but also family principals and family offices to make this country their base. Malta is a jurisdiction that because of its climate and lifestyle appeals to families who would then establish a Malta family office as party of their migration plans.
The main thrust for family offices nowadays is that of looking at diversification in terms of what and where they base their investments leading to a search for the most effective jurisdiction. Malta being an EU country is becoming more and more sought after by non-EU nationals to base themselves in, offering a central location from which to manage their EU asset base.
Advantages of Malta as a Family Office
A Malta family office is able to enjoy the following:
- A legal and regulatory framework that responds to the changing financial markets,
- Estate and succession planning rules that are clear and that allow for various precautions to be put in place by the family for the protection of their family’s wealth,
- State of the art office facilities,
- Regulated lawyers, tax advisors, trustees and insurers,
- Good technology servicing support system with service providers who are at the forefront of technological advancements,
- Pro-business environment,
- Certainty in terms of tax legislation,
- Political and economic stability,
- Favourable lifestyle,
- Well connected to the major European cities,
- Very advanced healthcare system.
Types of Malta Family Offices
There are mainly two types of family offices: single family office or multi family office.
Malta Single Family Office
The first is a Malta single family office, which provides wealth management services similar to what private banks offer but limited to one family. This is a very structured organisation that would reflect the requirements and preferences of the family setting it up. A Malta single- family office has no requirement for a minimum amount of assets under management and neither does it have to obtain a licence in order to be able to invest in financial instruments. This is because a Malta family office would not be managing funds for third parties but only own funds.
If the Malta family office chooses to set itself up as a Malta private fund it can avail itself of a simpler authorisation process by the Malta Financial Services Authority. In such cases the Authority limits the amount of information required on the persons involved and does not assess the competence of the managers of the fund. This fund also commonly referred to as a Malta family and friends fund can have up to fifteen individual investors. The participants need to be close friends or relatives and the scheme should not qualify as a Malta professional investor fund.
Malta Multi-Family Office
The second type is a Malta multi-family office, providing the same services but extending these to various families. A Malta multi-family office is typically set-up as or incorporates in it a licensed or registered fund management company. The number of investment professionals here will depend on the value of the asset base and the number of families that have engaged with it.
What this Means for You - Considerations for the Set Up or Relocation of a Family Office
A number of considerations must be made before setting up or relocating a family office. These could be categorised into three aspects: risk control, financial control and re-prioritisation of the family needs.
Risk Control
The minimisation of risk is a topic that all setups have to deal with whether it is in the family environment or in the business environment. Management of risks which cannot be avoided is also key for the family to be able to carry out their vision and succeed over multiple generations.
Financial Control
In terms of the assessment of financial control together with their advisors the family should consider their current investment strategies and their asset spread. Costs need to be looked at with the aim of controlling these in a world where returns are looking more endangered and unpredictable. Whilst traditionally families were advised of the risk of future generations tampering with the wealth built by their ancestors and the risk of that being lost with the introduction of the second and third generations in the decision-making processes, now families are at risk of losing their wealth now because of external forces. Inflation cost should be one of the main factors under consideration.
Re-Prioritisation of the Family Needs
The pandemic has shown us that health threats can be very sudden and devastating and families have realised that preparing the next generation to take over is an ever pressing need that should be dealt with sooner rather than later. Heirs need to be trained not only in the family investment strategies but also in how to deal with major threats such as a pandemic or a war. Having access to global deals is a reality that the next generation needs to be geared up because it can pose an opportunity as much as a threat.
A family vision is at the core of leading the family office into the right direction. Having a strategic plan with goals in place would feed the achievable to the different individuals involved. The family members must be in the know of all the details including cost to income ratios, growth rates and the likelihood of new risks emerging, their likely impact and how these can be mitigated. The choice of jurisdiction and advisor is at the centre of all this and has an inevitable impact on the success of the family office.