J.P. Morgan’s Goals-Based Planning: Preserving The Legacy Of UHNW Families

Clearly-defined objectives ensure the decision-making process serves the primary intent of your wealth, providing a route map for future action.

Wealth. It’s a privilege. And it’s a responsibility that comes with its challenges. Deciding where your personal priority lies with regard to its use may just be about the most critical undertaking for every ultra-high net worth (UHNW) family across Asia and beyond. This is particularly the case when it comes to determining how wealth should be managed during an individual’s lifetime and the strategies for its transition to the next generation.

Increasingly, many UHNW families are discovering the power of J.P. Morgan’s goals-based planning approach as they seek to resolve such issues. Its appeal is not hard to see—it’s a straightforward discipline that establishes the groundwork for delivering on long-term objectives.

At the heart of this dynamic and flexible practice are four pivotal considerations. First and foremost, there is the issue of purpose, essentially, “What do you want to achieve with your wealth?”

Secondly, there is the matter of stewardship, which seeks to focus the family on thinking about who is best suited to take responsibility for the management of their wealth over the longer term.

As a third consideration, there is a need to decide how assets should be held and how best to prepare them for any future transfer. It could be, for instance, that the founder’s intention is that the ownership of an existing family business is structured in such a way as to provide sufficient flexibility for future generations to decide how to deal with their respective share. Alternatively, the intent could be to ensure that the family business is collectively owned and managed in perpetuity.

Finally, there is the question of horizon—Is there a near-term, mid-term and long-term plan? At the key generational transition points, what are the assets that would be transferred and to whom?


Highlighting the benefits of the goals-based planning approach, Sameer Mehta, Head of Goal-Based Advice of J.P. Morgan in Asia says,

“Essentially, this process allows personal/family preferences to be considered and for a clear route map to be agreed upon by all stakeholders as a means of achieving these predetermined objectives.”

 


Third Party Insights and Consensus-Led Commitments

Finding satisfactory and enduring answers to these questions may require a considerable degree of reflection, but families should also be aware that their aims and preferences may evolve as circumstances change. The perspective of a neutral third party, such as advisors from J.P. Morgan, working alongside family members and their legal/tax advisors, can be of benefit here. This is especially the case when such advisors share their accumulated insights and extensive knowledge of the best practices across their field.

With the right team in place and a degree of consensus achieved, the wealth of the family can be apportioned to such priorities as liquidity, lifestyle maintenance, legacy and the perpetual expansion of an existing asset base. There are also three significant strategic areas that can be evaluated (or revaluated) via the prism of goals-based planning—investing, succession planning and family governance.

When it comes to investing, the framework allows for flexibility to be built into any growth initiatives. It also ensures that the related decision-making process is transparent for all stakeholders.

On the succession planning front, a long-term strategy should be adopted, with bespoke succession structures created to ensure the coordinated management of assets and the seamless transfer of wealth to future generations. The family governance applications, meanwhile, provide a means of ensuring all of the relevant parties remain engaged and informed. This helps minimize potential areas of conflict and paves the way for the formation of an organization dedicated to managing shared prosperity along agreed guidelines—a family office.

Family Office Founding Principles

The desire to establish and maintain a family office is frequently observed amongst UHNW families. Given that every family is different, though, there can be no one-size-fits-all solution, especially when it comes to setting up a Single Family Office (SFO)—a bespoke entity entrusted with managing the various financial and non-financial needs of UHNW family members.

Applying the principles of goal-based planning to define the structure and mandate of the SFO, the first recommended step is to agree on a set of core principles. Essentially, it enables the family to formalize the communication and decision-making process for the wider family network.

With the family’s vision and strategy already agreed in the initial stages of the goals-based planning process, three additional questions need to be asked at this juncture:
1. What functions are required from the family office on an ongoing basis?
2. Who, principally, is the family office there to serve?
3. What services does the family want (and not want) the office to provide both now and in the future?

A Joint Stake in a Shared Financial Future

With delivering clarity one of any SFO’s founding protocols, it can then address such matters as helping mitigate a family’s internal challenges (notably instances where individual family members may have incompatible wealth management objectives or needs) and preparing for any external risks that may have been identified, as well as deciding where outside support is required from third parties. This latter issue often sees specialists in legal, tax or investment sought out and appointed to provide ongoing support to the SFO.

Summarizing the importance of family members taking an active role in both the initial planning process and the formation of a family office, Amanda Lott, the Executive Director and Head of Wealth Planning Strategy for J.P. Morgan in the U.S. says, “When we have a hand in building our financial plans, we have a greater sense of ownership. The very process of building a plan makes it more valuable and drives commitment. It also highlights where the family’s strengths lie and where it is best all round to call upon the skills of specialist third parties.”


Expanding upon this, Elvin Ho, Executive Director and Senior Wealth Advisor of J.P. Morgan says,

“The first recommended step is to agree on a set of core principles, often considered the “North Star” of such an establishment. This underpinning framework should assist the family concerned when it comes to setting the policies that govern the purpose of the office, its investments and the deployment of its resources.”


 

1          LEGACY PLANNING FOR ART COLLECTORS

The passion involved with building a fine art collection shouldn’t preclude a thoughtful succession management strategy.

Given the passion involved with building and curating an art collection, it can be easy to forget it is also an asset requiring thoughtful organization, structuring and, ultimately, succession planning. As ever, the ideal first step is to define your goals—essentially, “What future do you envision for the treasures that you have amassed over the years?”

Initially, it is well worth considering who you would like to pass the collection on to, whether that be an individual or an institution. You also need to decide if you want the collection to stay intact, be divided among your heirs or sold and the proceeds shared with the next generation.

Next, it is prudent to draw up inventory of what you own and where it is located. It is then important to keep all of the related files updated, including any legal documents and dealer insurance estimates.

When thinking of passing a collection on, future costs also need to be factored in. This should include funding for tax liabilities, as well as for any insurance, transportation, storage or repair overheads.

If you intend to pass your art collection on to your children, it is best if you can discuss your strategy with them at the earliest opportunity. If they are too young to participate in any meaningful way, clearly outlining your preferences in your will is the most reliable fallback position.

Similarly, should you wish to pass the collection on intact to a designated institution, it is advisable to start the discussions early. Setting up a dedicated foundation or museum and establishing its governance structure is also best accomplished within your own lifetime.

You may also need to consider whether professional assistance is required in order to optimize the management of the collection.

2          PROTECTING A DIGITAL ASSET PORTFOLIO

Forgetting to properly plan for the succession management of your digital assets could leave your heirs and beneficiaries with a virtual nightmare.

It is easy to think that the term digital assets solely refers to items such as non-fungible tokens (NFTs) or cryptocurrencies. In fact, the term encompasses a broad array of online account or service protected by log-in security that may be valuable to a family, both from an emotional perspective (such as photos stored online) and in terms of operational needs (notably access to critical email accounts).

Essentially, planning for digital asset succession needs to consider how authorized access to any online account or service, social media platform, cloud storage service or subscription can be maintained following an individual’s demise. This extends to access to online payment processing services, proprietary domain names, medical records and any digital banking accounts.

When looking to safeguard the digital assets of a family, making a detailed inventory is always the first step. This should include a record of the names of all of the relevant accounts, as well as details of the information needed to gain access. It is prudent to ensure all such details, particularly with regards to financial accounts, are accessible by a trusted contact person, an individual identified as a suitable steward for your digital legacy.

Should you fail to factor your digital assets into your succession plan, your heirs may well be either barred from accessing them or face considerable inconvenience when it comes to their recovery. Lack of proper legal planning here could also result in estate or inheritance tax liabilities.

It is also advisable to plan to ensure you always keep up with the latest developments in this fast-developing area. For peace of mind, it’s also best to keep your legal representatives and wealth advisors informed of any new digital activity that could affect your financial status and your family’s future well-being.

3          ENHANCING GOVERNANCE VIA A FAMILY CHARTER

A mutually agreed charter ensures all family members are on the same page when it comes to how decisions should be made with regards to a family’s wealth.

When it comes to ongoing governance, one of the primary issues family members need to resolve is whether they wish to cooperate when it comes to managing any family business or shared wealth. This becomes more challenging when family members live in different jurisdictions, with many of them inevitably having quite distinct wealth management expectations. While some will prioritize liquidity (short-term needs), others may favor lifestyle (spending), legacy or growth.

For many families looking to take a holistic approach to the future, the first step is to define a common mission for their shared wealth, often in the form of a charter that clearly outlines collective intent.

Properly implemented, such a charter can then lead to all parties agreeing to establish other family forums, such as a family assembly or council. These bodies are designed to ensure that a fair and transparent regime is maintained with regards to family wealth-related decisions. At the same time, they are also there to keep family members informed of any relevant issues or developments that may arise.


Advising on how to optimize the effectiveness of this process, Paul Knox, Managing Director and Senior Wealth Advisor of J.P. Morgan says,

“As a means of heading off any potential future disputes, it is important to have as many family members as possible participating in the development of the vision embodied in the charter, while it is also a useful way of gauging who has the appropriate skills/emotional intelligence to take a leadership role in the management of shared assets.”


Click here for more information

learn.more@jpmorgan.com

Back to Top