Strategic Relocation: Building Your Family Office’s Second Base

by Henry Brandts-Giesen, Partner at Dentons. 

In the current risk landscape family offices are increasingly looking towards new locations to set up alternate economic engines. This emerging trend, which I have been consulting on for several years has scaled since mid-2024. When executed effectively an alternate economic engine can be both a defense mechanism and a strategic growth path that diversifies and strengthens the family’s financial and human capital.

Mitigating home country bias and concentration risks

Family offices traditionally have a strong home country bias and concentration risks. While it is not usually necessary or helpful to completely overturn this bias, the implementation of a gradual and strategic diversification plan can stabilize the family office's primary economic engine (e.g. legacy assets like founder’s shares, operating companies, real estate, financial assets, etc) and provide a platform for growth.

Key points to consider 

Family offices considering this approach need to consider everything from geopolitical, economic and currency risks, to how they want to diversify across sectors and asset classes. There are also counterparty risks to consider, where relying on a limited number of financial institutions in a location can increase exposure. Changes in laws and regulations are also frequent in many jurisdictions, and can impact strategies.

By implementing a gradual and strategic diversification plan, family offices can significantly enhance the stability and growth potential of their portfolios. This involves setting up new wealth management accounts, creating offshore legal structures, and establishing satellite family offices.

Personalized playbooks for wealth management

The strategies employed in setting up these economic engines are tailored to individual risk assessments and objectives. Key components include:

1. New wealth management accounts: Establishing new wealth management accounts involves evaluating and selecting new custodians, currencies, and strategies and then exporting free cash flow and/or proceeds of sale of capital assets from the primary economic engine. This diversification helps mitigate concentration risks and may enhance the resilience of the financial portfolio.

2. Offshore legal structures: Creating new offshore legal structures such as holding companies (HoldCos), private funds, and trusts provides a framework for continuity planning, asset protection and tax efficiency. These structures also offer flexibility and can be tailored to meet specific family office needs.

3. Satellite Family Offices: Setting up satellite family offices in neutral countries allows wealth owners to leverage local market opportunities and regulatory benefits. Singapore, Hong Kong and Dubai are emerging as preferred destinations. 

Human capital and residency by investment

In addition to financial capital, human capital is a crucial consideration. Many family offices utilize Residency by Investment (RBI) programmes in stable third countries to enhance lifestyle and access to quality education, healthcare, and other essential services. These programmes also offer strategic advantages in terms of global mobility and security.

From defensive to growth-oriented strategies

Discussions around setting up alternate economic engines often begin with a focus on defensive strategies to manage identifiable risks. However, my consulting projects frequently evolve into growth-oriented plays as clients spend more time in new markets and develop local networks. These emerging opportunities can transform initial defensive moves into dynamic growth strategies, unlocking previously unknown avenues for wealth expansion.

Potential issues with a global strategy 

Implementing a global strategy can offer significant benefits. However, it also comes with several potential issues that need to be carefully considered, namely the increased complexity of managing operations across multiple countries, and the higher costs associated. Unfamiliarity with local rules and customs can also create challenges, and make it essential to invest in local expertise and build strong relationships with local partners to navigate these challenges effectively.

A call to action – plan early and proportionately to assess risk

Wealth stewards, wherever they are in the world, can take proactive steps to manage risks in the countries where family capital is most concentrated.

In my view, this should involve consideration of the movement of at least some financial and human capital to stable, neutral third countries whilst at all times ensuring local tax and legal compliance. 

The time to do this is well in advance of the feared risks and barriers to movement (such as exchange controls and exit taxes). 

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Henry Brandts-Giesen is a leader in the Dentons Global Family Office (DFO) group, recognised globally for his expertise in the organisation and regulation of private wealth.