! NOVEMBER 15, 2014! ! !




WWW.INTERNATIONALWEALTHPLANNERS.COM ! PAGE � 1

New IWP Members !!Athena P. Constantinou

MBA, CPA, CGMA APC Constantinou Ltd. !

Nicosia, Cyprus!!Gerard Aquilina

Family Office Advisor !London, England !!

Rupert Pleasant LLB MBA MCSI

Director, Praxis Trust (Switzerland) SA, Geneva, Geneva!!

Recent Event “Foro Planificacion Legal

Patrimonial” IWP successfully held the

inaugural “Foro Planificacion Legal Patrimonial” for lawyers and

professionals from November 6 - 7, 2014 in Bogota, Colombia with the support of five attorneys including

Juan Pablo McEwan!(Conference Programme Attached)#

IWP NEWSLETTER !Veritas Vincit#

“Putting our Heads Together: Developing the Next-Gen Leaders” (from presentation at FFI Global Conference, Washington DC, October 14th, 2014)! To put this title into context, the underlying idea is the theme of succession which typically involves a person handing over power and control over something with value, such as a business or capital, most often to a younger family member. We are not considering political

power or royals. The transfer of authority, power and control may be triggered by death, incapacity or resignation. !At a technical level, there must therefore be an existing power holder and a recipient of that power,(continued on pg. 2.)

FORO PLANIFICACION LEGAL PATRIMONIAL, BOGOTAIWP organized the Foro Planificacion Legal

Patrimonial with around thirty attendees from countries including Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Peru, Spain, Switzerland, Uruguay and the USA. With Juan McEwan and four other leading attorneys sending out personal invitations, IWP created a memorable, highly engaging and exciting event. A very enjoyable

group dinner was held at Andres D.C. Thank you to the various sponsors from UBS, Mora Banc, Lombard International Assurance S.A., GaMFOs and JTC Group for supporting the event. !

The conference was held entirely in Spanish. Such was the strong interest that plans are underway for another Foro in Lima in May, 2015. Stay tuned!

Foro Planificacion Legal Patrimonial , Bogota - Juan McEwan - McEwan & Asociados, Argentina; Jonathan Mossi- GaMFOs , Switzerland (from left to right)

http://www.internationalwealthplanners.com

IWP NEWSLETTER! NOVEMBER 15, 2014




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Calendar!November 19 - 20, 2014 8th annual Private Banking

Latin America, Miami conference IWP Full Members, Edgar Fernandez, Fiduciary Solutions Specialist with RBC and Felipe Ruiz will hold a roundtable discussion on the subject of Protectors. Come join the discussion on this interesting topic giving employment to a few among us! !PRESENTERS WELCOME…!

February 4th, 2015 IWP Bermuda Event !Focus on Trusts and Insurance!Rosemount Tucker’s Point !!May, 2015 (2nd or 3rd week) “Foro Planificacion Legal Patrimonial”!Lima, Peru!!July 21st - 22nd, 2015 IWP Dublin Conference!Fitzwilliam Hotel!Ireland !

NEXT-GEN LEADERS!position of authority and / or ownership. These three items may provide certain benefits and comforts but fundamentally are transient. As the philosopher Voltaire commented on life and death, “One arrives at death as well as by lacking everything as by enjoying what can make life pleasant”. !!In the case of empires, Voltaire also said “For empires to fall, all they have to do is exist. Everything has to fall”. By analogy, businesses which can be small empires, also have to fall. What is the most profitable enterprise today may be non-existent tomorrow. Businesses, just like people cease to exist and both go through these natural cycles. Capital can be created just as easily as it can be squandered.! !Perhaps a useful recommendation on family business is the book from the turn of the last century by the German author, Thomas Mann, called “Buddenbrooks” on the decline of a family. A family business is at one point at its peak of financial prosperity and stability is great. Successive generations experience a gradual decline of their wealth and family ideals, finding happiness increasingly elusive as values change and rapid industrialization presents its own set of challenges. Business interests are sacrificed at the expense of happiness. Yet with the weakening of business acumen

and the deterioration of ethics, this results in the collapse of the firm and the family. By contrast, the family’s original ascendancy was driven by business expertise and strong ethics. Therefore a family’s values and principles are seemingly a key ingredient in their success and the business. !!Conceptually the ascent or descent of a family is linked to its values, intelligence and foresight, all these combined factors are intangible and the continuity thereof is perhaps the greatest challenge.!The assumption is that the goal is for an operating business to succeed and provide the benefits to a family from security, employment, involvement in a community. In the wealth management sphere a family’s capital may have a liquid state and comprise financial assets whether cash, bonds or equities which can also afford similar benefits. !!In the former case, most families where perhaps an older generation owns an enterprise and some members have the expectation and legal right to take ownership, preparation for leadership roles is paramount. Education and practical experience are fundamental to the planning process. Yet can an external consultant teach values to a family? With Latin American ones, the older generation is the one who will teach values at home. The external advisor can indirectly influence the importance of parents’ teaching values, setting good examples and recognizing the perils of wealth. For this to occur, there must be strong

IWP NEWSLETTER!!Please feel free to send

any articles you wish to have included in the next IWP Newsletter or topics you would like to see covered. !

! NOVEMBER 15, 2014

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NEXT-GEN LEADERS!communication in the family. Preparation of the next generation therefore must begin when individuals are receptive and can be molded. !!In the case of mining families in Peru, some family members manage active businesses and their children continue the family endeavour. Some will study relevant degrees abroad, others will go on to work for other unrelated mining companies before returning to the family business. Other siblings of the younger generation may convert their ownership into cash and then embark on the risky world of financial investments. The economic boom in Peru created many liquidity events with families sending their money to the United States just in time to experience the financial crisis. This event had three results: irrecoverable loss of capital, a realization of just how limited their understanding was of financial instruments; and most importantly, that in the wealth management business, interests are not aligned. !!A family who owned one of the largest retailing operation across Central America converted their 100 year old operating business into cash which created a new set of issues for the cash rich generation in that they were highly experienced in retailing but inexperienced in money management and the risks involved. Wealth may be liquid or illiquid, each carries its own set of risks. This particular family decided to separate the management of their liquid wealth from the active involvement of the family, they have evolved into passive investors in other operating business, essentially managers of managers, hiring external non-family professionals to administer their wealth, while designing a governance structure that would not allow the next generation of family members to manage operating businesses. This unique approach is akin to the Peugeot founder wishing all shares in the enterprise to only pass to the male heirs. An equally ineffective approach would be to ban a generation from having any children. It is my view that the retailing family will probably go full circle and return to retailing once the lock up period is completed. !

A patriarch of a Costa Rican family established a rule that no grandchild would inherit anything and the liquid wealth would serve to advance the interests of charitable foundations, the second generation would receive a usufruct for the duration of their respective lifetime. The patriarch’s view was that the grandchildren were not his responsibility and he did not want to create a generation of “inutiles”, spanish for useless people. !!A family member in Kenya commented to me once that he had the Midas Touch. Money was in abundance, life was very stable, health was excellent. Within a span of ten years the family business collapsed and the family homes were sold. On reflection the triggers were various, failure to recognize financial risks, excessive debt levels, deaths, separations, a lack of business expertise in new investments and a loss of trust. The cash cow that was the family business was milked not just dry but till it died. Which is not necessarily a bad thing, as life carries on, the family divided and each set off on a new path finding opportunities in different parts of the world. As Voltaire said, “God gave us the gift of life; it is up to us to give ourselves the gift of living well”. !!!!Authored by Felipe Ruiz for FFI Global Conference 2014, Washington D.C. !!© 2014 International Wealth Planners, LLC!