Investment

Rather than using a bank, billionaires could consider buying one – there are several available in Switzerland

Existential risks are multiplying in the wake of the pandemic and family offices need to take precautions, according to Angelo Robles, founder of the Family Office Association.

Political, regulatory and tax risks are familiar enough. But Robles says family offices now need to be aware of the risks posed by the digital world, as well as the opportunities.

He says: “The number one challenge to family offices is dependence on digital asset management platforms, the internet, private fibre networks and data centres and the corresponding dependence on cloud networks and power grids.” 

The vast majority of family offices fall short in managing these risks and their current advisers are clueless in protecting them…

The six-hour hit suffered by Facebook due to a programming error is a tiny illustration of the potential problem, which need not be caused by terrorists.  

In Robles’ view family offices need to protect themselves against existential risks by choosing their domicile with care and directly owning assets, where possible. 

Rather than using a bank, billionaires could consider buying one – there are several available in Switzerland. There are also tax advantages in owning a capital insurer. Life on the small Pacific island of Tuvalu may be limited, but citizenship may buy you local influence. Ultra-cautious families could also consider buying a submarine. The Migaloo submersible yacht is an interesting option.

Robles says families would do well to understand how to operate it themselves. They could usefully learn how to fly their own private jet, as well. 

Problems with Facebook’s outage have coincided with allegations of its malign social influence. 

Criticism has spilled over into whistleblower attacks on founder Mark Zuckerberg being answerable only to himself. 

This could, in turn, lead to broader attacks on entrepreneurs, as we have seen in China, and attempts to tax them severely. 

On a broader front, the atmosphere has been further poisoned by researchers mining the internet to find documents that catalogue assets owned by the world’s elite. The deteriorating relationship between China and the US produces a worrying backdrop. Riots have undermined the American dream. Supply chains and financial markets are fracturing and cyber attacks are multiplying.

But Robles says: “It’s the bus you don’t see that gets you.” He urges family offices to be resilient and avoid putting too many of their eggs in the digital basket.  

He has produced a bulky survival guide based on research carried out for a large family office. 

It argues that family offices need to go to much greater lengths to understand the risks to which they are exposed.

It goes into detail on the way digital devices need to be protected by a dynamic cyber policy, updated multiple times a month: “Your biggest points of weakness are people, systems and processes and you need a response process when something goes wrong.”  Backing up online documents in hard copy may not be a bad idea. Gold bullion and art, both physical assets, have a role to play.

Robles applauds the appointment of chief learning officers by family offices, capable of coming to terms with fast-evolving challenges. 

Robles also goes through legal structures, and relatively safe domiciles, that make it difficult for hostile governments to confiscate assets. 

Robles suggests limited liability companies in states like Wyoming and South Dakota, plus jurisdictions like Belize, Cayman and Cook Islands, reinforced by a trust structure and the creation of a foundation. Florida continues to protect family homes from creditors through homestead law.

Suggestions like these are not new, but Robles is unusually urgent in his analysis: “The vast majority of family offices fall short in managing these risks and their current advisers are clueless in protecting them.” 

One of the ironies of digital risks relating to breakdowns is the fact that some of the most interesting investment opportunities still exist in the sector. Robles is currently keen on the metaverse, where communities meet in cyberspace to trade and live virtual lives. 

But he says investors should try to back expertise directly where possible, rather than using a fund. 

Mark Cuban, for example, has backed Sky Mavis, a developer of NFT-backed computer games which has just raised $150 million. 

Hedge fund manager Steven Cohen is a backer of metavrse developers and NFT provider Recur. Peter Thiel provided Vitlaik Buterin with the resources to develop Etherium, the crypto-currency.

Digital currencies are volatile, but they could also provide a way to diversify from fiat currency risks. Hard on the heels of China deciding to ban crypto-currencies, Brazil is on the point of legalising their use. One door closes, another opens.

The current weakness in supply chains and crumbling infrastructure makes it important for billionaires to understand the impact on their businesses.

But the sectors also provide investment opportunities for those with deep pockets, given the need to keep goods on the move and develop supply chain logistics. 

Again, Robles stresses the importance of direct involvement, to minimise the risk of being let down by the system failure.

By way of example, UK-based Beacon, run by former Uber executives, has just raised $50 million with the direct support of Amazon’s Jeff Bezoz and Salesforce’s Marc Benioff to develop tech-driven supply chain platforms.

 Angelo Robles is holding a masterclass on sovereign risk from 2-4 pm Eastern Time on Thursday 4 November. For details contact: angelo@familyofficeassociation.com

Subscribe

You will need a Premium Plus Subscription to access this database.

Exclusive news, analysis and research on global family enterprise and private investment offices.

Access to the most comprehensive fully interactive database on global family offices, principal investment offices, and family enterprises.

Check Deal Data, Senior Staff, and New Analysis on more than 500 family/principal investment and holding groups

Already have an account? Login

Subscribe

You need at least a Premium Subscription to read this article.

The most comprehensive information service on the global family enterprise world, featuring exclusive news, analysis, research and data on global family enterprises, family offices, and private investment offices.

Premium

£299

per year

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
SUBSCRIBE NOW

Premium+

£399

per year

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

SUBSCRIBE NOW

Already have an account? Login

You've reached the end.

Continue reading free articles by registering as a Member.
Or choose a Premium Plan.

Membership

Free

  • Exclusive reports, analysis and commentary
REGISTER NOW

Premium

£299

per year

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
SUBSCRIBE NOW

Premium+

£399

per year

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

SUBSCRIBE NOW

Already have an account? Login

Leave a Reply