We talk to Squire Patton Boggs about its family office practice, the issues that affect this sector and how the team of experts at the law firm see challenges and opportunities unfolding.

This news service recently met with law firm Squire Patton Boggs and asked about the work it does to serve and inform family offices. We have carried a number of articles from SPB on family office topics. Its detailed analysis of particular issues has always impressed the editors, and we valued the chance to interview it on its work and what the future holds. Family Wealth Report recently interviewed Jeffrey S Levin, senior partner, and Daniel G Berick, partner, and, co-head of the family office practice.

Jeffrey Levin

Daniel Berick

FWR: When did SPB set up the family office team, and why? What was the state of knowledge at the time about family offices back then? 

Dan Berick: We started formalizing our global family office team in 2015, but our firm has handled private client tax work in a number of our jurisdictions around the world throughout the firm’s history. And, similarly, we have managed alternative investment transactional work for family offices and ultra-high net worth families since our firm’s founding in the late 19th century.

That work has been a part of my practice for many years and, during my tenure as Americas chair of our global corporate practice, we decided to bring together our colleagues from around the world whose practices involved the family office/UHNW client space. At that time, we were beginning to see “family offices” becoming increasingly involved in transactional matters and a growing number of UHNW families seeking our assistance in cross-border tax planning, investment structuring, and governance arrangements. While “the family office” was not a new concept, they were becoming more and more widely used and likewise increasingly visible in the alternative investment and global wealth planning spaces.

FWR: The rapid growth in family offices worldwide, including the US, has certainly driven demand for understanding the legal and regulatory issues that they have, from compliance to HR. What sort of topics do these organizations fixate on the most? What tends to be a more constant, if low-level, type of work?

Dan Berick: Income tax and estate planning, first and foremost, are the initial drivers of so much of the family office activity we see from our global clients, and the focus of so much attention from family offices. In the US, compliance with the Investment Advisers Act is increasingly on the radar of family offices as they grow to include more generations of family members.  

Alongside purely legal topics, issues involving privacy, data security, succession planning, family engagement and education are consistent topics of focus and concern for family offices. Our recurring work for family offices can involve everything from gift structuring and gift tax planning, assisting with employment matters for family office and personal family employees, real estate matters, transactional work for public and private investments and trust administration.

Jeff Levin: Many of our family office clients have family members who reside in countries other than the family’s primary country of residence. Recurring work for these family offices includes guidance on tax and estate planning, considerations related to those other countries, and considerations related to direct investments in those other countries.    

FWR: A few years ago, there were calls in Congress to regulate single-family offices more, linked to the failure of a hedge fund that used to structure itself as a family office. Has the risk of such regulation receded or should those in the sector be mindful that it could happen, particularly under a change of government?

Dan Berick: The tide of public discussion of SFO regulation seems to have receded at present, and the current US administration hasn’t shown much interest in reviving that topic. It could well re-emerge in the future, or potentially expand investment reporting requirements, but for the moment nothing has really surfaced.

Jeff Levin: A recurring US income tax consideration is whether an appropriate ownership structure is available for an SFO to claim a current income tax deduction for the SFO’s annual operating expenses as an offset to annual family income including hedge fund-related income.    

FWR: We hear that family offices are more professional than they used to be, for example remunerating staff, etc. How far do you think they have come? 

Dan Berick: I think there has always been a high degree of professionalism in the family office space, perhaps in part as a result of the sophistication and resources of the families they serve. I do think, though, that with the growth of family offices as an “industry,” family offices increasingly have access to peer information, whether informally or through surveys and benchmarking, that enable them to “best practice” areas such as compensation, data protection, insurance, and internal family operations and the like in ways that they were unable to do when each family office was much more siloed.

Jeff Levin: The members of Squire’s expanding Global Family Office Team frequently exchange information that is shared with our family office clients.  This information can include everything from potential transaction opportunities, to emerging fund managers whose investment theses might be of interest, to surveys, white papers, and other benchmarking materials we receive during our practice. This informal information exchange assists our clients in the enhancement of their professional administration of their family offices.  

FWR: You mentioned issues such as beneficial ownership disclosure and how this varies. What do you see as happening in the next few years?

Jeff Levin: Beneficial ownership disclosure considerations will not disappear. In the US Corporate Transparency Act issues have not totally disappeared.  New York State still has its own version of a corporate transparency act for limited liability companies. There is some uncertainty as to its application because of the CTA federal changes and pending court decisions. Other states, including California and Massachusetts, have considered having their own versions of entity transparency reporting and public disclosure of ultimate beneficial owners. One wonders whether the federal CTA could reappear in the future with a different political party in control because the recent change is based on a US Treasury regulation that could be modified in the future.  

Dan Berick: Aside from tax and the CTA, in the US the adoption of the Family Office Rule under the Investment Advisers Act was perhaps the most significant recent regulatory change affecting family offices – unless the Corporate Transparency Act returns in its previous form. We continue to hear from family offices that are looking for Advisers Act compliance advice, as well as support on related US securities law compliance matters such as Exchange Act transaction reporting and beneficial ownership reporting regarding investments in US public companies.

FWR: As we know, cross-border issues are complex, for example when tax is involved. How much of your team’s time is spent on this area, and are there particular matters worth a mention?

Jeff Levin: For US tax considerations, the cross-border issues often involve either non-US family members moving to and possibly emigrating from the US or a family member, who is a US person, leaving the US without adverse US income and transfer tax consequences. These matters and related compliance considerations are a significant portion of our private client US tax practice. The fact that US taxation applies to a US person’s worldwide income and assets and individual state taxation considerations are recurring issues for our international clients.

Dan Berick: We spend a lot of time on cross-border transactional matters, such as alternative investment transaction and real estate investments. In any kind of cross-border investment, issues involving entity formation – and entity transparency, depending on the jurisdictions involved – and funding arrangements, whether within the family structure or from external sources, can require a significant amount of planning.