After the financial drama of the past few years, high net worth clients want clarity and certainty above all, argues one of the of the most senior partners at East Coast law firm Hemenway & Barnes.

With
the ever-rising weight of tax and regulatory issues, people who want to set up trusts
and other structures must be sure arrangements are legally watertight as well
as prudent from an investment angle.  

After
the financial drama of the past few years, high net worth clients want clarity
and certainty above all, argues one of the of the most senior partners at East
Coast law firm Hemenway & Barnes, which is headquartered in Boston, MA, and
is celebrating its 150^th birthday.

And
that demand for certainty goes beyond complying with an expanded book of rules:
it also means avoiding the over-complex – and sometimes poorly performing –
products of the past.

“There has been, on the investment side, a
return to basics after the highly leveraged, complex products that had been
sold to clients in the US
before the 2008 financial crash. Some individuals suffered a permanent
loss of capital, which is essentially what financial risk amounts to, as
opposed to mere volatility,” Michael Puzo said in a recent interview with Family Wealth Report.

Puzo
concentrates on trust and estate issues, serving as a trustee of private trusts
and charitable foundations. His private client work includes sophisticated
estate and charitable gift planning and the resolution of probate disputes. He
chairs the private client group at Hemenway & Barnes and was formerly its
managing partner. And there’s more: Puzo is also a managing director and treasurer
of Hemenway Trust Company, a New Hampshire-based private fiduciary firm.

Private
trusts

“Providing clients with private trust
services is integral to our mission,” Puzo said. While a lot of large law firms
increasingly cater to large companies and other institutions, his firm
continues to focus on individuals and their families, he said, adding: “Our
sweet spot has always been the individual.”

Over the years, he’s noticed a number of
changes in what clients want, and says some of these trends have accelerated
since the 2008 financial crisis. For example, the idea of investors entrusting
wealth to a variety of managers with different specialist skills has definitely
increased. The asset allocation approach developed by the likes of Yale’s
university endowment fund – the “Yale model” – is becoming more widely used in
the private client space.

“The endowment model had been foreign to
private clients several years ago. But not now. We are more frequently being
asked to, or directed to, being part of a team of multiple managers,” Puzo
said.

There is a clear trend towards clients taking
more involvement in crafting their philanthropic endeavors in ways that tighten
controls and accountability. A big area is that of crafting gifting agreements
to prevent the terms of a gift being changed by other parties, he said.

Although set up as a law firm, Hemenway
& Barnes performs some of the trusted advisor functions of a multi-client
family office, he said, noting such an
advisor has to act, particularly with families with complex needs and
differences, as a sort of “chief of staff” to direct affairs and create some
kind of overall order.

What’s special about this firm? 

“The private trust practice is a
differentiator for us,” Puzo said.

“We have individuals serving as private
trustees for families and individuals and provide an alternative to a bank or
institutional trust company through our chartered private trust company. When
you serve as a private trustee, you develop a rapport with the client. We have
provided substantial advice to families. We have extensive tax planning and
have been involved, for example, in the sale of family businesses, both public
and private,” Puzo continued.

“The fact we work as private trustees, and
have responsibility for about $3.5 billion of trust assets is an essential element
of the knowledge we have,” he said. “We had a business plan and we continue to
be responsive to developments of the clients. It is a firm crafted by the
clients, not the owners. We have added services as client requests have changed.”

This
is a heavy-hitter of a law firm, although not in the highest ranks in terms of
size. The focus on a core of private client work is a merit that the firm,
judging by its website, is happy to highlight. Hemenway & Barnes has about 100 employees, of whom 30 are
lawyers. Some 21 of them are equity partners in the business.

A few years ago (2010) the firm created its
own wholly-owned private trust company, chartered in New Hampshire (a state where there is a good
deal of legal flexibility) to provide a broad range of trust services. This is
a regulated trust company.

In July, the firm hired Raymond Young as Of
Counsel at its private client practice. Young works with high net worth
families and individuals, as well as businesses and non-profit organizations
involved in trust and estate administration or in disputes over wills and
trusts. Hemenway & Barnes traces its origins to 1863. As related on
the firm’s website, Stillman Boyd Allen, John Davis Long and Thomas Savage
established a law office in that year to serve New England's
business community. Alfred Hemenway soon
joined the three, and the firm of Allen, Long and Hemenway was born. In 1893, Charles
B Barnes joined the firm, which is where the business gets its current name
from. The overwhelming majority of its clients are from the US.

The
firm comes with a high reputation: It received a Tier 1 ranking in Boston
Non-Profit/Charities Law and Trusts & Estates Law categories of the 2013
Edition of US News - Best Lawyers “Best Law Firms.”

Structure

Puzo
said the heavy preponderance of senior lawyers in the business was deliberate,
given the complex nature of the work partners were called upon to handle. This
is the very opposite of a commoditized business.

“It is an unusual structure which reflects
how we practice. We don’t need a lot of foot-soldiers to do our work. The
clients we deal with need very experienced people,” Puzo continued.

It may not be the biggest, but in the complex
and demanding market in which Hemenway & Barnes works, it is undoubtedly one
of the thoroughbreds.