Succession planners

Twenty years ago, the esoteric world of private client, with its landed estates, entails and estoppels, was becoming distinctly off-brand in the shiny City offices of leading law firms. Maybe if their clients had presented more like Succession’s Logan Roy, with his complex blend of personal, family and corporate legal needs, things would have played out differently. But as it was, Linklaters, Freshfields, Norton Rose and Slaughter and May were among those who jettisoned their private client practices, while others read the runes and left to forge boutique firms. Maurice Turnor Gardner is a case in point, spun out of Allen & Overy in 2009 following cuts and a decision to stop focusing on ‘non-core’ areas such as private wealth. The firm is still led by Ceris Gardner. 

Not all corporate powerhouses dispensed with their private client teams. Notable exceptions to this trend were Withers and Macfarlanes. They have always maintained large private wealth teams as part of their core offering, alongside strong corporate teams.  

The years following the 2008 financial crisis changed everything. With the nosedive in M&A, IPOs and general corporate work, private client – or ‘private wealth’ as it is called in such firms – did not look so bad after all. An evergreen practice area focused on serving wealthy individuals and their families brought welcome equilibrium to the uncertainties of the economic cycle.  

By this point, private wealth shed its dusty image. While the traditional landed gentry client base remained, leading private client practices were equally likely to be advising international high-net-worth individuals, captains of industry and hedge fund managers. Just the sort of people who should be spearheading deals and driving up revenue in adjacent firm departments.  

Missing generation  

By the time that law firms realised this and sought to rebuild their private wealth teams, there was a problem. A generation of private client lawyers was missing from the recruitment market – a hangover from law students in the early 2000s shunning the elective private client for the perceived glamour of corporate and other ‘business-focused’ options. The result is a succession-planning issue of the sector’s own making: the big names in the market are approaching retirement age, with few lined up to replace them. In what must be a satisfying reversal of fortune, these practitioners are paid well to stay where they are. Headhunting is rife but largely unsuccessful.  

Jonathan Shankland, head of the international wealth team at top-40 UK firm Weightmans, and Duncan Bailey, head of private client and charity at north-west firm Brabners, are rare examples of practitioners who fit into this ‘lost’ cohort. Bailey trained at Brabners and has remained at the firm throughout. Shankland was head of the private client team at London firm Radcliffe Brasseurs when it merged with Weightmans in 2022, bringing with it a client base of ultra-high-net-worth individuals. Both firms pair strong corporate practices with complex international and UK private wealth advice.

'One day you are dealing with royalties for a rock band, another with the complexities of a trusteeship, or the donation of a work of art to the nation. It is a heady mix' 

Camilla Wallace, Wedlake Bell

Law firms which now lack private client teams have either invested in individuals with the requisite tax capacities or forged links with private wealth legal boutiques. These can offer a ‘white label’ service under which clients receive a one-stop-shop service under the same brand. The arrangement is made easier post-Covid. Fewer clients demand face-to-face meetings and are more acclimatised to a dispersed legal advisory service over Teams or Zoom.  

‘It is rare that I meet someone face to face, perhaps once every two or three months,’ says Jo Summers, co-head of the private wealth and tax team at virtual law firm Jurit. ‘Even our elderly clients are becoming familiar with online meetings and feel that it is more convenient for them not having to leave their own home.’  

Looking ahead, the deficit in private client expertise should right itself, with time. Trainees are clamouring to qualify into their firm’s private wealth departments – if they are lucky enough to have one.

‘Private client is intellectually stimulating, but you also need high emotional intelligence with bags of empathy; a combination that seems to appeal to the younger generation,’ says Camilla Wallace, senior partner and private client partner at London firm Wedlake Bell.  

She adds: ‘It is also very varied, often with a cross-border element. One day you are dealing with royalties for a rock band, another with the complexities of a trusteeship, or the donation of a work of art to the nation. It is a heady mix.’  

Why now?  

The exemplar for first-rate law firm management and client service has shifted from a focus on deal execution (getting deals done, and lots of them) to a more nuanced picture. The ability to collaborate and cross-refer clients between practice areas rather than working in silos is highly prized, or it should be. This is a natural talent for private client practitioners, who tend to be highly networked within the firm.

‘Lawyers cannot really ask clients engaged in a transaction “how is your marriage?”, in the hope of referring them to a family practitioner, but it is reasonable and pertinent to enquire whether someone has a will, and introduce them to the private wealth team,’ says Bailey.  

The ability to empathise and work with demanding people is also an essential part of the private client lawyer’s skill set. With more focus on workplace culture and getting the best out of people, such skills are now highly valued – being essential to team building and the retention of both clients and lawyers.  

‘We deal with clients at the most emotional times in their lives, guiding them through bereavement or difficult decisions,’ says Summers. ‘Sometimes when someone who is the linchpin of the family dies, there is family fallout. We are used to clients bursting into tears. A private client lawyer will be ready with the tissues – while the corporate partner is eyeing the door.’  

No wonder so many private client partners have segued into positions as senior partners in the past few years, a job that requires similar skills: arch-diplomat, smoother of egos and consummate strategic planner. Nicholas Warr at Taylor Wessing, Bart Peerless at Charles Russell Speechlys, Sebastian Prichard Jones at Macfarlanes, Camilla Wallace from Wedlake Bell and Andrea Zavos at Boodle Hatfield are all senior partners with a private client pedigree. At Payne Hicks Beach, private client lawyer Robert Brodrick is chair of the firm. 

‘At Wedlake Bell we have 14 different teams, and as a private client lawyer I have a mutual client in almost every team,’ explains Wallace. Being well-connected to every department does no harm with those all-important votes in partnership elections. 

Tax net

International tax planning for clients, particularly non-doms, has been an intense focus for private wealth practitioners pre- and now post-budget. Increasingly, though, it is not just the super-rich that require private wealth advice. With the tax net widening and rules becoming ever more complex, more ‘moderately wealthy’ people, especially if they have foreign property or spouses, are drawn into needing professional legal assistance to manage personal affairs.

‘Our clients used to be primarily high-net-worth individuals,’ says Summers. ‘Now they are also people who have saved hard to buy a house in France, or a buy-to-let, who need advice on tax and succession planning.’  

Practitioners report a rise in enquiries for fixed price fees, perhaps a reflection of the growth of more moderately affluent individuals requiring assistance.  

Trusts

Current popular areas of focus include trusts, the perennial of successful tax and succession planning. ‘Although people talk about the death of trusts, and they are much maligned as tax-avoidance tools, they provide excellent flexibility and protection,’ says Bailey, who reports that Brabners is handling more trusts than ever.  

Despite negative publicity, trusts – which can be offshore or UK-focused – are still seriously useful for clients and practitioners. With the rise in international and blended families, trusts are a versatile structure for cascading family wealth down to future generations while providing clever mechanisms – such as lifetime trusts – to protect current partners.  

‘If an individual has property across multiple jurisdictions, without an offshore trust they can face the possibility of applying for probate in all of those jurisdictions,’ says Wallace. ‘Trusts enable family wealth to be coordinated from a single pot.’

As tax rules over trusts tighten, family investment companies (FICs) have also risen in popularity. Offering tax efficiencies, an FIC is a private limited company that holds investments. The directors are usually the individuals who set up the company, such as parents or grandparents. Family members can subscribe to shares, with directors given the power to allocate different classes of share with varying levels of rights to members. Assets can be placed into the FIC through gifts, subject to the usual seven-year survival rule.  

The FIC allows directors to retain control over assets while allowing for growth. This is also a good vehicle for succession planning, as the directors can decide how each family member can benefit through the type of share they hold. FICs are not time-limited and can also be used in conjunction with trusts.

At the upper end of the wealth management market is the fast-growing family office sector. Ranging from managing the wealth of one family (a single-family office) to multi-family offices that manage several families, this is a wealth management tool for the ultra-high-net-worth individual and their family.  

Family offices are bespoke, tailored to the needs of a particular client – so they can be based in one jurisdiction or straddle many. The concept of the family office is now well embedded in Europe and the US. It is also gaining popularity in Asia and the Middle East.  

Practitioners do not just set up investment structures but must have an astute knowledge of the quirks of the family they are advising, to ensure the most appropriate succession planning strategies.  

‘We are seeing a demand for measures that implement the concept of “family governance”, particularly from Middle Eastern clients who may be first-generation wealth creators,’ says Wallace. ‘This is the idea that the younger generation must be imbued with a sense of “wealth with purpose” that is socially conscious and considers reputation and legacy, as well as financial return.’ 

Client preference

Clients seek out law firms that reflect their own values and concerns in the private wealth sphere. They look to learn from how a law firm positions itself to handle the issues of the day, whether this is establishing ESG credentials or protecting the business from threats such as cyber-attacks. Indeed, the reputational and security concerns that stem from cybersecurity breaches are at the forefront for family offices.  

According to a 2021 Deloitte survey, more than 38% of family offices reported that they had been subject to a cybersecurity attack in the past 12 months. Being small and sparsely managed but with access to significant assets, family offices are seen as a soft target by criminals.  

Some law firms which specialise in private wealth now offer cybersecurity packages to their family office clients, as well as bespoke advice from their cybersecurity teams. HR advice is another field that has been packaged by product innovation teams for family office consumption. 

Next chapter

With ever-changing tax laws across multiple jurisdictions, private client lawyers will always be busy. At the moment there is a mix of different approaches within the UK legal market: high street firms doing wills and probate, the Lincoln’s Inn firms synonymous with private client – Hunters, Payne Hicks Beach, Farrer & Co – and those which are known as corporate firms foremost alongside a strong private client offering, such as Taylor Wessing, Brabners and Weightmans.  

Looking ahead, technological transformation may create a gap between firms which invest in artificial intelligence technology and those that do not. Although tech may seem tangential to a practice area that prizes the personal quality of its human interactions above all else, this is a development that firms need to watch.  

Shankland says: ‘There now exist tools that can present a multiplicity of answers to potential tax structuring options in a few hours – a task that would take a junior over a week of research. It is seriously impressive.’

Investment in innovation could make the difference between remaining competitive and appearing expensive and out of date to the up-and-coming generation of technically literate wealth creators. However the tech revolution pans out though, it is unlikely that private client will be banished to the margins of legal practice again any time soon.

 

Katharine Freeland is a freelance journalist