ICSA Guernsey Conference 2019 - Updated presentation slides

Building Board Resilience
ICSA Guernsey Conference 2019
Wednesday 1 May, St Pierre Park Hotel
@ICSA_News
#GuernseyConf19

Welcome and introduction
Paul Smith FCIS, Branch Chair, ICSA Guernsey

ESG Investing
Fiona Le Poidevin
1 May 2019

ESG
Green
Impact
Sustainable
Responsible
Ethical
Climate
Decarbonisation

Guernsey Green Finance
• Joint initiative of stakeholder groups
• Global – UN FC4S
• Local – 20 for 20
• Regulatory offerings:
―Guernsey Green Fund
―Guernsey Green Insurance
• TISE GREEN

What are the benefits of TISE GREEN?
• Issuers of green investments get enhanced visibility
• Investors get easier access to relevant opportunities
• Capital gets allocated to make a positive environmental impact
• Environmental sustainability
• Part of our Corporate & Social Responsibility (CSR)

Who is eligible for TISE GREEN?
• Security must be listed already on TISE’s Official List
• No additional cost to be added to TISE GREEN
• Open to any type of green investment product
― Bonds
― Investment vehicles, including funds and REITs
― Trading companies
• Open to issuers from any jurisdiction
• Issuer must have valid third party verification

Why third party verification?
• Growing interest in allocating capital to green investments
• Accentuates problem of ‘greenwashing’
• Approaches of other exchanges e.g. Lux:
• Verifiers and standards
―Depends on ‘product’ type; evolving sector
―Verifiers must demonstrate expertise; standards must be recognisable
• Investor confidence in TISE GREEN products
“more critical commentators point to pure ‘green washing’ effects.”

Governmental and regulatory responses
• France: leads the way with ESG
• EU: taxonomy on sustainable finance; and ESG reporting
• FCA: discussion paper on climate change and green finance
• PRA & FCA: Climate Financial Risk Forum (CFRF)
• GFSC: Guernsey Green Fund; Green insurance consultation
• US & China

• Corporate Lip Service
• Investor Activism

Corporate action
• European fund managers oppose ESG regulation
• Investment Association consultation on SRI
• Investor financial literacy

What next?
• Products
• IA warns of ‘undue focus’ on the environment
• World Bank
• Standardisation

What is good?
• M&S: Plan A (because there is no Plan B) – 2007
• Unilever & GSK – ICSA Sustainability Disclosure of the Year – 2017
• Vodafone – ICSA Sustainability Disclosure of the Year – 2018

What’s next?
• Change is coming
• Evolving space

Focus on:
•Responsibility
• Transparency
• Accountability

Thank you for
listening.
Any questions?

Fiona Le Poidevin
Chief Executive Officer
E: fiona.lepoidevin@tisegroup.com
T: 01481 753010

Financial Crime – Meeting International Standards
Financial Crime Division
Nick Herquin FCSI, FICA
Deputy Director

Key Topics
• Overview of the FATF and Moneyval
• Why Guernsey strives to meet international
standards on AML/CFT
• How international standards and mutual
evaluations have influenced the Handbook
• Role of Boards in identifying and mitigating
ML and TF risks

Financial Action Task Force (“FATF”)
38 Members, 9 Associate
Members & 23 Observers

FATF – Why take part?
• Keep abreast of emerging issues in mutual
evaluations & policy development
• Shape international AML/CFT Guidance
• Ensure interests of small jurisdictions are
represented and dispel myths

FATF Guidance - Beneficial Ownership
“Conversely, some countries, particularly low-
tax jurisdictions, have well-established and
regulated TCSP sectors, and have implemented
a range of measures to enhance the AML/CFT
regulation of TCSPs, including integrity,
competence, and financial soundness tests.”

Evaluations – Focus on Outcomes

Evaluations – Outcome Ratings

Evaluations – Finance Centres
• United Kingdom – Assessed in 2018IO1 IO2 IO3 IO4 IO5 IO6 IO7 IO8 IO9 IO10 IO11
SE SE ME ME ME LE LE LE ME ME ME
IO1 IO2 IO3 IO4 IO5 IO6 IO7 IO8 IO9 IO10 IO11
ME ME LE LE ME LE LE ME LE ME ME
Isle of Man Ratings
Cayman Islands Ratings

Transparency of Beneficial Ownership
FAT
F
Moneyval
OEC
D
EU
FAT
F
OECD
EUFAT
F
EU
FATF
OECDMONEYVAL

Key Changes in the Handbook – 31/3/19
• 3 Tier Test for Beneficial Ownership
• Enhanced Measures
• International Organisation PEPs and Domestic PEPs
• Electronic Verification and Data Sources
• Risk Assessment and Mitigation
• Board Oversight of Compliance
• Appointment of an MLCO

Risk
• General duty to understand, assess and mitigate ML and
FT Risk
• Separate ML and FT Business Risk Assessments
(Can be in one over-arching document)
• National Risk Assessment
• Relationship Risk Assessment

Risk Appetite and Mitigation
• Determine the overall ML/TF risk
• Appropriate level of mitigation
• Determine type and extent of risk that a firm is
willing to accept to achieve its strategic
objectives
• Must feed into relationship risk assessments

Board Oversight of Compliance
Boards must: -
• Maintain responsibility for the review of
overall compliance with Guernsey AML/CFT
• Establish and maintain PPCs
• Consider the appropriateness and effectiveness
of its compliance arrangements
• Consider whether based on the size and risk
profile of its firm whether an independent
audit function is required to test ML/FT PPCs

Key Personnel
• Money Laundering Reporting Officer
• Money Laundering Compliance Officer
• Natural person
• At least management level
• Appropriate knowledge, skill & experience
• Same individual can be appointed to the positions of MLRO
and MLCO.
• Does not nullify Board’s responsibility

Regime Effective 31/3/19, but…
Subject to transitional provisions:
– MLCO Appointed by 31 March 2019 & Commission Advised by 14 April 2019
– Business Risk Assessment Reviewed & Approved by Board by 31 October 2019*
– Policies, Procedures and Controls Reviewed & Approved by 31 January 2020*
– Nominated Firm for Collective Investment Scheme Investor CDD by 31 May
2019
– All High Risk Existing Customers Reviewed by 31 December 2020
– All Other Customers Reviewed by 31 December 2021
* Subject to the NRA’s publication by 30 June 2019

The road ahead for ICSA
Simon Osborne FCIS, Chief Executive, ICSA

Networking coffee break
@ICSA_News
#GuernseyConf19

Board Evaluation
Peter Swabey, FCIS
Policy and Research Director, ICSA
May 2019

What is the main purpose of board evaluation?
1: To comply with the UK Corporate Governance Code.
2: To identify ways in which the board’s effectiveness might be increased.
3: To demonstrate to stakeholders that the board takes its responsibilities seriously.
4: To provide assurance to stakeholders that the board is and will continue to be effective.

A brief history
1992: The ‘Cadbury’ Code said that the duties of non-executive directors included
“reviewing the performance of the board”.
2003: A recommendation for a “formal and rigorous” annual evaluation of the
performance of the board, committees and directors was introduced to the Code.
Companies are expected to report how it had been conducted, but no requirement to
use external reviewers.
2010: The Code recommended that FTSE 350 companies should have “externally
facilitated” reviews at least every three years.
2011: FRC’s ‘Guidance on Board Effectiveness’ made recommendations on the
scope of the board evaluation.
In parallel, PRA/ FCA have promoted board evaluation in the financial services
sector.

2018 UK Corporate Governance Code (1)
Principle L
“Annual evaluation of the board should consider its composition, diversity and how
effectively members work together to achieve objectives. Individual evaluation should
demonstrate whether each director continues to contribute effectively.”
‘Comply or Explain’ Provisions
21. There should be a formal and rigorous annual evaluation of the performance of the
board, its committees, the chair and individual directors. The chair should consider
having a regular externally facilitated board evaluation. In FTSE 350 companies this
should happen at least every three years. The external evaluator should be identified in
the annual report and a statement made about any other connection it has with the
company or individual directors.

2018 UK Corporate Governance Code (2)
‘Comply or Explain’ Provisions (continued)
22. The chair should act on the results of the evaluation by recognising the strengths and
addressing any weaknesses of the board. Each director should engage with the process
and take appropriate action when development needs have been identified.
23. The annual report should describe the work of the nomination committee, including…
how the board evaluation has been conducted, the nature and extent of an external
evaluator’s contact with the board and individual directors, the outcomes and actions taken,
and how it has or will influence board composition.
Guidance on Board Effectiveness (2018):
More detail on the scope and process of board evaluation.

Use of external reviewers (1)
Source: Annual Review of Corporate Governance and Reporting; Financial Reporting Council (October 2018)

Use of external reviwers (2)
“There were 32 external board evaluators active across the FTSE 350. They include
dedicated board evaluators, one-person firms, larger organisations, academics, and one
search company…
Four organisations undertake 63% of all board evaluations; two-thirds of these are
completed by just two firms…
One organisation completes 30% of all evaluations.”
“There is little evidence that assessment methods are evolving; this is a cause for
concern as it suggests that evaluations might not be bringing truly fresh perspectives.”
“Just 41% of FTSE 350 companies provide good or detailed explanations of how their
board, committees and directors are annually evaluated.”
Source: Corporate Governance Review 2018; Grant Thornton (October 2018)

Areas of concern
• The quality and quantity of independent board reviewers.
• The robustness of their methodologies.
• Potential conflicts of interest.
• The willingness of companies to allow reviewers to carry out a genuinely independent
review, and to act on the findings.
• The usefulness of public disclosures to shareholders, regulators and others.

Carillion – 2016 Annual Report
Corporate Governance report (p56) - Board and Committee performance evaluation
“The Board undertakes a formal review of its effectiveness and that of its Committees on
an annual basis. The 2016 performance evaluation was conducted by Linstock Limited,
an independent corporate advisory firm, which the Board has used for a number of years
to undertake the annual evaluation.”
“The 2016 evaluation confirmed that the Board remained highly effective with its
performance having further improved during the year.”
“Some of the key strengths highlighted by the 2016 evaluation included … the Board’s
approach to risk management and internal control …The evaluation also confirmed that
the Board’s performance and effectiveness had further improved during 2016.”

Carillion – 2016 Annual Report
Chairman’s Introduction to Corporate Governance (p49)
“The annual review of Board effectiveness is an important process for helping to identify
key areas for future improvement or focus. The 2016 review was led by myself and
facilitated by Linstock Limited, an independent corporate advisory firm.”

The Government’s request to ICSA
“The Government will take steps in partnership with stakeholders to strengthen standards
for independent board evaluations and consider also whether shareholders should have a
role in the appointment of an external evaluator. Independent reviews should add fresh
perspective and new ways of thinking to boards and can be particularly useful where there
is a new chairman or there is a known problem around the board, or there is an external
perception that the board is ineffective.
The Government invites ICSA: The Governance Institute to convene a group
including representatives from the investment community and companies to identify
further ways of improving the quality and effectiveness of board evaluations,
including the development of a code of practice for external board evaluations.”
Source: ‘Insolvency and Corporate Governance: Government response’ (August 2018)

ICSA Review: Questions to consider
• Is a code of conduct for board evaluators really what’s needed?
• Is there really a problem with external board evaluation or just an expectations gap?
• If there is a problem, does the fault lie mainly with companies or reviewers?
• If there is an expectations gap, can it be narrowed by more robust processes or more
useful disclosures?
• How can you make external board evaluation more robust without increasing costs for
companies or reducing competition between service providers?
• How can you be sure that disclosures are reliable?

ICSA Review: Possible outcomes
The ICSA is required to submit a report and recommendations to the Government. It might
include:
• A code of practice for providers of board evaluation services.
• Suggested arrangements for monitoring the implementation and impact of the code.
• Voluntary principles to be followed by companies when engaging external reviewers.
• Guidance for listed companies on the disclosure requirements in the UK Corporate
Governance Code.
Consultation is expected to begin in early May.

Thought leadership from ICSA
Thank you

Boardroom Dynamics
Dr Jeremy Cross
ICSA Guernsey/Jersey Conference 2019
jeremy@bailiwickconsulting.co.uk

Bailiwick Consulting Boardroom Dynamics – May 2018 jeremy@bailiwickconsulting.co.uk
Contents
1.  Why boardroom dynamics?
2.  Defining boardroom dynamics
3.  Your boardroom dynamics challenges
4.  The ABCDE of boardroom dynamics
5.  A board meeting pre-flight checklist

1. Why boardroom dynamics?
•  Corporate failure (even when companies ticked all the boxes)

“Any Chairman who is
described as charismatic
immediately rings alarm
bells for me. Charisma is
very close to narcissism so
the psychological need to
be the centre of attention
comes into play” (Cross,
2013)

If incompetence is not having enough of some important characteristic, for
example conscientiousness, then derailment is usually having too much of a
characteristic.
•  S: Special (believes he or she is special and unique)
•  P: Preoccupied with fantasies (of unlimited success, power, brilliance, etc.)
•  E: Entitlement
•  C: Conceited (grandiose sense of self-importance)
•  I: Interpersonal exploitation
•  A: Arrogant (haughty)
•  L: Lacks empathy

•  Evolution of governance codes

‘…it is remarkable that there is
practically no guidance in the
Code on the main drivers of, and
factors affecting, boardroom
behaviours… Encouraging best
practice boardroom behaviours,
are critical aspects of corporate
governance, but seem currently
to be a neglected area’.

•  Shift in governance research and practice
‘The gap between the contributions of theory and what practitioners are interested in
seems to be widening… Both agency and stewardship studies typically do not reflect the
dynamics of governance – the interplay of power, conflict and ideology’. (Bob Tricker)

•  Shift in governance research and practice
•  Interest in human/behavioural factors

2. What is boardroom dynamics?
noun
‘The theory and application of the behavioural aspects of board functioning’
(Cross, 2019)

Board
demographics
Do directors have
capacity,
capability and
are they well
connected?
Board
structures
Does the board
and committee’s
have appropriate
configuration
and are they
compliant?
Board
attributes
Do directors
display
competence,
commitment and
character?
Board
dynamics
Does the board
model a culture
of cohesion and
challenge?
Technical – ‘on paper’
BoardIndividual
Behavioural – ‘in practice’
11 C’s model
of corporate
governance
(Cross, 2019)

“The presence of expert members may actually decrease team effectiveness if
members are not helped to use the experts’ special talents”
(Wooley et al, 2008)
‘Reading the mind in the eyes’
https://socialintelligence.labinthewild.org

‘Leadership is a potent combination of strategy and character. But if you must be
without one, be without the strategy’.
General Norman Schwarzkopf, leader of the coalition forces in the Gulf War
Professor Roger Steare, the Corporate Philosopher in Residence and Professor
of Organisational Ethics at Cass Business School.

‘Governments and business leaders who build a cage of laws, regulations and
internal processes become high risk, dysfunctional, mindless, fear driven,
bureaucratic, totalitarian communities, dominated and exploited by narrow elites’.
So what can boards do?
‘It may also be beneficial for boards to explain the behavioural tone which is
established in the way it engages with shareholders and the management team
and in the actions it takes. This can be seen as a statement of who we are and
what we stand for. In this context, boards may wish to explain what management
style and behavioural norms they encourage and what behaviours they will not
tolerate’.
Steare (2012)

2. What is boardroom dynamics?
noun
‘The theory and application of the behavioural aspects of board functioning’
adjective
‘The interactions between board members individually and collectively and how these
influence, and are influenced by, their wider stakeholder system’.
(Cross, 2019)

Chapter 3:
Board
demographics
Chapter 2:
Board
structures
Chapter 3:
Board
attributes
Board dynamics
C4: Board cohesion
and challenge
C5: Decision making
C6: Stakeholder
conversations
C7: Board culture
C8: Diversity
C9: Board
environment
Technical
BoardIndividual
Behavioural

3. Your boardroom dynamics challenges
Board dynamics
C4: Board cohesion and
challenge
C5: Decision making
C6: Stakeholder
conversations
C7: Board culture
C8: Diversity
C9: Board environment
What kinds of boardroom
dynamics-related issues do you
find the most challenging?

4. Boardroom dynamics ABCDE
Some key evidence-based summarising principles of how to develop high
performing boardroom dynamics include:
AASK WITH
HUMILITY
DON’T
advocate with
ego
BBUILD
RELATIONSHIPS
DON’T block
relationships
CCHALLENGE
THE ISSUE
DON’T clash
with the person
DDECIDE WITH
EVIDENCE
Dictate with
bias
EEVALUATE
DYNAMICS
Evaluate
structures

5. A board meeting pre-flight checklist
1. Set meeting date and co-create (initially with chairman but also all directors) the meeting
goal/purpose/theme focus and agenda
5. Circulate the confirmed agenda and timings (ideally morning, 3-5 hours with pre-meeting
coffee time and breaks), along with board material, in good time prior to the meeting
7. Arrange appropriate complimentary refreshments
9. Start of meeting: start on time even if attendees have not arrived; ensure refreshments can
be self-served before/during the meeting (for feelings of ownership and so as not to distract
others); complete a meeting agreement on the tasks and behavioural ground rules (including
ethics and technology use)
11. End before or on time (having reviewed meeting agreements)

www.icsa.org.uk/shop/books/updated-qualifying-programme/
boardroom-dynamics
23

Thank you
Dr Jeremy Cross
ICSA Jersey/Guernsey Conference 2019
jeremy@bailiwickconsulting.co.uk

Family office governance
A presentation for the ICSA Guernsey Conference 2019
1st May 2019
Heath Martorella ACIS, Ch. MCSI, Dip. M
Head of Family Office, Bellerive Trust
heath.martorella@bellerivetrust.com

2
• Ernst & Young “at least 10,000 single family offices” around the world, at least half of
which were set up in the last 15 years
• Cerulli Associates: Multi-family office assets totalling $668bn end-2017, up 70% over
the previous 5 years
• Drivers include – new wealth, often from APAC and emerging economies
• India – 31 new Indian billionaires added to the Hurun Global Rich List in 2018. Family
offices are a status symbol
• Wealth in transition: estimated $16 trillion of wealth to be transferred from baby-
boomer entrepreneurs to heirs in US alone
The growing trend in family offices

3
The growing trend in family offices
Source: www.ifc.org

4
What is a family office?
• Selected individuals / a private entity with the mission of streamlining and addressing
complex wealth management needs for its associated family
• To centralise decision-making for high/ultra-high net worth family wealth
• Formal governance and management structure – in contrast to the informality of
principal / family oversight only
• Aims to align family interests around shared mission and objectives
• Layer above all other relationship / service providers – lawyers, accountants, bankers,
investment managers. Family office will not have conflicts of interest.

5
• Separation between any family-owned business and private family wealth
• Plan and execute wealth transfer between generations
• Centralise reporting / administration. Concierge/lifestyle services can be added if
required.
• Aims for cost-reduction, economies of scale
• Aims to increase investment returns – IPS, more rigorous investment selection,
oversight, fee negotiations

6
Source / adapted from: thetaxadviser.com
Family office scope of services
Concierge
services
• The principal / family must decide which services it expects from its family office

7
“In many cases the role served by the family office represents the
administrative wing of the family’s government ..its “Civil Service” ..so that its
members enjoy the benefits of a coordinated supply of services.”
– KPMG Australia
(Source: The family office as a ‘Civil Service’ – Bill Noye)

8
“Civil service” risks:
• Risk of family office benefits being outstripped by expertise of third parties, office staff
may not pass knowledge and expertise to family
• Risk of focussing on needs of dominant family members only
• Family members may complain at cost of the family office
• “Service creep” concerns from family office executives

9
• Estimated assets of $100m+ needed to justify costs of establishing and running a
single family office
• Annual costs are estimated at 80 – 100 basis points (e.g. $1m on $100m)

11
Unstructured Family Office
• The principal (family patriarch / matriarch) starts to internally ring-fence some assets,
for investment and future wealth transfer to the family.
• Often a desire to keep costs low, avoid “institutionalising” with investment managers,
custodians etc.
• Full control by the principal, changes can be made quickly to strategy / investments /
spending plans. This can be attractive at outset.
• No tension / expectations between informality (family nature) and formalities that
would be required for family wealth management and governance. Costs, legalities,
recruitment etc. to set up a family office are avoided

12
Unstructured Family Office - challenges
Challenges
• Lack of ring-fencing - no separation between principal and their wealth
• Treasury - lack of separation between corporate treasury / family wealth (if family
business will be a key asset)
• No governance - to take into account different family interests / needs, or to manage
conflict
• Heightened risk of family disputes – principal is sole decision-maker, time horizon
• No economies of scale and knowledge advantages – inherent, as pot of wealth is
managed in isolation
• Unstable structure, revolves around principal:
• Investment strategy, choices, spending plans will cease upon death / incapacity
• Rapid distribution of wealth – subject to principal’s will – possible disputes
• Any trusts etc. will lack an overall family mission – skewed to wishes of principal

13
Embedded family office
“It is not uncommon for business owners as they become increasingly successful to have
capable trusted personnel within their companies handle their personal affairs. Many
times, these employees perform the same function as a single-family office. When this is
indeed the case, the business owner can be said to have an embedded single-family
office.”
Source: www.forbes.com (R Price)

14
Embedded Family Office
• The principal selects employees within his/her family business to help manage the
family wealth (e.g. CFO, Finance Division, General Counsel)
• Most common in Asia, Latin America and the Middle East, where separate family
offices are not as commonplace
• Trusted employees - cost effective and convenient management
• Likely stability of the “structure” if employees are long serving -
management/investment functions should outlast the principal

15
Challenges
• Mission creep – employee time and effort trying to serve the interests of both the
principal/family and the business = double workload
• Lack of ring-fencing of family wealth - private expenses, investments for family
structure etc. are paid by company (drawings) – ambiguous governance. Reverse
situation if business struggling – family wealth at risk
• Inefficiencies - employees of family business may not be fully skilled to manage private
wealth - dealing with different investment types, personal taxation, fiduciary matters
etc.

16
Challenges
• Low visibility / fiduciary oversight - Employees reporting to patriarch/matriarch in the
business may not know the wider family expectations, financial needs, conflicts.
Decisions driven by principal – difficult to challenge. Key issues and family conflicts
might not be visible to family office personnel
• Privacy / impartiality – possible issues for family members dealing with principal’s
employees

17
Single family office
“A Single Family Office (SFO) is a private structure created to oversee personal financial
matters for family members”
Source: Association of International Wealth Management of India (AIWMI)

18
Single Family Office
• The principal decides it is time to formalise and professionalise management of the
family wealth for the long-term, using a private structure.
• Typical assets required are $100m+ to justify annual costs, which are estimated at 80
– 100 basis points p.a.
• Founders can create an organisation to serve the needs of themselves and family
• Separation between the principal and family wealth (also between family wealth and
corporate assets / treasury of any family business)

19
• Strong control element at outset as the principal can be involved in creating the
structure, hiring personnel and selecting external advisors. Each structure is different.
• Creation of family office as a “unifying force”. Adult children should become involved
in shaping the structure and objectives as it evolves
• Regulating access to family wealth – requests must be consistent with family mission,
values etc.
• SFO funded initially by capital contributions / loans, but general objective is that they
should become self-sustaining. Consideration needed between break-even model or
profit motive
• If SFO is providing investment advice just to family structures - unlikely it will need to
be regulated. There are no third party investors / external fee charging

20
Challenges
• Establishment and ongoing expenses are solely for the family
• Principal is responsible for recruitment, motivation and incentivisation of staff
(particularly non-family employees)
• Operational risk – framework and accountability rests with the principal

21
Single Family Office > “Hub-and-Spoke” model
• If permitted / agreed within family, adult children will establish a satellite SFO, with
different investment focus
• The parent SFO will continue to function as the hub for wealth planning expertise,
reporting and administrative support, co-ordinating lifestyle services

22
Source: aafmindia.wordpress.com

23
Multi-family office
“A Multi-Family Office (MFO) is a commercial enterprise established to meet the
investment, estate planning and, in some cases, the lifestyle and tax service needs of
affluent families”
Source: Association of International Wealth Management of India (AIWMI)

24
Multi family office
Source: alphacapital.in

25
Multi family office – most common
• “A multi-family office is a privately controlled and commercially operated organisation
which employs staff, and offers support to a number of wealthy families with the
organisation, management and maintenance of part or all of their assets, needs and
wishes”
Source: FOSS Family Office Advisory
• MFOs will often have enhanced investment capabilities – either investing family
monies themselves, or defining strategy and outsourcing investment mandates to asset
managers (or a combination of both).
• A chief investment officer and other professionals will be employed, the cost base is
supported as the MFO has 2 or more income streams from different families it works
for.
• MFOs will often have different specialisms e.g. private equity, charitable/philanthropic
functions, real estate. These specialisms will often follow from the MFO owners.

26
Multi family office
• Economies of scale – cost-reduction re. premises, staff. Ability to pool assets to achieve
fee reductions from investment managers, service providers, etc.
• MFO’s providing investment advice to multiple family clients – will likely need to be
regulated in their jurisdiction

27
Multi family office
Variants
• Commercial MFO – most common type, objective is to make operational profit. Usually
staffed by professionals with different areas of expertise – accountants, investment
managers, wealth planners etc. Independent approach. Estimated 95% of MFOs are
commercial, a number are also owned by banks.
• Private (“closed’”) MFO – established jointly by a group of families. Or, other families
will join an SFO at a later stage to share costs. Cost centre only, no profit objective.
• Virtual MFO – group of independent professionals acting together, balancing expertise
and input between themselves. Flexibility and adaptive, no staff/fixed costs but
someone needs to co-ordinate inputs/outputs between the various hubs.
Or, these can operate completely independently of each other, but the Principal (+ 1 or
2 dedicated staff) must coordinate activities / reporting of overall picture.

28
Multi family office
• Virtual MFO via Private Trust Companies / Foundations in multiple locations
(also involving family member and family adviser)
Private Trust Company / Foundation
Professional fiduciary Family adviser Local adviser
Trusts
Companies
Quoted investments Alternatives: PE / HFs Real Estate IP rights
Acting as Trustee
Directors of PTC / PTF
Family member

29
Other family office examples

30
Private investment entities > evolving to SFOs / closed MFOs
• Hedge funds, private equity funds redeeming external investors and family(s) running
their own money
• Once established, these may evolve from money management to include other
services – administrative, lifestyle, wealth planning etc.

31
Another way…? A “listed family office”
• Berkshire Hathaway (c. $500bn mkt cap, Most respected Company in the World 2007 – Barrons):
“We’d be the last guys in the world to have a family office”
- Warren Buffett (c. 98% of net worth invested in BH)
“We already have a family office, it’s sitting right here”
- Charlie Munger (“majority of family wealth” invested in BH)
• “Owner’s Manual” – business principles, economic goals, “fiduciary obligations”
• BH website - corporate governance documents incl. Code of Business Conduct &
Ethics, committee charters inc. Compensation rules

32
Another way…? A “listed family office”
Pros:
• Long term investment management
• Stable IM team with succession planning
• Unitised & publicly listed asset (stock)
• Strong governance, audit, regulatory obligations (NTSE, SEC)
• Family members cannot “invade” the investment company by way of influence /
disrupting underlying assets
Cons:
• Single investment, conservative strategy. Some family members may want
exposure to other asset classes – e.g. PE / HF
• Future wealth transfer to family members not addressed
• But this simpler to achieve with unitised investment, rather than a basket of
privately-held assets

33
Private investment vehicles
• A similar arrangement can be achieved with a private investment fund, to unitise
underlying assets under centralised investment management.
• Shares can be allocated to family members in different proportions, which may change
over time as the principal decides to divest wealth, also when younger family members
attain certain ages, have children etc.

34
Ownership and fee-charging
• Ownership – SFO usually owned by family itself.
• Care however that direct ownership by the principal / family members does not create
any management / control issues for fiduciary structures which the family office might
oversee

35
Integration with fiduciary / other structures
• Care with embedding any family office into a fiduciary / investment holding structure –
governance issues / potential conflict with director / trustee duties
• Also risk of permanent establishment (taxation) depending on function and location of
family office e.g. investment advice
• “Advisory” functions are optimal, also perhaps very limited powers e.g. addition /
removal of beneficiaries, change of trustee
• Ensure family office is authorised to pass on / issue requests on behalf of family
members to trustees, fund administrators etc.

37
Succession planning
• Always a key governance concern for family offices – issues include:
• Control - Is the founder ready to give up control over the family wealth (which may
include a family business)?
• A difficult discussion – in some cultures, discussing the transfer of wealth and planning
beyond one’s demise is considered taboo. Time and diplomacy essential.
• Capability / interest - Possible resistance from next generation to become directly
involved with any family business / wealth. They may be more highly educated (e.g.
foreign university), more exposed to technological developments, possibly Western
management practices, governance etc.
Either external management, or a complete exit may be needed from the family
business, with focus on managing wealth post-sale / IPO / MBO, via the family office.

38
Succession planning
• Poor tax planning – possible tax charge on wealth transition, assets may need to be
sold if planning has not been undertaken, or is ineffective.
• Loss of Family mission, values – from the 4th generation onwards (if wealth has
survived) – high probability there may be little or no emotional connection with the
founder and their values, achievements etc. as well as the overall mission
(Note: Berkshire Hathaway - good example of enduring mission / values)
• Trust & communication - strong levels of trust and good communication between
founders and next-generation will create backdrop for effective succession planning.
New ideas can be explored with the foundation of strong business/wealth
management – new innovations.

39
Succession planning
UBS / Campden Wealth – Global Family Office report 2018 (300+ FOs questioned)
• 29% of next generation already hold a management or executive position
• 23% sit on the board of a family office
• As at 2016: 70% expected next generation to take control of wealth within next 10 –
15 years (2026 – 2031)
• Asia-Pacific – only 39% of family offices have a succession plan, lowest of any global
region
____
• Positive for investment – 1/3rd already have exposure to impact investing. 39% expect
to increase allocations to impact/ESG investments. ESG metrics becoming important to
next generation.
• Philanthropy / Charitable objectives – next generation experience, helps bind family

40
Data and cyber-security
• 69% consider family data, confidentiality and ID theft to be key. 15% of family offices
reported cyberattacks (UBS / Campden Wealth – GFO report 2018)
• Lack of formalised governance – can result in few rules and insufficient training on
information security
• ‘Rapid response’ culture – careless mistakes can arise as family office personnel are
often expected to reply quickly to family principals, including out-of-hours
communication. Possible avoidance of cybersecurity checks / best practice if this might
impact response times
• Underinvestment in IT systems / training - the family office will usually operate
separately and remotely from the family / family business, for closer access to
particular markets / investments
• Wealth attracts publicity – despite best efforts to remain private and choose generic
family office names, family members can be easily identified

41
Reputation management
• 49% of family offices concerned about managing the family’s reputation (UBS / Campden
Wealth – GFO report 2018)
• 24/7 media – a “slip of the tongue” can go viral in minutes and be recalled for many
years into the future. The “old days” were often about avoiding the paparazzi
• Flaunting wealth – younger family members posting pictures of themselves with luxury
cars, enjoying private jet travel etc.
• Educating family members / family office and understanding media scrutiny are
essential

42
• Dispute resolution – best done internally. Not dragged through courts with exposure of
family wealth and conflicts to the public
• Ideally, DR this should be formalised in a family governance charter and supported
privately by professional mediation/ADR as necessary.
See the public battle for control of Aldi Nord in Germany, between warring factions of
the family:
o Widowed sister-in-law is buying lavish cars, artwork etc. vs the eldest son of the
founder who continues to uphold his late father’s values of thrift.
o Dispute re. control of 2 trusts - could affect company strategy as both sides need
to sign off on future investment plans
o Son has broken “family code” of confidentiality
• Lack of, or breakdown of - shared family mission, values, dispute resolution

43
• Co-investors – visibility needed on co-investors in smaller PE / club deal situations. One
bad apple can contaminate the investment and the good reputation of other investors.
Can also happen with loans to family friends / colleagues from fiduciary structures
• PEPs / CIPs / HPIs - must be whiter than white, both re. media and tax reporting etc.
Pay bills on time!
• Ethical / ESG investing – risk of family being associated with businesses / investors who
are under scrutiny.
• Domicile of family office / fiduciary structures – considerations include: Jurisdictional
reputation, quality of courts and appeals process, common law, Data protection
standards, Governance standards, Effective (and demonstrable) decision-making,
quality of staff.
Avoid “Dirty Deeds done Cheap” (AC/DC, 1976)

44
1. Staff performance objectives - Remuneration/bonuses of CEO, CIO & other senior
personnel linked solely (or closely) to NAV only
2. Conflicts of interest (investments) – avoid scenarios where CEO/senior personnel might be
offered co-investment for their own account, alongside family money
3. Family transparency - Other family members unaware / uninvolved in family office /
wealth structuring. No shared family mission/objectives, can cause major challenges after
death of principal
4. Selection criteria – at the outset, SFO staff and service provider appointments can often
be based solely on trust and friendship. Need other skilled – and independent – personnel
to add other skills and expertise, and challenge decision-making if necessary
5. Wholly-owned interests / businesses – may have own finance functions, but internal audit
may be a safeguard to validate MI coming up to the family office – potential for fraud
Warning lights…?

45
Concluding thoughts
• Planning for the transfer of wealth is very emotive for HNW/UHNW individuals and
families – creating a family office won’t be ‘front of mind’ at the outset
• Importance of agreed family mission and protocols – regulate control, management
and access to family wealth through successive generations
- best chance of ensuring wealth survives
• “It all boils down to people… Effective, Resilient and Adaptive are the three building
blocks of stunning SFO success” – Angelo Robles, Family Office Association

46
Concluding thoughts
• Complexities and challenges with establishing and running family offices and
associated structures – but they are highly desirable as clients:
• Opportunities to establish SFOs/MFOs – ideal to be involved at the outset
• Various services that banks, investment mangers, trustees etc. can offer
• Very long-term relationship, “patient capital” for investment

47
• Guernsey is ideally placed for the formation of SFOs / MFOs and wealth-holding
structures – strong reputation, well-established laws and regulations, governance,
time-zone etc.
• Proximity to London as key advisory centre for global HNW/UHNW families
Concluding thoughts
• ICSA – opportunity to play an important role in family office governance, utilising
expertise re. listed company governance

48
Thank you for listening
Questions…?

49
Please note this presentation is a summary of the subject and is provided for information only. It does not constitute any form of legal,
taxation or other professional advice. Whilst every care has been taken in producing this presentation, neither the author nor Bellerive
Trust Limited shall be liable for any errors, misprint, or misinterpretation of any of the matters set out in it. Professional advice must be
sought before taking any action regarding the subjects discussed in this presentation.
Bellerive Trust Limited is licensed and regulated in Guernsey by the Guernsey Financial Services Commission.
© 2019 Bellerive Trust Limited. All rights reserved.
Disclaimer

An Introduction to Coaching Skills for
Governance Professionals
Lesley Ward

Why does using coaching skills work?
• Solutions focused
• Individual finds own solutions
• Stretching
• Future looking
• Positive
• Helps individuals understand own strengths and how to use
them
• Change is difficult – supports the building of new habits

IDENTIFY
GOALS
WHERE AM I
NOW?
EXPLORE
ALTERNATIVES
TAKE
ACTION
REFLECT
ACHIEVE
GOALS
ENERGY!INSIGHTS
How does it work?

GROW Model
G OAL What do you want?
R EALITY Where are you now?
O PTIONS What could you do?
W ILL What will you do?
GROW Model
John Whitmore

Using coaching well
• Ask powerful questions to raise awareness and promote
responsibility
• Allow silences
• Listen carefully
• Check understanding/clarifying
• Don’t assume
• Be prepared to abandon your own agenda
• Be open minded and see situations from their perspective
• Willing to adopt a different approach

Goal questions
The purpose of goal questions are to :-
• agree the topic of discussion/the goal for the session as well as short and
long term goals
• establish why the goal is important for them to encourage commitment to
action
“What would you like to change?”
“Where would you like to be at the end of this discussion/next week/next month/next year
“What end result are you looking for?”
“Why is this important to you/the company?”
“How long have you been thinking about it?”
“What difference would it make?”

Reality questions
In order to review the current situation
“What is happening at the moment?”
“How do you see things at the moment/what is your view of the current situation?”
“What is working/worked in the past?”
“What isn’t working?”
“What feedback have you had?”

Options questions
In order to explore the different options available
“What could you do to change the situation?”
“Who might be able to help?”
“What opportunities do you have to learn and practice?”
“What else could you do?”
“What are the advantages and disadvantages of each option?”
“If that option won’t work, what will work?”

Will questions (action questions)
In order to agree specific actions
“What action are you going to take?”
“What are the next steps?”
“Precisely what will you do, when?”
“What support do you need?”
“How can I best support you to achieve this action”

Let’s try it…….
In pairs:-
1 x coachee
1 x coach
“What do you most want to change as a
result of being here today”
10 minutes each

Using coaching skills at work
Governance
Professionals have a
uniquely challenging
role!

Using coaching skills at work
• Managing upwards
• Difficult conversations
• To help your team become high performing and able to
think for themselves
• To help you work through dilemmas or to process new
information

Duncan S Smith FCIM
CIPP/E
iCompli® Ltd.
What are the RISK and
OPPORTUNITIES
presented by emerging
technologies?

@icompli
This is the title
This is the title
• 2018 John Hancock
stops underwriting
traditional life insurance
• Only sells interactive
policies that track fitness
and health data through
wearable tech
No Fitbit, No Insurance.

@icompli
This is the title
This is the title
• Steam – Science –
Digital – Cyber-physical
systems
• the exponential rise of big
data, artificial intelligence
and connectivity
The 4th Industrial
Revolution.

@icompli
‘Exponential’ - Maths 101
4
Sinclair Johnson 2016
Exponential
gets faster
and faster

@icompli
5
No longer ‘just a Telco’, now
a Data Company competing
with Google and Facebook
Verizon collects browsing,
location, interests and other
personal data for marketing
purposes.

MARKETING
Technology is
reshaping sectors

@icompli
7
Feed inferences back in to input
data for subsequent analysis
INFERENCES
ACTIONS
ANALYTICS
PERSONAL
DATA
Opaque or hidden
from users
Actions affect
subsequent behaviour

@icompli
8
INFERENCES
ACTIONS
ANALYTICS
• Anti discrimination law
and pricing algorithms
• Consumer protection
law and pricing
algorithms
• GDPR and non-material
damage and distress
• Reputational damage
• Industry codes of
practice

@icompli
http://www.pnas.org/content/110/15/5802.figures-only
PNAS vol. 110 no. 15 > Michal Kosinski,
5802–5805, doi: 10.1073/pnas.1218772110
• Basic digital records
of human behaviour
• Can automatically
and accurately
predict personal
attributes
• Attributes people
assume to be private

@icompli
Apply a little Magic Sauce
https://applymagicsauce.com/prediction

@icompli
• Integrated with a
RealSense™ camera
• real-time consumer
behaviour/demographic
reports
• Facial recognition
identifying age, gender
and location
https://www.aaeon.com

@icompli
One of the first clues for type
2 diabetes may be a small
amount of bleeding in the
retina
Certain types of
bleeding in the retina
can signal leukemia
the dilation level of the
eyes is considered to be a
key marker of illicit drug
use

@icompli
Extrovert or Introvert?
"The End of Privacy", Dr. Michal Kosinski

@icompli
This is the title
This is the title
• Technology, algorithm?
• Bias, significant effects,
legal effects?
Wealth screening
services

@icompli
The ‘skill gap’
19
• See the
opportunity
• Manage the
risk

@icompli
This is the title
This is the title
• Seizing Opportunity and
Seeing Threat
• Building Information
Governance Frameworks
My world of Data and
Privacy.

@icompli
21
‘Information
Governance Steering
Groups’
SIRO
Implements the
strategy
Legal
CIO
Enterprise vision,
protecting information
assets and systems
Data Protection
Officer
Font of knowledge,
GDPR go-to-person
Heads of Dept.
Data Flows, supply
chains and
partnerships
Information Asset
Owners
Data Flow detail and
use-cases
Reports to the
Board

@icompli
Who ‘sweats’ the detail?
• GDPR applies to profile creation even if you don’t do any
decision-making.
• Profiling has to FAIR and TRANSPARENT
– Discriminating, Understood, logic explained, bought to their
attention?
• Must have a LAWFUL basis for profiling
– Consent, legitimate interest?
• Must advertise and facilitate an ‘opt-out of profiling’
mechanism

@icompli
Is your profiling fair? Safeguards!
• Your statistics will be challenged
• ‘appropriate technical and organisational measures’ to
spot inaccuracies and minimise the risk of errors in
profiling
• DO NOT discriminate on the basis of racial or ethnic origin,
political opinion, religion or beliefs, trade union membership,
genetic or health status or sexual orientation’
24

@icompli
Significant effect?
• Does the automatic
decision making (based
on profiling) required to
show this ad present a
problem?
• Significant or legal
effects?

@icompli
This is the title
• ‘Visionary’
• Data ‘wrangler’
• InfoSec
• IGF e.g. the rise of the Chief
Privacy Officer and DPO
developing a privacy strategy
Acquiring expertise to
LEAD.

@icompli
This is the title
This is the title
1. Retained subject experts
(DPO)
2. Millennials ‘paired’ with
senior leadership team
3. NED appointments
4. Board briefings – short,
sharp, ‘searching’
Do this!

@icompli
iCompli® Limited
‘Developing your Privacy
Strategy
Protecting your reputation’
www.icompli.co.uk

Thank you
Lesley Ward
Email: lward@icsa.org.uk
Tel: 07852 323322

ICSA Guernsey Conference 2019 - Updated presentation slides

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