Family Offices in Portugal for High-Profile Clients in 2020

A family office (FO) in Portugal is quite a new service, and it has not yet earned much popularity among potential customers. But this does not mean that such an extremely interesting and profitable service will remain unclaimed. Rather, on the contrary: after a short period of familiarization with its benefits, the target audience will inevitably recognize all its undeniable advantages. So it is quite realistic to expect soon the explosive growth of interest in family offices that can be set up in Portugal for foreign High-Net-Worth Individuals and high-profile families.

Family offices are more frequently encountered in jurisdictions that are considered conventionally rich – Great Britain, Singapore, Hong Kong, Monaco, UAE, and Switzerland. Portugal is not qualified as a wealthy nation yet. It would be more appropriate to call it a developed European state with a highly favorable environment for life and business. And, most importantly, it maintains a sustainable economy, politics, finance, and steady relations with the neighbors. This is what wealthy customers value more than the world rankings or availability of luxury hotels and famous brands. So, family offices are destined to become more commonplace in Portugal soon.

But what are they like? What services do they provide to their clients? What kind of entities are their clients? Why exactly would they settle down in Portugal seriously and for the long haul?

Family Office: Definition

The phenomenon that we are discussing today has not been clearly defined yet legally, although family offices emerged at the end of the XIX century, and their elements had appeared even earlier – when the industrial revolution began and a class of wealthy people, not necessarily business people, with a sufficient level of own (and not borrowed) assets was formed.

To grasp the essence of the family office service, let us approach the definition indirectly – through the following analogies.

There are many professionals to whom we refer for help in many important tasks. Every serious businessman has a personal secretary who deals with organizational matters. A concierge’s job is to meet the hotel guests’ wishes and requests. Ticket offices and travel agencies reserve seats on the plane. Without food delivery services (as well as equipment, clothing, home fuel, other goods deliveries on orders) we would not be able to do online shopping.  If you trade on the exchange, you probably have a personal broker. A private solicitor settles your business and legal matters, whereas barristers advocate on behalf of their clients in court. There is a team of managers through whom you run your business. You hire many other specialists and experts whose professional services make life truly comfortable.

However, hiring is not enough. You need to negotiate with each of them, somehow control their performance, give instructions, and develop a strategy. Such chores take your time, which is the most valuable and important asset we all are short of. Moreover, the numerous subtleties require your attention and insights and often increase the likelihood of risks and errors.

Family offices were invented as a solution to many challenges when various issues need to be solved and all arrangements made (from booking a table at a restaurant to managing a package of shares). In countries, where the standard of living is not high enough, there is little demand for family offices, and they have not taken root. But in rich jurisdictions, this service is either actively developing, or is in the process of formation.

Family Offices in Portugal

The Portuguese family offices are about the same as FOs in other countries. Although they all feature unique specifics, the subtleties inherent to local family offices do not change their main concept of an integrated solution to whatever issues may arise. In other words, when planning your family office in Portugal you are entitled to and will be able to choose the same set of services and tasks as elsewhere in the world.

Would you like to book a specialist who will breed alligators in your yard or a painter who will repaint the exterior a different color every day? Or do you want to trade on the stock exchange relying on specific data from agents? No problem at all. There is no need to ask your secretary to search for the right people on the Internet. It takes just one call to the family office to get any of your wishes fulfilled. In this respect, a comparison with the Aladdin genie lamp’s flawless performance would be the most accurate analog of the efficiency of the family office.

The Main Categories:

• By the number of clients served: single-family, multi-family.
• By the type of staff: private (closer relations of the in-house personnel with the customers), outsourced (a group of external specialists remaining conditionally independent).

The organizational structure is usually determined by the complexity and scope of the tasks. There is a difference between whether you want to arrange a support service for a family living in one city (Porto, Lisbon, Albufeira, etc.) and often in one big house, or whether you are a member of a multinational clan scattered across several continents.

Another important concern is about costs. A family office in Portugal is a rather expensive venture, and one should consider in advance if the associated expenses could remain affordable in the long term perspective.  In many cases, it turns out to be quite reasonable to join the existing family office (if there is the consent of other participants, and if the period of integration procedures taking 3-4 months is acceptable), rather than to organize your own one, which can take much more time – up to 1 year.

Payment Methods

There are several ways by which you can pay for services rendered by the family office. Besides, a combination of standard options is also possible. In any case, the service is quite expensive. Prices are gradually declining (due to the impact of the COVID-19 pandemic), but it’s still too early to talk about them becoming affordable by any family.

On the other hand, the fees cover the all-inclusive service available for a long time and the guarantee of confidentiality and security. Many clients say that the ultimate convenience of a family office is worth the money that they pay.

Standard Fees:

• By the hour. Actual costs depend on the complexity of tasks and the category of performers. This is the most reasonable payment method for occasional users. For frequent users, it would be too expensive if the service is booked for a sufficiently long period. The main advantage of this scheme is transparent accounting.
• Fixed price. This format implies annual (or monthly) fees payable for all services that would be rendered in any amount during the fixed period. However, too many services ordered may require an upward revision of the price.
• Percentage fee. This is a high-profile option because it involves quite significant assets managed for a fee which equals some percentage of these assets’ value. However, the general rule is that the larger the asset portfolio, the less is the percentage charged for the services.

Family Office Services

This is perhaps the most useful part of this article, and let us offer one interesting observation. There is no standard list of types or categories of services rendered by all family offices.

However, as we have said before, whatever you come up with – an idea to organize a badminton club on the beach in Cascais, or a plan to buy shares of the most promising startups on the NYSE (New York Stock Exchange) every day at 13:45, your family office can be your reliable support.

As soon as you have all the related arrangements completed, you will see for yourself that any task is attainable if you delegate it to the family office (FO).

Given below is a menu of possible functions you can entrust to your FO professionals.

Wealth Management / Investment 

• Financial status analysis
• Estimation and specification of investment horizons
• Operations with securities that are not traded on the market
• Banking services (e.g. opening accounts of all types)
• Expert assistance in distribution and placement of assets
• Development of a general investment strategy for further activities
• Mandates of both types (discretionary, non-discretionary)

Surveillance and Reporting 

• Consolidated reports on bank accounts, family assets, profitability
• Revenues and income reports according to any required level of details
• Profitability analysis with direct comparison against some reference projects
• Analysis and forecasts of basic financial indicators
• Notification and reports about possible risks
• Reporting online (regular or on specific request)

Estate and Succession Planning 

• Comprehensive expert assistance on any issues related to assets management and administration
• Settlement of potential problems related to inheritance and succession
• Development of a code of rules and regulations that will govern all aspects of asset ownership (including the total family capital)
• Integration in the family / exist from the family
• Organization of general business meetings
• Mentoring and training (including customized individual tutorship)

Planning 

• Structuring and redistribution of capital to optimize the fiscal burden
• Consultations on any legal and related rights (management, distribution, cooperation, division and assignment of shares, etc.)
• Provisions for privacy and protection

Taxes 

• Settlement of issues and problems related to double taxation (business, real estate)
• Tax planning and management advice
• Projects related to fiscal migration of business
• Preparation of tax returns (both personal and corporate)
• Advice on relocations to other jurisdictions

Corporate services 

• Registration of any organization and legal business in Portugal (including the free economic zones) or abroad
• Selection of the most advantageous jurisdictions for complex corporate structures (trusts, foundations, etc.)
• Coordination with local authorities and national regulators
• Control of how the trust providers’ funds are spent
• Trustees’ appointment. If such services are not available in a particular jurisdiction (eg. Indonesia), the client will be offered alternatives that may differ by the risk levels
• Expert management of the portfolio of the family stocks
• Assistance in selecting external guardians and managers
• Selection of premises (for a fully equipped office)

Charity

Charity activities, although they do not produce any tangible commercial effect,can be an opportunity to invest in noble deeds and initiatives. Besides, if certain conditions are met, such a step may lead to tax optimization.

• Profound expert planning of charity activities
• Design of the general strategy
• Preparation and establishment of grant distribution bodies (trusts, foundations)
• Activities aimed at fund-raising of different scope (including crowdfunding)
• Administration and accounting support to charity entities
• Any technical advice and facilitation
• Development and technical analysis of any initiatives in the field of charity
• Open charities that welcome, in case of your approval, the participation of third parties (legal and physical entities)

Relocation to Another Jurisdiction 

• Analysis of current tax rates in alternative jurisdictions (including customized criteria)
• Real assistance in obtaining temporary or permanent residence permits, citizenship, and the tax residence status
• Coordination of interactions with regional and national authorities
• Comprehensive relocation support (house moving chores, transportation/transfers, business relocation, etc.)
• Selection of educational institutions of any type for children – kindergartens (nurseries), schools, universities, training courses, etc.
• Assistance with access to lump-sum tax payments in Switzerland

Real Estate 

• Professional expertise and consultations (please note that any amateur advice can be disastrous)
• Remote access to any property on sale or for rent
• Opportunity to get acquainted with any real estate, which is not mentioned in public catalogs
• Luxury items of the luxury class
• Assistance at any stage of the purchase – from arrangements of a temporary visa and the property selection to the registration of the deal and repair works management
• Assistance in selling the property
• Provisions for turnkey apartments, apartments, and mansions (matching any requirements)
• Safety and security measures and provisions (physical, legal, financial)
• Search for objects by required criteria
• Design of presentations on any property (including the provision of documents)
• Cross-border real estate management
• Programs related to the financing of large and medium-sized projects (for example, through mortgages)

Luxury

It should be noted that the luxury market in Portugal is still not mature, so most transactions are carried out abroad. Luxury items may be any objects, technical devices, transport vehicles, jewelry, animals and pets, works of art, etc. However, it would not be easy to find a family office in Portugal, which serves the premium segment. If you are interested in such a service, we recommend your own family office to be set up.

• Assistance in choosing, testing, and purchasing transport vehicles – planes, helicopters, cars, yachts
• Selection of horses for private stables
• Financing of major projects that require significant investments
• Recommendation of optimal tax schemes
• Compilation of documents for insurance
• Refinancing
• Documentation of deals
• Transfer of digitized materials for remote review of objects, as well as detailed reports on their technical condition
• Organization of restoration work of any complexity (including those involving outstanding professional experts)

Corporate Business Development, Investment 

• Mergers and acquisitions
• Public offering of shares
• Different funding and financing options
• Search for business partners according to specified criteria
• Search for the most suitable options for private investment (optimal balance of risk and future profits)
• Issue of additional shares

Insurance 

• Independent assessment of the existing insurance portfolio and search for alternative options to protect savings/property/assets
• Algorithms of structuring capital and private (alternative) insurance
• Working out together with the client the optimal package of insurance protection
• Optimization of already available means of risk compensation
• Insurance at the international level
• Coverage of personal and corporate responsibility
• Insurance of highly valuable objects and assets (private yachts, aircraft, works of art, etc.)

Property planning 

• Asset structuring
• Marriage contracts and prenuptial agreements
• Pension plan calculations to ensure the achievement of your goals
• Testaments and last will documents (drafting, amendments, etc.)
• Wills compliance services in any jurisdiction (not just Portugal)

Budget management 

• Estimations of wealth by set indicators (the value of the assets, current income and expenses, capital assets and liabilities, etc.)
• Private accounting
• Planning and distribution of financial flows of any kind (personal, corporate, family)
• Planning of current expenses

Administration

• Any support available 24 /7  (by subscription or on request)
• Preparation and submission of accounting and tax reports
• Administrative and desk-work
• Business correspondence, documents, paperwork
• Comprehensive accounting service
• Regular and other payments subject to current legal requirements

Family Matters and Arrangements 

• Tickets and travel arrangements (travel and transfers, accommodation, meals, etc)
• Concierge service of any desired class
• Arrangements of personal contacts and appointments through other similar structures in other cities and countries
• Management of domestic services staff and supervision of their daily activities. This refers to nannies and babysitters, gardeners, drivers, cooks, tutors, butlers and housekeepers, guards, caretakers, handymen, home health aides, etc. – their recruitment, promotion, dismissal, moving to other cities/jurisdictions, etc.
• Personal assistance and support to senior and younger family members (small children, aged parents). This applies to all aspects of their life: nutrition, health care, personal habits, etc.
• Private secretary (companion, security guard)
• Family events (general or age-specific) staged in any format or style, can be all-inclusive
• Any personal order and service rendered

Reasons for Choosing This Jurisdiction

Many factors speak in favor of Portugal. If we mentioned here only reasons directly related to business, their list would be significantly shorter The most important reasons for choosing Portugal are as follows:

• Maximum public security
• Full membership in the EU and other European structures
• Competence and qualification of workers and middle-level employees (which is important if the tasks to be performed are beyond the standard ones)
• No taxation of inherited assets, gifts, and donations
• No wealth tax, which reduces the fiscal burden on existing assets
• Special tax regime NHR (Non-Habitual Residency), which means that you will be able to earn income and increase your capital (generated inside or outside the jurisdiction) without paying taxes. This plan is available for 10 years and allows you to use the family office in Portugal as efficiently as possible
• Double tax treaties with all major states, including the ex-Soviet bloc members
• Nice climate
• Perfect environment for a comfortable life of senior customers (60+)

Many other advantages of life and business in Portugal are mentioned in the topical articles published on the InternationalWealthinfo portal in the appropriate section, as well as on our information channels YandexZEN and Medium.

There are jurisdictions recommended mostly for business expansion. Others are more conducive to the preservation and accumulation of wealth. Some of them offer the most attractive tax rates but do not count as pure offshores. Provisions for old-age retirement in many jurisdictions are not beneficial for their senior residents’ active life.

Portugal refers to the category of countries that promote all-inclusive packages of benefits for business and wealth management and attractive standards of living on reasonable terms and at agreeable fees.

A family office in Portugal is the best example of such inviting opportunities.

This market instrument is only gaining popularity in Portugal, but it has already proven its efficiency in upgrading many customers’ quality of life to a level that had been previously possible only for very wealthy people. We, for our part, will try our best to make it work for you!