The office of the ‘Problem Child’ – family offices in an influencer age

Jake Paul is no stranger to the limelight. At 29 years old, the controversial ‘Problem Child’ has journeyed from content creation on Vine to professional boxing. His venture capital firm, a mobile sports betting company, and a sports promotion agency all represent a lucrative move from the camera to the boardroom. In doing so, he has amassed a fortune reportedly worth more than $200 million, and recently announced the launch of a family office at Old Parkland in North Texas.

Paul represents a growing trend among younger HNW and UHNW individuals towards the use of family office structures. Whilst still largely the preserve of the ultra-wealthy, family offices are becoming a more familiar feature of wealth planning. At a time when an estimated £5 trillion+ is expected to pass between generations in the UK over the coming decades, they offer a means of preserving control, coordinating decision making, and shaping long-term family legacy.

The advantages of the family office structure

In Paul’s case, his wealth has been generated through complex and diverse sources which are not always easy to manage under traditional structures. He has interests in property, venture capital, business, sports and non-profit enterprises. A family office offers a central coordinating framework, through which these diverse interests can be managed cohesively. For entrepreneurs such as Paul, it also creates a platform from which wealth can be deployed into new opportunities, while maintaining oversight of an increasingly complex portfolio.

A family office can operate as a central wealth hub from which investments are directed, while balancing philanthropic interests with wealth preservation in accordance with an overall philosophy determined by the individual or the family. Business, investment and charitable activities can therefore form part of a single, cohesive strategy, administered through one central body. Paul is a good example of the trend towards integration fuelling growth in the family office sector, which is set to surpass $10 billion USD in the UK by 2035.

Additionally, family offices can serve as dynamic operational vehicles. Paul has spoken about consolidating his various interests into a single entity capable of responding quickly to opportunities facilitated by modern markets, as they arise. An active family office that can support a creative and fast-moving principal offers a model through which new ventures can be pursued without the need for wholesale organisational overhaul. While Paul is a particularly entrepreneurial example of this, the wider point is that the transition of wealth often brings new ideas, new priorities and different approaches to investments from the next generation. Having a structure which can respond to those changes is proving increasingly attractive.

Family offices and generational wealth transfer

Paul’s wealth is largely first-generation and self-created, but the factors driving him towards a family office are becoming more relevant to established family wealth structures as well. The same flexibility, centralisation of decision-making, and ability to coordinate multiple interests are proving appealing to families preparing for the transfer of wealth between generations.

Arguably, the principal driver of this change is the tension that often accompanies wealth and inheritance. The transfer of control of a family legacy to a new generation is frequently accompanied by families becoming larger, more geographically dispersed, and therefore exposed to multiple tax jurisdictions, all while balancing potentially divergent views on wealth management and succession.

Priorities that shaped the creation and preservation of wealth in one generation may need to evolve in response to a changing global landscape and the different perspectives of those who will ultimately steward that wealth. Structures such as family investment companies (FICs) have traditionally allowed voting shares (and therefore control) to remain with an older generation, while transferring economic value to younger family members. However, for a younger generation seeking greater involvement in investment decision making, particularly in an era of tech opportunity and alternative asset classes, such structures may not always provide the degree of autonomy and responsiveness they desire to make investment decisions that capitalise on new growth sectors. Paul is one of a growing number of first generation UHNW individuals seeking greater flexibility in how wealth is controlled, deployed and developed through a family office structure.

Dr Sanjay Tolani, CEO of the Tolani Family Office and family office planning advisor, points to changes to the international tax and reporting environment as another cause of depletion of family assets. Planning methodologies that once proved effective can become less viable as tax authorities across jurisdictions continue to adjust their approaches to transparency, reporting and international cooperation, a legacy from the global financial crisis.

Family offices offer one response to this tension. Their flexibility allows families to balance long-term wealth preservation with the ability to pursue new opportunities as they arise. Assets can be deployed across a broad range of investment strategies, from traditional holdings such as real estate and public markets to emerging sectors including technology, healthcare innovation and private capital. In this respect, the modern family office increasingly resembles a sophisticated investment platform, capable of integrating venture capital-style opportunities alongside more established sources of wealth.

Wealth is also being viewed by many families as a tool for education, stewardship and positive impact. Philanthropy, impact investing and social enterprise initiatives have become an important part of the overall responsibility of wealth management for many families in this sphere. Family offices can provide a governance framework, through which philanthropic objectives sit alongside wealth preservation and investment strategy, helping successive generations pursue charitable goals without losing sight of the family’s broader long-term financial objectives.

Notably, there is no single model for a family office, which is part of the attraction. It is a bespoke solution tailored to the specific circumstances of the individual or family concerned. Governance arrangements can be designed and personalised around the priorities and objectives of the family in question, whether that is preserving family values, coordinating international assets, supporting entrepreneurial activity, facilitating charitable giving or managing succession planning. The flexibility of the family office structure allows these aims to coexist within a single framework that seeks both to preserve wealth and to provide a platform for its future development.

Should you wish to speak to our team about any of the points discussed above, please do not hesitate to contact us.