In the new transparent world – it is vitally important for wealthy Asian families to constantly check their ‘financial’ health

Butterfield Singapore’s Asia Regional Head Brian Balleine talks to Hubbis about the Bermuda-based Group’s trust company’s expansion into Asia. He also shares why transparency has created a great opportunity for professional services firms. With dramatic tax and reporting changes, it is now vitally important to obtain professional advice on a regular basis, to ensure any financial structures set up are still fit for their original purposes.

Executive summary

The Bank of N.T. Butterfield & Son Limited ('Butterfield'), was established as a trading firm in 1758, and then as a full-service bank and wealth management provider headquartered in Hamilton, Bermuda in 1858. The company has also been establishing and administering trusts for individuals, families and businesses for over 80 years. Earlier this year, Butterfield completed its acquisition of Deutsche Bank's Global Trust Solutions (GTS) business, excluding its US operations, and took over the management and administration of the GTS portfolio, comprising approximately 1,000 trust structures for some 900 private clients. In 2016, it also acquired HSBC Bermuda's Trust and Investment arm. Following the completion of the GTS acquisition, Butterfield set up its office in Singapore, where it offers specialised fiduciary services. Its Asia Regional Head, Brian Balleine speaks to Hubbis about the company's presence and plans for expansion in the region.

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Brian Balleine relates the story of how the Bermuda-based bank, The Bank of N.T. Butterfield & Son, came to open a branch in another tiny island nation, half a world away. 

“We had the opportunity to buy Deutsche Bank’s trust business in a number of locations, including the Cayman Islands, Guernsey and Switzerland. We already had a presence in these jurisdictions, but we didn’t have a presence in Singapore,” he begins. 

“Part of the Deutsche Bank business was in Singapore, so for us, it became quite an attractive acquisition opportunity.” As part of the acquisition, completed at the end of March 2018, Butterfield took over the management and administration of the GTS portfolio, comprising approximately 1,000 trust structures for about 900 private clients. 

More than 60 Deutsche Bank employees were offered positions with Butterfield offices in the Cayman Islands, Guernsey, Switzerland, Mauritius and Singapore, becoming part of an expanded international Butterfield trust team, and ensuring a smooth transition for their former GTS clientele.

Balleine notes that it was this prior acquisition, and HSBC’s Asian-centred footprint, that had enhanced Butterfield’s growth in this region. “As part of the nature of being in the trust business, we have always had clients from all over the world. We have been frequent visitors to this region over the course of the last ten years, and had gained a number of Asian clients who wanted sophisticated trust planning and fiduciary services,” he says. “Quite a lot of HSBC clients are Asian families. So our Asian client base just grew.”

He continues: “However, we were also conscious that by not having a presence in Asia, there was a good chance we were probably not being considered for certain opportunities in this region. I think families do like to be close to their trustees, so the GTS acquisition has given us the opportunity to develop our footprint in the Asia region.”

Emerging issues in Asian wealth management

On issues beginning to arise in terms of wealth planning in Asia, Balleine says: “I think Asian families now have to accept that whatever they do in terms of planning, there will be reporting requirements around what they structure.”

“Gone are the days where you could put together a structure, and there wouldn’t be any need to report this to the country in which you live. CRS has been a bit of a game changer in that sense,” he notes, referring to the implementation, by the G20 group of nations, of the 2015 Convention on Mutual Administration in Tax Matters and its Common Reporting Standard (CRS). 

Under CRS, financial advisors and professional service providers are bound to automatically share certain information on visible financial assets and other movements, such as income.

  So what does that mean in terms of wealth planning in Asia? Balleine says: “I think it means that when you are looking to effectively structure assets, to meet short and long term objectives, you have to plan properly.”

“You have to take the time, get the right advice and structure the trust properly,” he stresses. “Not only do you have to have it structured properly, but you have to have a health check on the structure on a regular basis.”

He elaborates with the analogy of a car: “You go into a showroom, you buy the car, you drive it away. You also need to have it serviced on a regular basis. You don’t just drive it until the wheels fall off.”

The importance of regular financial health checks

In his own experience, Balleine has seen that many people do not check on or update structures that might have been put in place during different phases of their lives. “I find that sometimes with people’s financial planning — inasmuch as they may or may not have obtained advice at the beginning — they might not actually be getting advice on a regular basis, and making sure that that a structure previously set up is still fit for its purpose,” he says. “Because laws change. The environment changes. Reporting requirements change. Something that was set up 15 years ago may not be the optimum structure now.”

Another change factor that should cause a re-look at any existing wealth structure is the movement of people between countries. Balleine gives an example: “You may start off with a structure that was put in place when none of the beneficiaries lived in the U.S. But ten years later, a beneficiary might have relocated to the U.S. There would potentially be tax implications to the structure.”

Or, he adds: “For a lot of families that I’ve dealt with over the years, let’s say in Europe or South America, their main focus has been, “Okay, what happens to my family if there’s a divorce? What happens if I get sued, or face litigation, or if beneficiaries fall out with each other?” 

By and large, Balleine says, issues such as these have only been emerging in Asia in the last decade, particularly in Hong Kong. In Singapore, he notes, these are still relatively rare. “I think families in this region have probably not experienced litigation or divorce to the same extent as families in the western hemisphere.”

“But I think those are issues that are going to confront families here more and more, to be honest,” he observes. “Wealth, in itself, tends to create litigation of that nature. So this again goes back to ensuring that your financial planning, the wealth structure that you set up, is put together properly and is sufficiently robust.”

Appointing impartial advisors

The increasing wealth in Asia has also led to the rise of first-time clients who might be newcomers to getting professional wealth management advice. Of this segment of potential clients, Balleine says, “If I am meeting a family for the first time, the first thing I’m going to ask them is, ‘Who is providing the tax and legal advice?’ should the family be in need of advice, we can provide some suggested names of tax and legal advisers upon request.”

Balleine says the process of structuring a trusteeship begins with the family sitting down with their lawyer, who drafts a trust deed on behalf of the family. “That document has to work from the trustee’s point of view too,” he emphasises, “But the starting point has to be that it’s a document for the family.”

“We take that to quite an extreme at Butterfield, in the sense that we don’t typically have standard documents. A lot of institutions in this space have boilerplate documents that they use. That’s really not our model.”

“I think advice has to be impartial. It has to be without conflict,” he says. “With a lot of the trustee arrangements that I see in this region, I wonder about some of the conflicts, particularly on the banking side where the banks are providing the trustee and also the asset management advice. I get the model, but there is a significant conflict of interest, and I wonder whether that ends up being the best advice for the family.”

Balleine adds: “At the more complex end of this business, we have always been advocates of families getting proper advice before we begin working together.” 

Why is getting such advice so important? “We want to make sure that when assets are transferred to a trust, there can’t be contested at that point, where somebody says, “Well, you didn’t have the full right to transfer those assets to the trust in the first place.” In such instances, that transfer can be voided.

The role of trust companies

Balleine describes the spectrum of trust companies, which range from large banks who package trust services together with asset management and banking products, to small, or family-owned independent trust companies. 

The larger institutions, he says, overlay trusteeships over other services, with pricings structured to earn the most from the asset management aspects of these services. “These institutions typically have a fairly narrow focus when it comes to trusteeship. They are trustees of bankable type assets. Without the asset management side, the trusteeship doesn’t work for them.”

“If you seek independence, a trustee who is going to look at a range of asset classes to be held in a trust, I believe you have to jump all the way across to a smaller independent trust company. An independent trust company will typically hold various assets. But they’ll have to outsource the bankable asset management piece, because they don’t do that themselves,” he explains.

Because of the potential risks of being with a trustee that is not a bank but a small independent business, Balleine believes that this is where Butterfield bridges the two ends of the spectrum.

“For one, we are a bank. Secondly, Butterfield is publicly traded on the New York Stock Exchange (NYSE: NTB) as well as the Bermuda Stock Exchange (BSX: NTB.BH),” he points out. “We have a good balance sheet, but we don’t insist on doing the banking. We don’t typically handle the asset management. We can do these things, but it’s not part of a packaged product at all.”

“Our proposition is: you get the bank, you get the balance sheet. You get all the internal controls that go with a bigger bank, but we can provide other services too - we manage a variety of assets as a trustee. If a family wants us to hold the artwork, we can do it. If they want us to hold property, we can do it. If they want us to hold the family business, we can also do it.”

Priorities: doing more in Asia

Balleine outlines the company’s priorities going forward. “We’re getting to know the families whose trusteeships we have taken on as part of the recent GTS acquisition, and understanding what issues are important to them,” he says. “Building long-term relationships with our clients is our top priority and is very important to us.” 

He adds: “We are looking to do more things with our clients; as part of the acquisition, we have taken on structures that have typically had quite a narrow focus. For the families who had previously created trust structures to hold their bankable assets, we are now able to offer them a structure that can hold more and different types of assets.”

The second priority for the company, Balleine says, is growing brand awareness of the Butterfield name in Asia. “We are very well known in the legal and accounting community in the region because, as I mentioned, we’ve been visiting them for over ten years.” 

Nevertheless, he says, Butterfield would like its name also recognised by its ultimate clients. “From our point of view, it isn’t enough for the lawyers of a family in Jakarta or Kuala Lumpur to recommend Butterfield as a reputable firm. It would be nice when we get to a point where the family also says, “Yes, I recognise the brand, I’ve heard of them. Butterfield is a good and reliable trustee!”

Finally, the company is concentrating on developing and growing its business in Asia, including recruiting more people for its Singapore office. “We have made a substantial commitment here to grow this business over time, and we want to attract the right people to our business.” However, he adds: “People can be brand-conscious in this region, and our brand isn’t necessarily the best-known one at this time, so attracting the right people can be a little bit more difficult for us than it is for the major banks.”

“It comes back to us being an independently-minded trust company, and one that will handle a range of assets. What we can offer people who are keen to develop their career in the trust industry is a broad and in-depth scope and a valuable opportunity to grow with our brand.” 

Getting Personal

Originally from Jersey, Brian Balleine is the Regional Head for Butterfield (Singapore) Pte. Ltd. With more than three decades of experience in international wealth planning and trust and fiduciary administration, he has previously held key roles with Barclays Bank and Rothschild Trust. Balleine holds an MBA from Scotland's Heriot-Watt University and is a Fellow of the Chartered Institute for Securities and Investment. He is also a member of the Society of Trust and Estate Practitioners. 

Balleine is a supporter of the English rugby team, as well as Jersey, which he says "is doing very well in the RFC championship division". He enjoys travelling in Asia, with Hoi An in Vietnam a particular favourite destination, and plans to visit Komodo Island in Indonesia next. Balleine is married with two children, in their 30s, who live in the UK.