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Mercer’s Research Perspectives covers a wide variety of investment topics. This edition includes a discussion on liquid alternative investments, actively managed global small-cap equities, features our new study on climate change, introduces the Chinese bond market and closes with an interview with Stefan Hepp who joined Mercer through the acquisition of SCM, a private markets research firm headquartered in Zurich, Switzerland.

In this paper, Cara Lafond explores family office characteristics and makes recommendations for asset allocation strategies that ensure growth of assets and preservation of capital and purchasing power, two goals that have been identified as important to most family offices. She emphasizes the importance of downtown risk mitigation and argues that seeking consistent returns and avoiding losses is more important than pursuing outsized gains.

The decision to sell or continue ownership of a family business is complex. Business owning families who recognize early the importance of both the financial and non-financial considerations of a potential sale are more likely to make good transition decisions.

Clients often hire domestic staff for help managing a large family and household. But for the affluent homeowner, there are significant risks associated with retaining employees such as babysitters, elder-caregivers, and housekeepers, to name just a few. When hiring domestic workers, it’s important to consider and address the risks involved, which are discussed in this article from Marsh Private Client Services.

One area of concern arises from large or multi-engine jet aircraft owners and operators — or their counsel — who focus solely on the potential civil liability risks. These parties often seek to minimize potential civil liability by creating a sole-asset company to own and operate the aircraft, which is in turn owned by the individual or the operating company that is the “real” aircraft operator.

Wealth transfer to younger generations is one of the biggest concerns for families today. Many families feel that the younger generations aren’t ready to handle the wealth they’ll receive; in fact, only one-third of wealthy parents have fully disclosed their wealth to their children. The perceived unpreparedness, along with a concern for privacy and wealth preservation or asset protection, are some of the key non-tax reasons that many families establish trusts.

The white paper, “Sudden Wealth: Managing the Transition,” provides helpful guideposts for handling new wealth, regardless of the circumstances – whether the wealth represents a recent windfall (the immigrant experience) or having control of a large amount of money for the first time (the inheritor’s experience). The paper highlights common examples of steps to take and to avoid, the typical reactions and emotions experienced by the suddenly wealthy, and a recommended timeframe for making decisions that focus on important personal priorities.

A 678 Trust is a unique vehicle that (i) eliminates estate tax on trust assets, (ii) protects trust assets from creditors, (iii) allows the client to stay in control of the assets, (iv) allows the client to direct where the assets pass at death, and (v) has multi-generational “dynasty” benefits—protecting heirs from creditors, divorce, and estate tax when the heirs die.

This case study walks through the estate planning The Blum Firm, P.C. did for a client who sold their billion-dollar company several years ago. The planning occurred in five stages and exemplifies planning which saves taxes, provides asset protection, and structures an inheritance for future generations.

Family-run enterprises make up a significant portion of businesses within the United States. Because it is clear that many of these business-owners will be looking to plan their exit from the companies they have established, it is important that planners prepare for their role in the succession planning process. We’ve compiled a list of ten steps planners should adopt as their standard approach to attaining the perfect balance between pleasing the family and protecting the business.