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A timeless classic in a new way

Yan from Owner.One

81.6% of capital owners do not share details about assets with their family members. They view early disclosure as risky, while understanding that late disclosure is simply impossible. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the event of an emergency, conveying all necessary details to family members can be challenging or impossible. Many believe that existing methods are either unreliable or cumbersome. However, the solution can be simple: grab a sheet of paper and a black marker. Write down a list of your assets, capital, and their locations. Make several copies of this document. Use a black marker to obscure different parts of the information on each copy (this can also be done digitally in MS Word). To ensure the information cannot be read through the redactions, photocopy these documents again. Distribute the lists to different family members. Now, your family has crucial information that they can use in a critical moment, but they will need to come together to combine the pieces of the puzzle. Risks: this method is not perfect, but is certainly better than having no plan at all. It works best if the family members are in reasonably good relationships with each other.

Expand

Playing by one side’s rules

Yan from Owner.One

42.8% of wealth owners are not aware of KYC risks and issues related to banks’ KYC (Know Your Client) procedures. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Don’t get complacent, if you pass bank compliance when opening an account. Banks regularly conduct reviews of their clients and send requests for additional documentation. They may ask for statements or recommendation letters. Get ready for it in advance; otherwise, you may not have sufficient time to gather the necessary documents, leading to the refusal of transactions. To stay ahead, request recommendation letters, annual, and semi-annual statements from all banks where you hold accounts every six months. Typically, bank inquiries cover the current and previous year, and recommendation letters are valid for six to twelve months. To save time, create a template that can be sent to all relevant banks. Most banks accept free-form requests, but some may require you to use their specific templates. In such cases, you’ll need to send separate requests.

Expand

Rhino running

Yan from Owner.One

A rhinoceros runs fast and sees poorly, but its weight makes it a problem for anything in its path. Banks and partners don’t listen to you; they evaluate a person based on their digital profile. Services such as World-Check or Lexis Nexis are the sources of this data. These platforms were created to check counterparties for involvement in illegal financial activities. However, in reality, they contain information on millions of people. These services are often associated with scandals and data leaks, unjust categorization of individuals as suspicious, and the inclusion of data from irrelevant sources, yet they continue to be widely used. Do not leave this issue unattended. Request information about yourself regularly, at least every six months. You don't need to have done something wrong; it's enough for the World-Check algorithm to flag you as suspicious, or for someone in your contacts to be linked to questionable transactions. There's also the risk of database errors or incorrect interpretations. World-Check is a black box that significantly impacts your capital and assets, potentially leading to loan refusals, blocked transactions, denied bank accounts, and even revocation of residence permits or citizenship. Bank compliance departments work solely with documents and digital traces, so if you face unexplained refusals or biased treatment, World-Check could be the reason.

Expand

The rearview mirror or the history of your money

Yan from Owner.One

92% of capital founders underestimate the importance of Source of Wealth Essay (SoWE) with a proof of Continuity of Ownership. They consider it to be a document of little importance. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Recently, banking compliance procedures have become increasingly stringent, and it is likely that they will only get worse in the future. Primarily, they request documents proving the continuity of ownership. (Continuity of ownership refers to the history of the origin of your wealth). The timeframe for these requests has also changed: initially, regulators were interested in information from the past 6 months, then from the past year, and then from the past 3 years. These days, you may be required to provide data from the past 10 years. If you have not yet recovered your data, each day you wait only worsens your situation, as your data becomes outdated while the depth of bank inquiries increases. If you do not start addressing this now, eventually these two trends will intersect, and you will find yourself in an untenable situation. Start by recovering copies of documents from the past three years and then delve deeper. Recovering some documents may be difficult or impossible, but by starting this process now, you will already be ahead of many. * Continuity of ownership - the history of all your assets

Expand

Red button

Yan from Owner.One

93% of wealth owners admit that they have no understanding of how their family will act in the event of force majeure. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the subway, on trains, and at workplaces, there is always a red button for emergencies. In human life, the variations of unexpected events are much greater. Nevertheless, statistics show that 99.2% of wealthy families do not have a precise action plan for emergencies. Have you thought about what you will do and what plan your family will follow if such an event occurs? To avoid being part of this majority statistic, prepare in advance by developing several future scenarios. Even a simple list of basic actions and assets will prepare you and your family for the most unexpected events. Remember to update the plan every six months. In the event of your sudden absence, the survival of your entire family and the preservation of assets will entirely depend on having clearly formulated and planned actions.

Expand

Ski slopes

Yan from Owner.One

Only 4.02% realize that if their bank requests verification of a frozen transaction – they will have just three days to provide the documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. A black slope can be easier with good snow than a blue slope with bad snow. Often, the reasons behind account freezes or bank-canceled transactions are not immediately clear. Regulatory criteria for deeming client transactions suspicious are vague. Sometimes, this judgment is made because a client has a large number of diverse transactions. This can lead to a transaction freeze and a request for additional documentation. To avoid this, separate your bank accounts by transaction types, and ideally, conduct different types of transactions through different banks. This reduces the frequency of regular and unexpected requests and helps you manage and respond to bank inquiries. For example, use separate accounts for dividends, current expenses, bonuses, and investment income. This approach saves time, is convenient, and reduces compliance risks. Of course, dividing assets among multiple accounts and banks may increase the complexity of financial planning. Additionally, if you mistakenly mix up the accounts and conduct an atypical transaction, the regulator will likely send you a request.

Expand

Follow the trail

Yan from Owner.One

Private transactions from $134 000 to $4M, often scrutinized for KYC compliance, are mostly initiated by capital founders with assets between $3M and $99M. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. You’ve sent a payment to another country, and it’s taking a long time to reach its destination — this is a common scenario. People check the status of the payment with the sending bank, not realizing that there can be at least four intermediaries involved in the payment chain. If any bank in this chain holds the payment longer than usual, it’s highly likely that you’ll be required to provide more detailed KYC (Know Your Customer) data next time, even if the payment goes through this time. To be prepared and to track your transactions, you can use services to monitor SWIFT payments. These services track the status of your cross-border transactions in real time and notify you of any delays. You can subscribe to paid versions or use free alternatives available online or through Telegram bots. If you don’t want to spend time on this, you can delegate the task to assistant, who can also monitor the transactions. However, keep in mind the risk of disclosing confidential information, as the data will show either the amount or the purpose of the transaction. Additionally, a major drawback of these services is that they provide data only in real time and do not maintain statistics for individuals.

Expand

The “Alien - Own” strategy: securing your family’s future

Yan from Owner.One

92% of additionally surveyed lawyers claimed that in many cases having detailed information about assets is more important than having documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In today’s world, our lives are diversified not only by types of assets, but also by the jurisdictions where these assets are located. Does ownership of an asset give you your own rights and how can we transfer this capital to heirs without causing them headaches? What rules will govern the inheritance of these assets? The simplest solution might be to draft a will for each individual foreign asset located in its respective country. To create this document, you usually don’t need to travel; in most cases, it can be done at a consulate without the other party’s presence. The key is to plan how to transfer this information to your family in the event of an emergency. Keep in mind that inheritance can be a lengthy and costly process, and until it is finalized, your heirs will have limited access to the assets. This poses a risk of improper management, potentially leading to asset loss. Additionally, inheritance may be subject to high taxes in the relevant country, adding to the financial burden.

Expand

SWIFT

Yan from Owner.One

Few people closely track the movement of their international payments through SWIFT trackers (many of which are publicly available). However, it's worth doing, as the information obtained can signal potential problems ahead. For example, when you send a USD payment from one country to another, it likely passes through a chain of banks, usually between 3 to 5. If the payment gets stuck at one of them, it’s likely that this bank has compliance or KYC-related questions for the sender. In such a case, the bank sends a request to the previous bank in the chain, asking for the sender's client profile. They receive information about the sender’s identity and finances, conduct their own analysis, and then either process the payment or return it. In some cases, they may even freeze the payment. If a gray-area or illegal payment passes through the banks, all the banks in the chain can be held responsible. This is why they are keen to check every payment—no one wants to be the last in the chain if the next bank blocks the payment. It is generally believed that if not for KYC checks, payments would go through almost instantly. If such a request is made by the bank holding up the transaction, all banks in the chain will be aware of it. There's a high likelihood that your sending bank will take notice and start monitoring your future transactions more closely, or even initiate a more thorough review of your entire profile. It's important to track payments and know where they are held up and for how long, even if they eventually go through successfully. This task can be delegated to an assistant, as some SWIFT trackers allow tracking by payment number (without revealing the amount or purpose), so you can maintain anonymity within your circle. It’s crucial to have a well-prepared client file with each of your banks. But that’s a topic for another note.

Expand

Cryptocurrency

Yan from Owner.One

I have nothing against crypto. Quite the opposite. But everything must be done carefully. What’s the main issue with large-scale crypto transactions? Statistics show that in 91% of cases, transitioning from traditional fiat money to crypto and then back again breaks the chain of continuous ownership. After that, the freedom to move capital significantly decreases. Why? Let’s say you have a sum of money, for example, $1M in dividends from your business. You have all the necessary documentation, which makes you a respectable capital owner in the eyes of banks. Now, you decide to purchase cryptocurrency, such as Bitcoin or USDT. The purchase of crypto is a standalone transaction. Later, when you exchange crypto back into traditional currency (whether tomorrow or in a year, but at some point, it will happen), that will be a separate, independent transaction. These two operations are not formally linked in any way. As a result, you exchanged capital with a clean history for crypto, but when you exit, you lack supporting documentation. Your chain of continuous ownership is tragically broken. For small amounts, this isn’t a big deal, but for large amounts, it becomes a problem. Any bank is highly cautious of such funds. When conducting a transaction, the receiving bank will also require a history of ownership, and the lack of it will be a red flag. In the end, you’ve turned an asset into capital that is difficult to move around the world. Justifying the source of funds and maintaining ownership continuity is one of the mantras of the modern financial world. Banks want to understand every stage of a client’s сapital accumulation. Not abstractly, but in great detail, tracing the appearance and movement of every dollar. The simple crypto transaction described above is one whose consequences are extremely difficult or impossible to fix. Can it be done differently? Yes, but statistics show that people only worry about this in 9% of cases.

Expand

Vertical and Horizontal Family Capital

Yan from Owner.One

There are many myths and illogical behaviors among wealthy families in our field. Many of these have been analyzed in Penguin Analytics. One such myth goes like this: when money passes from hand to hand within a family, it's a vertical transfer (to children). Over 90% of our respondents and clients believe this to be true. This is not the case at all. In most situations, the transfer is not vertical, but horizontal (to spouses). This occurs both in planned and unexpected transfers. According to estimates from various analysts (Owner.One, UBS, and local banks), the volume of capital that will change hands within families over the next 10-20 years is projected to be between $75-95 trillion. Moreover, in the coming years alone, horizontal transfers (to spouses) will account for around $8-10 trillion of this capital and asset movement. Projections indicate that this capital will remain at the horizontal level for another 10-15 years before it is transferred vertically (to children). What are the conclusions? In most cases, part of the capital is lost during the transfer from one hand to another (not afterward, as is commonly believed). As a result, the actual loss rate doubles. The founder of the capital needs to pass on not just the capital itself to family members but also its detailed and formalized history since its inception. The increasing compliance and KYC (Know Your Customer) requirements of financial institutions make it extremely difficult, even for the founder, to reconstruct the capital’s history. Without their involvement, it's almost impossible. As a result, family members receive capital that they can use only until the first question arises about its origin. Among capital founders, 42.86% do not know the details of preparing their capital and assets for KYC. Among their family members, a staggering 88.06% are completely unaware of these matters. The problem is exacerbated by the fact that only 4.50% of family heads understand that by doing nothing now, they are merely postponing the issue and passing it onto their family members. How to be prepared for this problem at any given moment is a topic for another post. For now, it’s important to simply recognize that this is a much more complex problem than the physical transfer of capital.

Expand

Bitcoin, US Reserves, and Your Wallet

Yan from Owner.One

Bitcoin (BTC) is slowly but surely carving out its place in the legal world. Fundamental changes that could affect all of us might be coming to the US. Republicans, eyeing a potential Trump presidency (a crypto supporter), have prepared a rather progressive bill. If passed, Bitcoin would become an official reserve asset of the US. This would be just a step away from becoming a tool of monetary policy. If BTC were already considered a reserve asset today, its share would be about 1.8% (with total reserves around $850 billion). Notably, most of this is confiscated from illegal and suspicious transactions. If the bill is passed, the US would purchase an additional 1 million BTC over 5 years, raising its share in reserves to about 8%. So, what does this mean for us? Many wealthy families keep a portion of their wealth in crypto assets. Currently, 4.94%* of wealthy families have such investments, and this number is growing, with increasing allocation of family capital to digital assets. Regulation of crypto transparency has recently been escalating at an exponential rate. The FATF is rapidly and aggressively imposing strict requirements on the crypto market similar to traditional fiat transactions—compliance, KYC, KYT, KYB, AML, and other unwelcome terms. The US is a marker for global financial markets. If (or when?) the bill becomes law, it will give a significant boost to crypto regulation, leading to a rapid end to crypto freedom and the full adoption of traditional financial transaction standards. These are quite strict rules. Those investing in crypto now may face problems soon—problems such as reconstructing the chain of ownership, compliance with KYC requirements, and difficulties in converting crypto to fiat, as well as freedom of capital movement globally. What should you do? It’s wise to start preparing and conducting crypto transactions as if fiat world rules are already fully applicable to crypto. Currently, this approach is used in only 9%* of cases. (*) Statistics are from Penguin Analytics by Owner.One

Expand

A timeless classic in a new way

Yan from Owner.One

81.6% of capital owners do not share details about assets with their family members. They view early disclosure as risky, while understanding that late disclosure is simply impossible. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the event of an emergency, conveying all necessary details to family members can be challenging or impossible. Many believe that existing methods are either unreliable or cumbersome. However, the solution can be simple: grab a sheet of paper and a black marker. Write down a list of your assets, capital, and their locations. Make several copies of this document. Use a black marker to obscure different parts of the information on each copy (this can also be done digitally in MS Word). To ensure the information cannot be read through the redactions, photocopy these documents again. Distribute the lists to different family members. Now, your family has crucial information that they can use in a critical moment, but they will need to come together to combine the pieces of the puzzle. Risks: this method is not perfect, but is certainly better than having no plan at all. It works best if the family members are in reasonably good relationships with each other.

Expand

Playing by one side’s rules

Yan from Owner.One

42.8% of wealth owners are not aware of KYC risks and issues related to banks’ KYC (Know Your Client) procedures. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Don’t get complacent, if you pass bank compliance when opening an account. Banks regularly conduct reviews of their clients and send requests for additional documentation. They may ask for statements or recommendation letters. Get ready for it in advance; otherwise, you may not have sufficient time to gather the necessary documents, leading to the refusal of transactions. To stay ahead, request recommendation letters, annual, and semi-annual statements from all banks where you hold accounts every six months. Typically, bank inquiries cover the current and previous year, and recommendation letters are valid for six to twelve months. To save time, create a template that can be sent to all relevant banks. Most banks accept free-form requests, but some may require you to use their specific templates. In such cases, you’ll need to send separate requests.

Expand

Rhino running

Yan from Owner.One

A rhinoceros runs fast and sees poorly, but its weight makes it a problem for anything in its path. Banks and partners don’t listen to you; they evaluate a person based on their digital profile. Services such as World-Check or Lexis Nexis are the sources of this data. These platforms were created to check counterparties for involvement in illegal financial activities. However, in reality, they contain information on millions of people. These services are often associated with scandals and data leaks, unjust categorization of individuals as suspicious, and the inclusion of data from irrelevant sources, yet they continue to be widely used. Do not leave this issue unattended. Request information about yourself regularly, at least every six months. You don't need to have done something wrong; it's enough for the World-Check algorithm to flag you as suspicious, or for someone in your contacts to be linked to questionable transactions. There's also the risk of database errors or incorrect interpretations. World-Check is a black box that significantly impacts your capital and assets, potentially leading to loan refusals, blocked transactions, denied bank accounts, and even revocation of residence permits or citizenship. Bank compliance departments work solely with documents and digital traces, so if you face unexplained refusals or biased treatment, World-Check could be the reason.

Expand

The rearview mirror or the history of your money

Yan from Owner.One

92% of capital founders underestimate the importance of Source of Wealth Essay (SoWE) with a proof of Continuity of Ownership. They consider it to be a document of little importance. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. Recently, banking compliance procedures have become increasingly stringent, and it is likely that they will only get worse in the future. Primarily, they request documents proving the continuity of ownership. (Continuity of ownership refers to the history of the origin of your wealth). The timeframe for these requests has also changed: initially, regulators were interested in information from the past 6 months, then from the past year, and then from the past 3 years. These days, you may be required to provide data from the past 10 years. If you have not yet recovered your data, each day you wait only worsens your situation, as your data becomes outdated while the depth of bank inquiries increases. If you do not start addressing this now, eventually these two trends will intersect, and you will find yourself in an untenable situation. Start by recovering copies of documents from the past three years and then delve deeper. Recovering some documents may be difficult or impossible, but by starting this process now, you will already be ahead of many. * Continuity of ownership - the history of all your assets

Expand

Red button

Yan from Owner.One

93% of wealth owners admit that they have no understanding of how their family will act in the event of force majeure. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In the subway, on trains, and at workplaces, there is always a red button for emergencies. In human life, the variations of unexpected events are much greater. Nevertheless, statistics show that 99.2% of wealthy families do not have a precise action plan for emergencies. Have you thought about what you will do and what plan your family will follow if such an event occurs? To avoid being part of this majority statistic, prepare in advance by developing several future scenarios. Even a simple list of basic actions and assets will prepare you and your family for the most unexpected events. Remember to update the plan every six months. In the event of your sudden absence, the survival of your entire family and the preservation of assets will entirely depend on having clearly formulated and planned actions.

Expand

Ski slopes

Yan from Owner.One

Only 4.02% realize that if their bank requests verification of a frozen transaction – they will have just three days to provide the documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. A black slope can be easier with good snow than a blue slope with bad snow. Often, the reasons behind account freezes or bank-canceled transactions are not immediately clear. Regulatory criteria for deeming client transactions suspicious are vague. Sometimes, this judgment is made because a client has a large number of diverse transactions. This can lead to a transaction freeze and a request for additional documentation. To avoid this, separate your bank accounts by transaction types, and ideally, conduct different types of transactions through different banks. This reduces the frequency of regular and unexpected requests and helps you manage and respond to bank inquiries. For example, use separate accounts for dividends, current expenses, bonuses, and investment income. This approach saves time, is convenient, and reduces compliance risks. Of course, dividing assets among multiple accounts and banks may increase the complexity of financial planning. Additionally, if you mistakenly mix up the accounts and conduct an atypical transaction, the regulator will likely send you a request.

Expand

Follow the trail

Yan from Owner.One

Private transactions from $134 000 to $4M, often scrutinized for KYC compliance, are mostly initiated by capital founders with assets between $3M and $99M. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. You’ve sent a payment to another country, and it’s taking a long time to reach its destination — this is a common scenario. People check the status of the payment with the sending bank, not realizing that there can be at least four intermediaries involved in the payment chain. If any bank in this chain holds the payment longer than usual, it’s highly likely that you’ll be required to provide more detailed KYC (Know Your Customer) data next time, even if the payment goes through this time. To be prepared and to track your transactions, you can use services to monitor SWIFT payments. These services track the status of your cross-border transactions in real time and notify you of any delays. You can subscribe to paid versions or use free alternatives available online or through Telegram bots. If you don’t want to spend time on this, you can delegate the task to assistant, who can also monitor the transactions. However, keep in mind the risk of disclosing confidential information, as the data will show either the amount or the purpose of the transaction. Additionally, a major drawback of these services is that they provide data only in real time and do not maintain statistics for individuals.

Expand

The “Alien - Own” strategy: securing your family’s future

Yan from Owner.One

92% of additionally surveyed lawyers claimed that in many cases having detailed information about assets is more important than having documents. It is based on 'Penguin Analytics, research of 13 500 respondents from 18 countries, with Net Worth from $3 million to $99 million. In today’s world, our lives are diversified not only by types of assets, but also by the jurisdictions where these assets are located. Does ownership of an asset give you your own rights and how can we transfer this capital to heirs without causing them headaches? What rules will govern the inheritance of these assets? The simplest solution might be to draft a will for each individual foreign asset located in its respective country. To create this document, you usually don’t need to travel; in most cases, it can be done at a consulate without the other party’s presence. The key is to plan how to transfer this information to your family in the event of an emergency. Keep in mind that inheritance can be a lengthy and costly process, and until it is finalized, your heirs will have limited access to the assets. This poses a risk of improper management, potentially leading to asset loss. Additionally, inheritance may be subject to high taxes in the relevant country, adding to the financial burden.

Expand

SWIFT

Yan from Owner.One

Few people closely track the movement of their international payments through SWIFT trackers (many of which are publicly available). However, it's worth doing, as the information obtained can signal potential problems ahead. For example, when you send a USD payment from one country to another, it likely passes through a chain of banks, usually between 3 to 5. If the payment gets stuck at one of them, it’s likely that this bank has compliance or KYC-related questions for the sender. In such a case, the bank sends a request to the previous bank in the chain, asking for the sender's client profile. They receive information about the sender’s identity and finances, conduct their own analysis, and then either process the payment or return it. In some cases, they may even freeze the payment. If a gray-area or illegal payment passes through the banks, all the banks in the chain can be held responsible. This is why they are keen to check every payment—no one wants to be the last in the chain if the next bank blocks the payment. It is generally believed that if not for KYC checks, payments would go through almost instantly. If such a request is made by the bank holding up the transaction, all banks in the chain will be aware of it. There's a high likelihood that your sending bank will take notice and start monitoring your future transactions more closely, or even initiate a more thorough review of your entire profile. It's important to track payments and know where they are held up and for how long, even if they eventually go through successfully. This task can be delegated to an assistant, as some SWIFT trackers allow tracking by payment number (without revealing the amount or purpose), so you can maintain anonymity within your circle. It’s crucial to have a well-prepared client file with each of your banks. But that’s a topic for another note.

Expand

Cryptocurrency

Yan from Owner.One

I have nothing against crypto. Quite the opposite. But everything must be done carefully. What’s the main issue with large-scale crypto transactions? Statistics show that in 91% of cases, transitioning from traditional fiat money to crypto and then back again breaks the chain of continuous ownership. After that, the freedom to move capital significantly decreases. Why? Let’s say you have a sum of money, for example, $1M in dividends from your business. You have all the necessary documentation, which makes you a respectable capital owner in the eyes of banks. Now, you decide to purchase cryptocurrency, such as Bitcoin or USDT. The purchase of crypto is a standalone transaction. Later, when you exchange crypto back into traditional currency (whether tomorrow or in a year, but at some point, it will happen), that will be a separate, independent transaction. These two operations are not formally linked in any way. As a result, you exchanged capital with a clean history for crypto, but when you exit, you lack supporting documentation. Your chain of continuous ownership is tragically broken. For small amounts, this isn’t a big deal, but for large amounts, it becomes a problem. Any bank is highly cautious of such funds. When conducting a transaction, the receiving bank will also require a history of ownership, and the lack of it will be a red flag. In the end, you’ve turned an asset into capital that is difficult to move around the world. Justifying the source of funds and maintaining ownership continuity is one of the mantras of the modern financial world. Banks want to understand every stage of a client’s сapital accumulation. Not abstractly, but in great detail, tracing the appearance and movement of every dollar. The simple crypto transaction described above is one whose consequences are extremely difficult or impossible to fix. Can it be done differently? Yes, but statistics show that people only worry about this in 9% of cases.

Expand

Vertical and Horizontal Family Capital

Yan from Owner.One

There are many myths and illogical behaviors among wealthy families in our field. Many of these have been analyzed in Penguin Analytics. One such myth goes like this: when money passes from hand to hand within a family, it's a vertical transfer (to children). Over 90% of our respondents and clients believe this to be true. This is not the case at all. In most situations, the transfer is not vertical, but horizontal (to spouses). This occurs both in planned and unexpected transfers. According to estimates from various analysts (Owner.One, UBS, and local banks), the volume of capital that will change hands within families over the next 10-20 years is projected to be between $75-95 trillion. Moreover, in the coming years alone, horizontal transfers (to spouses) will account for around $8-10 trillion of this capital and asset movement. Projections indicate that this capital will remain at the horizontal level for another 10-15 years before it is transferred vertically (to children). What are the conclusions? In most cases, part of the capital is lost during the transfer from one hand to another (not afterward, as is commonly believed). As a result, the actual loss rate doubles. The founder of the capital needs to pass on not just the capital itself to family members but also its detailed and formalized history since its inception. The increasing compliance and KYC (Know Your Customer) requirements of financial institutions make it extremely difficult, even for the founder, to reconstruct the capital’s history. Without their involvement, it's almost impossible. As a result, family members receive capital that they can use only until the first question arises about its origin. Among capital founders, 42.86% do not know the details of preparing their capital and assets for KYC. Among their family members, a staggering 88.06% are completely unaware of these matters. The problem is exacerbated by the fact that only 4.50% of family heads understand that by doing nothing now, they are merely postponing the issue and passing it onto their family members. How to be prepared for this problem at any given moment is a topic for another post. For now, it’s important to simply recognize that this is a much more complex problem than the physical transfer of capital.

Expand

Bitcoin, US Reserves, and Your Wallet

Yan from Owner.One

Bitcoin (BTC) is slowly but surely carving out its place in the legal world. Fundamental changes that could affect all of us might be coming to the US. Republicans, eyeing a potential Trump presidency (a crypto supporter), have prepared a rather progressive bill. If passed, Bitcoin would become an official reserve asset of the US. This would be just a step away from becoming a tool of monetary policy. If BTC were already considered a reserve asset today, its share would be about 1.8% (with total reserves around $850 billion). Notably, most of this is confiscated from illegal and suspicious transactions. If the bill is passed, the US would purchase an additional 1 million BTC over 5 years, raising its share in reserves to about 8%. So, what does this mean for us? Many wealthy families keep a portion of their wealth in crypto assets. Currently, 4.94%* of wealthy families have such investments, and this number is growing, with increasing allocation of family capital to digital assets. Regulation of crypto transparency has recently been escalating at an exponential rate. The FATF is rapidly and aggressively imposing strict requirements on the crypto market similar to traditional fiat transactions—compliance, KYC, KYT, KYB, AML, and other unwelcome terms. The US is a marker for global financial markets. If (or when?) the bill becomes law, it will give a significant boost to crypto regulation, leading to a rapid end to crypto freedom and the full adoption of traditional financial transaction standards. These are quite strict rules. Those investing in crypto now may face problems soon—problems such as reconstructing the chain of ownership, compliance with KYC requirements, and difficulties in converting crypto to fiat, as well as freedom of capital movement globally. What should you do? It’s wise to start preparing and conducting crypto transactions as if fiat world rules are already fully applicable to crypto. Currently, this approach is used in only 9%* of cases. (*) Statistics are from Penguin Analytics by Owner.One

Expand

Yan’s Notes

True Story

Analytics

How it works

About us

start using

Contacts

CLIENTS ONLY

True Story

Analytics

How it works

About us

start using

CLIENTS ONLY

Is your wealth transfer-ready?

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Key Takeaways

  1. Wills are no shortcuts to success in family wealth transfers. In most cases, they are outdated, contested, and insufficient.
  2. Avoidance and sidelining are driving failures in equipping family members to act in the event of force majeure. 
  3. Prioritize wealth information over static documents. The latter can be restored. Without elaborate information on assets, nothing can be done. 

The Danger Ahead

All families lose money in wealth transfers from one generation to the next. However, wealth owners, and their families, with assets ranging from $3 million to $100 million, face the highest failure rate. They account for 75% of total losses in both emergency and planned intergenerational transfers.

What are the underlying reasons for this? Owner.One, a service for families who are worth $3M-$100M in assets, conducted the research to find evidence-based answers.

In total, we surveyed 13,500 capital founders across 18 countries. According to the study, the average loss rate is 34%. It is estimated that this incurs losses ranging from $1.2 million to $34 million for these families.

Fact: Research conclusions are supported by data on assets with unidentified owners. For bank deposit boxes, the rate is 21%. For luxury homes, it is 16%, and for digital assets, it is 23%.

 

Acquiring, Preserving, and Transferring Wealth

It takes business acumen and entrepreneurial skills to build a fortune worth up to $100 million. As first-generation wealth creators, our respondents demonstrated outstanding abilities in both domains.

However, their approach to managing family wealth lacks a comparable level of efficiency. Only 14% of them share pertinent information with their families. This is vital to facilitate the transfer. Conversely, 68% do not disclose any data at all. Moreover, in 98% of cases, wealth-related documents or wills are outdated or non-existent.

If wealth owners applied similar principles to manage their business activities, they would probably run out of business quite quickly. Acquiring, preserving, and transferring wealth demands a different skill set.

At this point, ultra and high-net-worth individuals (U/HNWI) stand on the opposite side of the fence, compared to ultra-rich families with a net worth starting from $100 million. The latter have already established family offices, trusts, or other legal structures to manage their assets.

Our survey revealed that just 0.45% of U/HNWI families have trusts or family offices. In cases where they exist, these structures tend to manage only a portion of the wealth. On average, only 30% of their assets are managed by family offices, trusts, or funds.

As a result, wealth owners with $3 million to $100 million and their families are chronically unprepared for the great wealth transfer. What are other factors contributing to this?

 

Insecure Data Storage

Study findings suggest that, on average, up to 31% of family wealth is lost during transfer, due to a lack of comprehensive data on assets. What are the origins of these gaps?

Fully 81% of capital founders prefer to maintain and manage records and store information, regarding family wealth, themselves. Unfortunately, in 97% of cases, they opt for unreliable methods to complete these tasks.

It is indicative that most wealth owners utilize conservative, yet insecure methods. Almost half of this number (49%) simply put documents in a box, and use hand-written notes or spreadsheets.

These practices result in approximately one-sixth of vital information being irretrievably lost annually. Without it, passing Know Your Customer (KYC) procedures or claiming assets becomes a near-impossible task for families.

 

Information Monopoly and Asymmetry

In most cases, capital founders gravitate towards becoming the sole owners of family fortune-related information. They monopolize knowledge on asset classes, legal structures, sources of origin, relevant business contacts, instructions and limitations of power of attorney, etc. 

This also creates an information vacuum. Wealth founders are reluctant to share their knowledge in advance for two reasons. First, they fear that premature disclosure could trigger intra-family conflicts. Second, younger generations could lose their motivation for education and long-term career planning.

At its core, wealth transfer touches on the most sensitive topics for every individual. Family relations and personal finances are not common topics for conversation, even with close friends or trusted professionals.

For these reasons, family wealth transfer often becomes an elephant in the room. Understandably, 85% of wealth owners prefer not to disclose any information. Even when they do, the shared data often has no practical value in connection with the family wealth transfer. This could be because of a possible lack of completeness or currency.

 

The Burden of Avoidance

The common misconception is that transferring assets from one generation to the next will be straightforward. The process is perceived as obvious, with no conscious thought given to forward planning. 

According to the study, only 6% of wealth owners have drafted or are in the process of drafting a wealth transfer plan. In contrast, the next owner must know up to 20 details, and sometimes even more, about a single asset to be able to claim ownership. 

The evolving KYC requirements further complicate the matter. Regulations on capital origins and proofs of ownership continuity tighten when assets and capital are transferred from a wealth owner to successors.

Unfortunately, only 4.5% of all respondents realize the consequences of their inaction. Avoidance of planning ahead shifts the burden onto family members and children. This significantly reduces their chances to successfully gain ownership.

Eight out of ten capital founders do not take any action to resolve the information monopoly problem. This attitude largely contributes to the high family wealth transfer failure rate.

As a result, 93% of respondents openly admitted that they had no understanding of how their family will act in the event of force majeure.  Can this be remedied?

 

Wealth Transfer Check-Up

Let us look at a step-by-step guide on how to avoid losing millions in the wealth transfer process.

Step 1: Set a Framework for the Wealth Transfer

Who are the next owners? This is square one. Undoubtedly, family matters can be intricate. Before delving into a full-fledged wealth transfer strategy, take a step back and consider who are all the players in the process. Evaluate the eligibility of both immediate and extended family members. Then, assess how each stakeholder’s needs may influence decisions.

 

Which long-term obligations do you want to fulfill? Some may require stable financial support for special care. For the younger generation, you may want to establish education opportunities. Life scenarios vary, but dedicate time to outline your vision and how you can support them or prevent actions you consider unacceptable.

What is your desirable endgame for the transfer? Define the recipients, the assets, and the timing. Consider whether to transfer a particular asset entirely or to distribute it in shares among the next owners.

How do you address the information monopoly and asymmetry? The best metaphor for family wealth is an iceberg. The largest part of it is always beneath the surface. Examine which vital information, about assets, is unknown to the next owners. How can you help them overcome this information black hole?

What are your legacy and philanthropy goals? If you want your wealth to have a lasting impact or address significant issues, incorporate this into your planning. Consider the role the next owner may play in this.

Who are the relevant business contacts? In case of an emergency, identify the people who can support the transfer process. What are their directions, powers, and instructions?

 

Step 2: Review Your Assets and Liabilities

What do you own? To increase the likelihood of a successful transfer, compile comprehensive records of all assets and capital you own during the forward planning phase. Ensure you categorize all asset classes, including bank accou nts, brokerage accounts, deposit boxes, real estate, jewelry, digital assets, stocks, bonds, public funds, gemstones, legal entities, and others.

What are the ownership structures? This is crucial, especially in cases of indirect ownership structures. Consider what legal frameworks protect your family’s ownership rights in case of unforeseen events.

What are your liabilities? Apply the same detailed approach to debts and obligations. These may include mortgages, secured or unsecured debts, or shared or guaranteed obligations like student loans or mortgages for children.

 

Step 3: First focus on the information, then on the documents

Why is information more important than documents? Our research team interviewed over 30 trusted professionals from 7 countries on family wealth transfers. The majority (90%) concluded that for successors, claiming assets is no longer a major issue if comprehensive data is at hand. Success is a matter of following well-established routines and legal procedures.

The heart of the problem is getting the right information at the right time about which assets to claim, their location, structure, legal status, and other specific details. While one can restore documents, nothing can be done without information about which assets the documents are missing.

What is the Source of a Wealth Essay (SoWE)? In some cases, this document is known as the Source of Funds Memorandum. It is a unique document where capital founders chronicle the creation of their fortunes. The SoWE provides an opportunity to write the history of your family wealth, in your terms and words. All other documents originate from external sources, such as contracts, letters of recommendation, statements, etc. 

It is recommended to prepare the SoWE in the language of the countries where your family members hold passports and residence permits. If your asset is located in a country with a different language, consider adding a certified translation of the SoWE in that language as well.

 

Step 4: Set the Right Timing

 

What to do once information on assets has been prepared? Review the comprehensiveness of documents and their copies for each asset. Financial institutions often require account histories, letters of recommendation, copies of money transfers, proof of ownership continuity, or other data arrays. 

You can only do that efficiently on one precondition. That is, if you store all documents, even if they seem unimportant at that moment in time. These could be demanded by financial institutions at short notice. For example, the typical timeline for a bank inquiry is a few days.

When to disclose information to family? Timing is the key factor in the outcome of family wealth transfer. Information must be delivered precisely at the right moment to avoid two major risks. 

The first is early disclosure. A family member might be tempted by the prospect of wealth before they are ready to handle the responsibility that comes with it. 

The second is the risk of losing assets. Typically, family members have a narrow window, from 3 to 6 months, to claim ownership of assets. Once this period elapses, assets are lost. The rule of thumb should be “Not sooner or later, but just-in-time”. The disclosure process must connect the next owners, assets, and trusted professionals. All parties involved should be equipped with sufficient data and instructions at the appropriate time.

Four Additional Questions for Family Wealth Self-Review

 

Which wealth information should be at hand? 

Check if you have the following documents:

  • Letters of recommendation from banks, brokers, or other financial institutions. These letters should be no older than six months.
  • 1, 3, and 10-year cash flow statements for all your accounts, including lists of accounts with their exact opening dates.
  • Rationales for all large account receipts and expenditures.
  • Details on the companies that paid your dividends.
  • Similar data for other large earnings, such as investments and bonds.
  • A regularly updated Source of Wealth Essay.

Is there a way to evaluate if my document filing is adequate?

We surveyed both wealth owners and bank compliance officers to clarify their definitions of “good filing”.

The question was straightforward: What is the volume of documents one must possess to confidently interact with financial institutions?

The unit of measurement scale was calculated as the number of pages of text.

Consult the table below to evaluate if your document filing is adequate.

 

Why is SoWE of primary importance?

At the time of the research, less than 1% of U/HNWIs had elaborate Source of Wealth Essays. 

This 1% has documentary support that is detailed enough to substantiate a trustworthy history of the origins of the family’s fortunes.

The importance of a well-crafted SoWE will only increase due to ever-evolving KYC regulations. In the first 5 to 10 years, the next owners will still rely on the predecessor’s SoWE to interact with financial institutions, proving the origins and ownership of the assets.

To make a bold statement, how wealth owners prepare their SoWE today is how the next owners will pass KYC requirements tomorrow.

Are wills of no use in family wealth transfers?

In 84% of cases, our respondents do not have wills in place for emergency capital transfers. Even if the capital founder is advancing in age, 72% still do not possess a will.

For families worth up to $100 million, the contested rate for wills is 99.5% in developing markets and 78.7% in developed markets. Approximately 56% of assets and capital are at risk of legal challenges from third parties.

Wills are important, but only to a certain extent. In the modern world, detailed data is more crucial. Without detailed data to claim the asset, the will won’t assist in the transfer.

Professionals point out the problem of executing what is stated in the will, especially if the will needs to be executed across multiple jurisdictions. A safer option might be to make a separate “regional” will for some of your assets, though this is exceedingly rare.

 

CONCLUSION

Data on wealth transfers outcomes run counter to the common misconceptions of wealth owners and their families. They expect the process to be straightforward. They also underestimate how data-demanding is wealth transfer. 

These misconceptions lead to high failure rates. Typically, $340,000 per $1,000,000 is lost in the process of transmitting wealth from the founder to the next generation.

 

  1. Affluent families account for 75% of total losses in both emergency and planned intergenerational transfers.
  2. In 98% of cases, wealth-related documents or wills are outdated or non-existent.
  3. Fully 97% of wealth owners opt for unreliable methods to store information on family wealth.
  4. Only 6% of wealth owners have drafted or are in the process of drafting a plan for the transfer of wealth.

If you’re looking for more sustainable approaches to wealth transfer planning, consider consulting Owner.One’s services. It equips you with a high-end tech setup to overcome common obstacles in family wealth transfers, mentioned in the article.


 

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