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Global Standards for Private Wealth Management (Standards)

(To accompany the Principles of Wealth Management for Private Wealth Holders)
Whenever used in the Principles and the Standards the term:
Wealth Holder may include:
An individual of wealth;
Trustees of a trust;
Directors or trustees of an eleemosynary (foundation, operating charity, or endowment), or
corporation (partnership); or
Any person holding substantial wealth as a legal owner under the laws of the jurisdiction
involved.
Wealth is intended to include the investable assets and portfolio(s) of the Wealth Holder.
Standards Director is intended to define the representative appointed by the Wealth Holder(s) to be
responsible for the management of the Wealth in accordance with the Principles and the Standards. The
Standards Director may be the Wealth Holder or a member the family. It is expected that the Standards
Director will prudently delegate whenever the Director lacks expertise, or capacity, in a particular
Standard. The Standards Director may serve in the capacity of an agent, steward, or fiduciary; and will
likely be drawn from one of the following professions:
Law;
Accounting;
Investment management;
Banking; or
Investment consulting.
Investment Manager is intended to include not only a person managing a separate account, but also a
person managing a mutual fund or a commingled trust.
Service Provider(s) is inclusive of family office staff, attorneys, accountants, Investment Managers,
investment consultants, custodians, and any other advisor providing investment-related services.
The Standards are written to have global applicationno matter where the:
Wealth Holder(s) is domiciled or residing; or
Wealth is held in custody or located.

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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Notes to persons reviewing these Standards:


The objective has been to identify Standards which are applicable to most, if not all, Wealth
Holders.
The Standards are intended to build upon one another, as opposed to each Standard having
sufficient language to stand alone.
To facilitate review of the Standards, there is a deliberate attempt to economize on words, and
to use terms which have global application.

Principles of Wealth Management for


Private Wealth Holders
1. The wealth holder, the Trustees of a Trust, or the
Directors of a Foundation shall articulate
purposes, goals, objectives, expectations, and
risk tolerance with respect to the Wealth; and
shall be ultimately responsible for maintaining
the currency of that articulation.

Global Standards for Private Wealth


Management
Standard 1:
The Standards Director prepares, monitors, and
maintains a written statement which defines the
Wealth Holders goals and objectives in terms of:
a. Core values: what the Wealth is for, and
what does the Wealth Holder hope to
accomplish with the Wealth;
b. Time horizon for the management of
Wealth (perpetuity; multi-generational);
c. The relationship between Wealth and
social or personal considerations;
d. Mission-based or philanthropic activities;
e. Long-term investment performance
i.
Absolute returns
ii.
Relative returns; and
f.

Risk management
i.
Financial risks
ii.
Governance risks
iii.
Hazard risks.

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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2. With respect to a Family Office, a Trust, or a


Foundation; the governance structure together
with various governance roles and
responsibilities shall be clearly set forth and shall
include provision for the communication of
those roles and responsibilities and assurance
that they are understood and accepted.

STANDARD 2:
The Standards Director:
a. Defines in writing the roles and
responsibilities of the Wealth Holder, and
others providing advice to the Wealth
Holder; and
b. Confirms that each Wealth Holder, and
others providing advice to the Wealth
Holder, demonstrate an awareness of
their roles and responsibilities.

3. Any Trust or Foundation and any Trustee or


Director shall adhere to best fiduciary practices;
and there shall be established process for
monitoring the discharge of fiduciary duties by
the Trust, Foundation, a Trustee, or a Director.

STANDARD 3:
The Standards Director defines in writing
fiduciary best practices to be followed by all
persons serving in a fiduciary capacity.

(Continued on next page)

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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4. Succession shall be set out where possible and


shall be considered. For the Wealth Holder,
provisions shall be in existence for disposition of
assets and management of affairs from and after
death or in the event of incapacity. For the
Family Office, Trust, or Foundation; provision
shall be made for succession of governance and
management.

STANDARD 4:
The Standards Director:
a. Ensures that succession plans are in place
for the Wealth Holder;
b.

Concludes that reasonable provision is


made for succession for those providing
advice or service to the Wealth Holder;

c. Secures from legal counsel the


appropriateness of wills, charters, trust
instruments, appointments of successors,
and similar instruments effectuating
succession for the Wealth Holder; and
d. Establishes or confirms there is a process
in place periodically to review the
succession plan for the Wealth Holder,
and to review succession plans that are in
place for others.

(Continued on next page)

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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5. Each investment portfolio shall be diversified as


completely as practical. There should be
diversification of asset classes, investment
managers, investment style, currencies, banking
and brokerage exposure, and geopolitical risks.

STANDARD 5:
The Standards Director:
a. Defines in writing an asset allocation and
investment strategy for the management of
the Wealth that is consistent with:
i.

Risk tolerances;

ii.

Asset class preferences (taking into


consideration the Wealth Holders
other assets);

iii.

Mission-based or philanthropic
objectives (if defined in Standard
1);

iv.

Investment time horizons;

v.

Performance objectives; and

vi.

Rebalancing guidelines.

b. Ensures that the asset allocation and


investment strategy are consistent with the
Standards Directors implementation and
monitoring constraints.
6. Every portfolio shall have an investment Policy
statement, and every manager shall have a
clearly articulated mandate; and the investment
Policy statement and mandate shall be
monitored.

STANDARD 6:
The Standards Director ensures that, for each
portfolio, there is defined in writing an
investment policy statement that includes
monitoring criteria.

(Continued on next page)

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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7. Any investment portfolio shall be designed


taking into account the assets, objectives, needs,
and character of the owner and/or beneficiary;
and should be monitored with those in mind;
and a Foundation shall have a process to
determine whether the investment program
reflects the values of its mission and its
philanthropic grant program.

STANDARD 7:

8. There shall be clear, disciplined, and objective


process for selecting, monitoring, removing, and
replacing investment managers, custodians,
banks, trade execution, accounting, and other
professionals.

STANDARD 8:

The Standards Director defines a process to


periodically monitor the investment management
program to ensure that it is meeting defined
goals and objective (Standards 1 and 5).

The Standards Director defines a process to


periodically evaluate the performance of all
professionals involved in providing investment
management services, including:
a. Investment Managers;
b. Custodians;
c. Broker dealers;
d. Investment consultants;
e. Accountants;
f.

Attorneys; and

g. Any other investment service providers.

(Continued on next page)

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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9. Any investment manager or specific fund to be


used shall have a strategy and style which can be
easily understood and explained to others by the
Wealth Holder or by one of the trustees,
directors, or staff members of the Trust,
Foundation, or Family Office. If no one other
than the Investment Manager or the fund
representative is able to explain the strategy and
style, the manager or fund shall not be used.

STANDARD 9:
The Standards Director defines a process for
selecting Investment Managers, which includes,
as a minimum, the following due diligence
screens:
a. The Investment Manager has a defined
investment strategy that is consistent
with goals and objectives (Standards 1
and 5), and can be understood and
explained to others by the Wealth
Holder, or the Standards Director.
b. The Investment Manager has a defined
investment strategy that can be
monitored by the Standards Director.
c. The same investment management team
has been in place for a period
commensurate with the period of the
performance evaluation.
d. Securities in the Investment Managers
portfolio are consistent with the stated
investment strategy.
e. Investment performance has been
verified by an independent third-party,
and compared to the Investment
Managers peers.
f.

Investment performance adjusted for risk


has been compared to the Investment
Managers peers.

g. The Investment Managers fees and


expenses have been compared to the
Investment Managers peers.
h. The investment structure (separate
account, mutual fund, commingled trust,
or hedge fund) is appropriate for the
given strategy, and the Standards
Directors ability to monitor the strategy.

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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10. Special scrutiny and limitations should be


applied to any Investment Manager who does
not provide complete transparency, or whose
portfolio is not liquid. Such investments are not
prohibited, but should be limited in proportion
to total portfolio investments.

STANDARD 10:
The Standards Director defines a process which
flags and limits investments with any Investment
Manager:
a. Who does not provide complete
transparency of their investment holdings;
b. Is investing in illiquid assets; or
c. Whose fund or program is not transparent, or
is illiquid.

11. Custody of assets, accounting for assets, and


investment management services shall each be
performed independently and separately.

STANDARD 11:
The Standards Director defines a process for
evaluating custodians and broker-dealers, which
includes, as a minimum, the following:
a. As a best practice, custodians are
independent of Investment Managers,
except as may be required by trust law,
or by the necessity of employing a
commingled investment vehicle.
b. Custodian can provide appropriate
security of assets, with insurance or
otherwise.
c. Custodial statements provide sufficient
detail that the Standards Director can
monitor the Investment Managers best
execution of trades (generation of soft
dollars).
d. The expense ratio of the custodians cash
sweep and money market fund is
compared to peers.
e. The ability of the custodian to provide
investment performance reports and tax
reporting.

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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12. There shall be established a process for


managing and monitoring internal and external
resources.

STANDARD 12:

13. There shall be full transparency of fees and


expenses.

STANDARD 13:

The Standards Director develops and places in


operation a defined process for monitoring
Service Providers.

The Standards Director periodically analyzes all


fees and expenses associated with investment
management including:
a. Fees paid to Investment Managers,
custodians, and investment consultants;
b. Brokerage costs, and use of soft dollars;
and
c. Fees and expenses of Service Providers.

14. Compensation and fees paid to staff, directors,


and governors of Family Offices, Foundations, or
Boards shall not be calculated on the basis of
investment return of shorter duration than
five years. Any salary, bonus, or fee must be fully
disclosed as to its amount and its calculation.
Any direct or indirect payment to or for staff or
governors other than a payment designated
salary, bonus, or fee (or similar designation) is
prohibited.

STANDARD 14:
The Standards Director periodically reviews
compensation agreements and service
agreements of Service Providers to ensure that
they do not contain provisions that:
a. Conflict with goals and objectives
(STANDARD 1); and
b. Are based on short-to-intermediate-term
(less than five years) investment results.

(Continued on next page)

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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15. Self-dealing by staff, trustees, or directors of any


Family Office, Trust, or Foundation is strictly
prohibited. Investment portfolios of these
parties shall be subject to strict disclosure rules
which ensure compliance with the prohibition
against self-dealing. Any grant or payment to any
agency or company in which such a party has
any interest whatsoever should clearly reflect
that interest in the deliberation relating to that
grant or payment.

STANDARD 15:
The Standards Director defines in writing an
ethics statement, and periodically checks for
conflicts of interests. The ethics statement
requires all persons involved with managing the
Wealth to:
a. Annually acknowledge the ethics statement;
and
b. Disclose all conflicts of interest as they
become known.

END OF STANDARDS

To complete a survey and opinion poll on the Standards, please go to www.wealthstandards.org


For questions or comments, please contact:
Don Trone
Strategic Ethos
don@5ethos.com
(860) 415-9191

Charles Lowenhaupt
Lowenhaupt Global Advisors
cal@lowenchas.com
(314) 241-5950

Global Standards for Private Wealth Management Copyright 2009, Strategic Ethos. All rights reserved.

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