Private Wealth Management
by
the Lowtax Network Editorial Team, August, 2008
Disclaimer:
The Lowtax Network has taken reasonable care in assembling
this report but accepts no liability for any actions
taken or not taken as a result. In particular, this
report does not constitute investment advice. Anyone
contemplating an investment, or a change to a current
investment, needs to take appropriate professional advice.
There
is such a lot of money!
Despite
a presumably temporary dip in asset values as a result
of shell-shocked markets post sub-prime, HedgeFund.net
said recently that total hedge fund assets stood at
USD2.848tn at the end of March 2008.
New
allocations of USD53.02bn during Q1 couldn't overcome
performance losses of USD93.18bn, resulting in total
hedge fund assets experiencing a quarterly decrease
for the first time on record. The 1.4% decrease in Q1
2008 compares to an increase of 11.5% in the first quarter
of 2007.
According
to the 12th annual World Wealth Report, released in
June 2008 by Merrill Lynch and Capgemini, the wealth
of the world's high-net-worth individuals (HNWIs1) increased
9.4 percent to US $40.7 trillion in 2007. The number
of HNWIs in the world increased 6 percent in 2007 to
10.1 million, the number of ultra-high-net-worth individuals
(Ultra-HNWIs2) increased by 8.8 percent, and for the
first time in the history of the Report, the average
assets held by HNWIs exceeded US $4 million.
A
study
by consulting firm McKinsey and Company published in
January, 2007, estimated that the value of total global
financial assets, including equities, government and
corporate debt securities, and bank deposits, expanded
to $140 trillion in the 12 months to the end of 2005,
an increase of $7 trillion from a year earlier. That
is a growth rate of 5.3%.
There
are no consolidated figures for the growth in offshore
assets - many jurisdictions simply don't release figures.
But for those that do, it is clear that the rate of
increase in banking, trust and fund assets dramatically
outpaces McKinsey's global figure.
In Jersey, for instance, banking and investment fund
assets were approaching GBP500 billion at mid-year,
up 40% in the last two years. In Guernsey, bank deposits
rose 14% last year to GBP92 billion, and fund assets
rose 45% to GBP210 billion in the year to June, 2008.
In
the Isle of Man, fund assets surpassed the $50 billion
mark as at June 30, 2007, bringing the total of assets
just in the UK's near-shore islands to more than US$2
trillion, up 30% in total over the previous two years.
So
where does it all come from?
From
rich people, stupid!
They
are the new kids on the block, the new rulers of our
world. They are going to get richer, and there are going
to be more of them. There are already more than 10 million
dollar millionaires in the world, and that number has
seen more than 10% annual growth in the last few years.
It
is estimated that the assets of these 10 million rich
people top US$50 trillion. And beneath them are tens
of millions of 'mass affluent' people with free, investible
assets in excess of US$100,000. And beneath them . .
.
Circling
these glittering concentrations of gold, silver and
diamonds are shoals of advisers, wealth management consultants,
hedgies and, especially, private bankers. The purpose
of this Investors Offshore special feature is to analyze
in particular the role played by bankers in wealth management,
and to offer some basic principles for choosing between
the many investment options available to the affluent.
Private
Banking
As a phrase,
the term 'private banking' is becoming so over-used
that it is close to losing the cachet that once attached
to the intensely secret dealings between a banker in
his Zurich parlour and his wealthy visitors.
Almost
every bank with any pretensions to being international
offers special rates of interest to wealthier private
depositors under the heading of private banking. Minimums
have fallen to as low as US$10,000 in many cases, although
some firms still maintain more traditional entry levels
of US$100,000 or higher before offering special treatment
to their clients.
The truth
is that there are vast numbers of banks competing ferociously
to capture the admittedly even vaster numbers of clients
with money to invest. The customer with $20,000 dollars
of spare cash today is worth the time of a 'relationship
manager' in the hope that he will have $200,000 or $2m
of spare cash tomorrow. It's a marketing exercise.
Private
banks, once the traditional first port of call for a
rich person seeking to safeguard wealth, tended to lose
out to alternative forms of wealth management during
the last 20 years of the 20th century. Bankers came
to be seen as old-fashioned. The very rich began to
use 'family offices' to manage their money, in effect
directly employing skilled advisers. And the bankers
were slow to recognize the attractions of investment
funds in general and hedge funds in particular. The
liberalization of capital markets and improved telecommunications
focused the attention of the media on investment as
a major preoccupation of readers or viewers, and it
became fashionable for moderately wealthy people to
self-invest.
But the
banks have fought back, gaining expertise in the new
types of investment and broadening their horizons. In
the last few years they have reclaimed a leading position
in private wealth management, and have enthusiastically
expanded out of their traditional bastions such as Switzerland
and Liechtenstein into newer 'offshore' jurisdictions.
Almost every week sees the announcement of another private
banking merger or expansion plan. Here is a recent sample:
- Gulf
Merchant Group Limited, a new investment banking and
asset management firm to the region, was licensed
by the Dubai Financial Services Authority (DFSA) to
operate as an authorised firm within the Dubai International
Financial Centre (DIFC). The DIFC said that the group
will provide international standard investment banking
services that target family-held business groups and
High Net Worth Individuals (HNWIs) within the MENA
region. Gulf Merchant Group Limited is a subsidiary
of Gulf Merchant Group LLP, which is regulated by
the UK’s Financial Services Authority (FSA).
- Swiss
Life Holding has announced that it will acquire the
entire share capital of Liechtenstein-domiciled CapitalLeben,
giving the company a leading position in structured
life insurance products for high net worth individuals.
Swiss
Life said that it will merge the company with its
subsidiary Swiss Life (Liechtenstein) AG. The companies
have a comparable business model, similar products
and complementary areas of geographical focus. The
insurance law introduced in 1996, and compatible with
applicable European Union directives, has made Liechtenstein
an attractive location for business with structured
life insurance products. Policies concluded under
Liechtenstein law enable wealthy customers to invest
their assets in life insurance, and therefore benefit
from attractive tax conditions and from the advantages
of wealth management and estate planning. Premium
income totalling around CHF6 billion (EUR5 billion)
is expected for this market for 2008.
-
International hedge fund management and brokerage
services company Gottex plans an IPO in Switzerland,
the company said. Gottex Fund Management says it has
US$13.3bn assets under management. The
company has operations in Switzerland, Germany, United
Kingdom, United States, Hong-Kong and Australia, but
the fund management company is registered in the British
Virgin Islands, while the holding company which is
apparently going to stage the IPO is based in Guernsey.
- EFG
International, a global private banking group headquartered
in Zurich offering private banking and asset management
services, has announced that it has reached an agreement
to acquire major US wealth manager PRS Group from
its main founder. PRS Group currently manages approximately
US2.5 billion in high net worth client assets, which
are primarily invested in proprietary funds and proprietary
funds of hedge funds. PRS Group was founded in 1981
to provide specialized investment services to a global
high-net worth and institutional investor base. In
addition, it offers a broad range of family office-type
private banking services, as well as discretionary
asset management services. PRS currently employs 46
professionals, 5 of whom are Client Relationship Officers.
For PRS, the association with EFG International will
provide access to a wider range of private banking
services including access to a global custody and
administration network.
- Ruling
Prince of Liechtenstein, Hans-Adam II, visited the
Dubai International Financial Centre (DIFC) to discuss
the strengthening of investment links between the
DIFC and Liechtenstein, particularly with respect
to LGT, the wealth management experts of the Princely
House of Liechtenstein. Nasser Alshaali, Chief Executive
Officer of the DIFC Authority, stated that: “We welcome
His Serene Highness Hans-Adam II and his delegation
to the DIFC and we look forward to a prosperous relationship
between the DIFC and both the Principality of Liechtenstein
and LGT. There are extensive business opportunities
for these two major financial centres and we are keen
to discuss these in further depth for the benefit
of both Liechtenstein and Dubai."
The expression
'private banking' is nowadays more to be seen as a gateway
into investment management in the broader sense than
as offering a confidential, almost family relationship
with a man to whom you entrust your money. Those relationships
still exist in the traditional places, but they apply
more to extremely rich people than to moderately wealthy
or well-off people who want more personalised treatment
than they can get from their high street branch, or
their regional 'personal banker'.
Here, 'private
banking' is taken to mean investment management offered
on a personalised basis by bank to an individual (or
indeed his company) with disposable wealth of more than
$100,000. 'Private banking' is obviously not synonymous
with 'offshore', but the costs of a personalised relationship
begin to be worthwhile at the $100,000 level in the
light of the superior gains to be realised from offshore
investment.
Choosing
A Private Banker
Some care
is needed when approaching a 'private banker' or a bank
offering customised relationship management (there are
lots of expressions all amounting to the same thing).
What matters is the structure of the bank. This is not
to say that one kind of bank is necessarily more reliable
than another, just to understand why the bank is offering
personal attention, and what it hopes to gain from it.
Some banks
are little more than front ends for investment funds.
They may be safe enough, but are they objective? Perhaps
it is best to look for a bank that is trying to make
money out of private banking as an activity in itself,
rather than just using it as a scoop for customers for
its financial products. If you just want a bank that
will give you a good rate of interest without deduction
of withholding tax, then the choice is simpler.
Private
banking doesn't just mean investment: banks like to
lend money, and especially to richer people. This raises
the question of how a private banker is going to get
rewarded. Depositing money with a bank is reward enough,
of course, whether into the bank or into one of its
financial products, but private banking when it has
an advisory nature and is not accompanied by lending
or borrowing may be fee-based. Provided the sum involved
is large enough to justify the fee costs, an advisory
private banking relationship is probably a good way
to go. The bank will get the benefit from time to time
of being able to offer bridging finance, or of holding
large amounts in transit etc. It can hope for more substantial
involvement with you in future. But the immediate relationship
is between financial adviser and client.
Given the
snowstorm of advertisements and mail-shots which surrounds
richer people, the problem might seem to be more one
of avoiding private bankers than finding them. But most
of the offers are from banks wanting to sell their own
services.
As explained
above, a 'private banker' is probably best approached
as an objective financial adviser rather than as an
investment-provider, and may also not be the most effective
choice for a reasonably sophisticated investor who wants
to play an active role in the management of his investments.
Many people
may have contacts or advisers who will be able to recommend
a particular bank, but assuming a blank sheet of paper,
then the first step is to decide between an onshore
or offshore bank. This will depend on an individual's
residential situation, but if you either already have
residence in a low tax area, or plan to have it in future,
or want to explore trusts and other 'distancing' techniques
which can legitimately reduce your exposure in high-tax
areas, then you are probably going to choose an offshore
bank.
An
Introduction To Offshore Banking
There
is a huge spectrum of different offshore banking services
available to expats, international investors, globetrotters,
international consultants and corporations, offering
varying degrees of return, protection, and privacy.
Before we look into the different sorts of offshore
bank account available, however, a brief rundown of
the background of this ever-growing industry is necessary,
in order to understand the present situation.
As
more and more financial institutions became keen to
establish themselves on an international level, regulators
perceived a need for greater banking regulation, and
introduced a set of minimum standards and safeguards,
known as the Basle Accord (introduced 1988). The Accord
outlined the requirements necessary for banks to obtain
licenses, which included two minimum types of bank
capitalisation- core capital and supplementary capital.
Core (Tier 1) capital is basically a mixture of shareholder
equity and disclosed reserves, and supplementary capital
is a mixture of debt and equity instruments.
The
Basle Accord set the minimum capital adequacy level
for each type of bank capital at 4%, meaning that
many banks operating in countries under this accord
were forced to increase their capital reserves and
to invest in 'safer' investments. Recently introduced
modifications to the original Basle Accord (originally
enough, called Basle 2, and running to 541 pages)
seek to align capital requirements with the underlying
risks of loans made, and will further affect the amount
of capital which each bank is required to hold. This
may mean that banks in countries which are operating
under the Basle Accord are forced to be more cautious
about the instruments in which they invest, resulting
in potentially less attractive returns. However, in
non-Accord countries (which includes many offshore
jurisdictions), regulation of this kind is usually
down to the regulatory authorities of the jurisdiction,
and the required capital adequacy levels can vary.
Other
legislative issues have also had an effect on the
offshore banking world. Initiatives by the OECD/FATF/G7
countries to combat money laundering have, in the
process, severely damaged the banking secrecy laws
of many offshore jurisdictions. 'Know your Customer'
legislation has meant that privacy in high tax and
certain low tax jurisdictions has been jettisoned
in return for international acceptance. In addition,
US rules have introduced 'Qualified Intermediary'
status which also imposes more stringent controls
on any institution wanting to avoid having to tax
US-source income regardless of the nationality or
tax status of the recipient. For all these reasons,
opening an offshore account can now often require
a small rainforest's worth of paperwork.
The
OECD's first shot across the bows of banking secrecy
was fired in earnest with the release of a report
in 2000 into improving access to bank information
for tax purposes, endorsed by all 29 members of the
organisation. Although the report was more a statement
of intent rather than a detailed plan, it set the
template upon which national tax authorities could
obtain information about specific individuals or companies
whom they have reason to suppose are engaged in tax
evasion or criminal activity.
Although
many offshore jurisdictions have responded to the
pressure brought about as a result of their blacklisting
by the OECD and the FATF by strengthening legislation
against money-laundering and introducing better controls
over financial institutions, the high tax countries
have failed to really galvanise a move towards any
comprehensive dilution of banking secrecy, and the
international framework of mutual assistance treaties
remains largely as it was.
Indeed,
the high-tax countries themselves are gradually being
forced by peer pressure and international regulations
to tighten up their own regimes.
In
January, 2007, for instance the UK took the latest
in a series of EU-inspired measures when Economic
Secretary to the UK Treasury, Ed Balls, published
draft money laundering regulations for consultation.
They were passed by Parliament in July, and came into
force on 15th December.
The
regulations are designed to implement the EU's Third
Money Laundering Directive, and have already caused
controversy.
The
proposed regulations include:
- Extended
supervision so that all businesses in the regulated
sector comply with money laundering requirements,
including estate agents, trust and company service
providers and unsecured lenders;
- Strict
tests to ensure people running money services
businesses and those who help set up trusts and
companies are fit and proper;
- Extra
checks on customers that firms identify as posing
a high risk of money laundering;
- A
requirement to establish the source of wealth
for those in high risk situations, for example
those involving deals with high ranking public
officials overseas; and
- A
strengthened and risk-based regime in casinos,
in line with, but stricter than, international
standards.
Mr
Balls announced that: 'These Regulations will strengthen
further the UK's defences against money laundering
and terrorist finance. By taking tough and targeted
new measures where the risks are greatest we will
crackdown further on illegal activity and help force
criminals and would-be terrorists out of the shadows.
At the same time our Regulations will ensure that
businesses and consumers in low risk situations face
fewer burdens than previously.'
The
Directive includes criminal penalties for advisers
ranging from stockbrokers to lawyers and estate agents
to bankers if they do not carry out multiple checks.
However,
the UK's Law Society warned that the new money laundering
regulations could put solicitors at risk of inadvertently
committing criminal offences because they are "impossible
to interpret" in practice. It also warned that the
new rules will increase the cost to clients of solicitor’s
work in dealing with trusts.
According
to the Law Society, a number of the terms in the new
EU Directive are unclear, and unless the Government
clarifies them, solicitors will have to make extensive
enquiries – at clients’ expense – in order to avoid
inadvertently committing a criminal offence.
Offshore
banks, or the offshore branches of banks based in
'high-tax' countries, may apply some residence tests
when you approach them. The situation is odd: there
are hardly any countries which make it illegal for
their citizens to have offshore accounts (there used
to be plenty, but the abolition of exchange controls
has changed all that). The illegality comes if you
don't declare the account (in some cases) or if you
don't declare the income from it (other cases). But
the offshore bank may well not be allowed to offer
you the account in the first place if it is not regulated
and licensed in your home country. The publicity of
such banks normally puts the onus on you to abide
by the regulations of the country you are in; their
practise is variable when it comes to accepting your
business.
The
Internet has of course sharpened the banks' dilemma.
If a bank is not licensed in a territory, it clearly
can't mail leaflets into it, or advertise on television
locally. But the Internet jumps these barriers, to
the extent that a bank cannot (and of course doesn't
in fact want to) prevent a prospect in a regulated
country from seeing its publicity. If the prospect
then approaches the bank of his own accord, is the
bank to turn him away because he found their publicity
on the Internet? The answer to this question probably
depends on the regulatory regime applying to the offshore
bank in question.
See
Regulation of Alternative Investment
for more details of the regulatory regime in different
countries. The licensing regime for offshore banks
is explored in www.lowtax.net
under Law of Offshore for a number of jurisdictions.
The choice
of an offshore bank is in itself a difficult, and to
some extent a circular task. You will not find it easy
to distinguish between the merits of different offshore
jurisdictions, or the banks they offer, until you have
got to know them quite well. This is the point at which
you might think that an onshore adviser in your own
home country can help you - and it may be so, but remember
that only a very skilled, knowledgeable and above all,
objective, adviser is going to be useful. Such a person
is hard to find.
www.lowtax.net
is designed to help people who do not have access to
the perfect adviser we just described. www.lowtax.net
is not an investment adviser, and is no substitute for
professional advice, which is an absolute necessity
for anyone planning a move offshore. But the www.lowtax.net
site does contain a wealth of information about
35 offshore jurisdictions, which is designed to help
you to make a preliminary choice of one or a few offshore
jurisdictions suited to your circumstances, which you
can then explore in depth.
Assuming
that you have been able to choose a particular offshore
jurisdiction in which to establish your investment base,
you now face the problem that people in that jurisdiction
are quite likely to be anything but objective when it
comes to planning international investment structures.
It is therefore likely that the best choice will be
a bank which has an international network, with a well-established
branch in the jurisdiction you have chosen. It may even
be that the head office of such a bank can have assisted
you in the choice of jurisdiction. But beware: if a
Zurich bank has just one branch, in the Cayman Islands,
which jurisdiction do you think they will recommend?
Purely
as a factual guide, here is a list (in aphabetical order!)
of those offshore jurisdictions offering a reasonably
wide choice of banks:
Bahamas
Cayman Islands (500 banks)
Dubai
Isle of Man
Jersey
Hong Kong
Monaco
Panama
Switzerland
Once you
have chosen a jurisdiction, it is quite easy to find
the names of the banks which operate there. A number
of banks will be available in the Private Banking Providers
Plaza; and our section Gateways To
Offshore Information Providers will lead you to
further sources of such information.
See the
investorsoffshore.com DIY
investment selector for investment guidance based
on specific residential and investor profiles.
Offshore
Versus Onshore in 2008
It
is unlikely that the relative advantages of offshore
will be undermined in the short term at least. The
OECD's rather uneventful Global Forum on Taxation
in Berlin in June 2004 encouraged participants to
continue to strive towards effective exchange of information
and transparency by 2006, although it was also recognised
that flexibility is required since many participants
have not yet initiated negotiations towards the required
signing of bilateral agreements.
The
OECD claims however that substantial progress has
been made. A report from the Global Forum secretariat
in 2006 stated that countries continue to improve
their international cooperation to combat tax abuse
by putting in place mechanisms which enhance transparency
and exchange of information for tax purposes. Many
of the economies reviewed have enhanced transparency
by introducing rules on customer due diligence, information
gathering powers and the immobilisation of bearer
shares. Most have entered into double taxation conventions
and/or tax information exchange agreements, and many
are engaged in negotiations for such agreements.
The
OECD also noted that none of its member countries,
and very few non-members, now make domestic tax interests
a condition for responding to a treaty partner’s request
for information on a specific taxpayer. However,
the Organisation argues that more progress can be
made to improve global tax transparency, and stated
that some countries still place constraints on international
co-operation to counter criminal tax matters and a
number continue to impose strict limits on access
to bank information in civil tax matters.
"The
direction of change is clear," Paolo Ciocca, Chair
of the OECD’s Committee of Fiscal Affairs and Co-Chair
of the Global Forum stated. "Onshore
and offshore financial centres are prepared to work
towards the implementation of mutually agreed standards.
I look forward to the day when the centres that have
met these standards are joined by other jurisdictions
that have not yet achieved them," he added.
Leasi
P. T. Scanlan, Governor of the Central Bank of Samoa
and also a Co-Chair of the Global Forum, said the
report demonstrated the ability of OECD and non-OECD
countries to co-operate in order to prevent their
financial centres being misused for illegal tax avoidance
and evasion. "This
has been a huge undertaking but we now have a clear
idea of where we stand. It is an important step in
helping countries to work towards a level playing
field so that these abuses do not simply shift from
one financial centre to another," he observed.
In
October, 2007, the OECD published two new reports
outlining the progress made so far in its campaign
against tax evasion.
'Improving
Access to Bank Information for Tax Purposes – the
2007 Progress Report' describes developments in OECD
countries and six others (Argentina, Chile, China,
India, the Russian Federation and South Africa) with
respect to access for tax authorities to bank information.
Meanwhile,
'Tax Co-operation: Towards a Level Playing Field –
2007 Assessment by the Global Forum on Taxation' compares
the legal frameworks for international tax co-operation
of 82 OECD and non-OECD economies. It is the second
in a series of factual reports by the OECD’s Global
Forum on Taxation.
The
OECD says that significant restrictions on access
to bank information for tax purposes remain in three
OECD countries (Austria, Luxembourg and Switzerland)
and in a number of offshore financial centres (e.g
Cyprus, Liechtenstein, Panama and Singapore). It further
argued that a number of offshore financial centres
that committed to implement standards on transparency
and the effective exchange of information standards
developed by the OECD’s Global Forum on Taxation have
"failed to do so".
“No
one country or even a small group of countries can
address the issue of harmful tax practices on their
own,” commented Paolo Ciocca, chair of the OECD’s
Committee on Fiscal Affairs and co-chair of the Global
Forum. “This is a global challenge which requires
a global response. In co-operation with partner financial
centres, that is what OECD is seeking to achieve.”
However,
Mr Ciocca went on to announce that in the view of
the OECD, progress has recently been made in the following
areas:
- Nearly
100 more exchange of information arrangements
are now in place, compared with one year ago,
including tax information exchange agreements
between the United States and Guernsey, the Isle
of Man and Jersey which entered into force in
2006.
- The
scope of some existing arrangements has been extended.
For example, Switzerland has signed a number of
protocols to its bilateral tax conventions to
allow it to exchange information, including bank
information, in cases of tax fraud and the like.
Some of these protocols also allow for exchange
of information in both civil and criminal tax
matters in the case of holding companies.
- Access
to bank information for tax purposes has been
greatly improved in economies such as Belgium,
which in November signed its first tax treaty
providing for exchange of bank information for
all tax purposes.
- Increasingly,
legislation requires financial and other service
providers to have available details of the beneficial
as well as the legal owners of corporate vehicles.
For example, in Macao, China; new anti-money laundering
legislation requires financial institutions to
verify the identity of customers and their beneficial
owners. In San Marino, new legislation requires
that from 2008 meetings of joint stock corporations
must be held in the presence of a notary public
who is required to identify holders of bearer
shares.
- Some
jurisdictions, such as Guernsey and Jersey, have
brought into force legislation empowering them
to fully implement the provisions of their bilateral
exchange of information arrangements.
“The
vast majority of OECD countries already meet or exceed
the standards set in 2000 regarding access to bank
information for tax purposes, and the direction of
change is clear,” Mr Ciocca stated, but warned that
jurisdictions which have not yet implemented the standards
for transparency and exchange of information developed
by the Global Forum must now do so.
He
concluded:
“We
will continue to press for further progress and explore
within the Committee how such progress could be achieved.”
The
offshore jurisdictions themselves have become highly
active in attracting wealth management business, often
creating marketing departments for the purpose. Isle
of Man Finance, the Manx government's finance industry
promotional arm, for example, recently hosted a ‘Family
Wealth Management Seminar’ in Geneva, which sought
to showcase the strength of the Island’s attractions
for high net worth individuals. Leading
the delegation and speaking on behalf of Isle of Man
Finance, Deputy Head, Steven Beevers commented:
"The
Island now has a strong message for private client
business, therefore Geneva, as the centre for wealth
management and the gateway to high net worth individuals,
was the most appropriate venue to leverage support
and interest. This high calibre event provided us
with the opportunity to showcase our attractive tax
package and expertise, to an audience of top level
advisers with a global client base. The inclusion
of industry and government spokespeople helped to
convey how well we work hand in hand to promote the
common goal of the Island’s finance sector."
He concluded: “The Isle of Man is continuously looking
at ways to increase our services and attractions to
this niche but high value market. Therefore, it was
pleasing to see that the broad range of Isle of Man
business offerings including the super yacht register
and shortly to be introduced aircraft register also
met with considerable enthusiasm by the wealth management
professionals.”
Research
published in October, 2007, by Barclays Wealth revealed
a trend amongst wealthy investors of an increasing
appetite for financial products that help reduce volatility
such as derivatives, private equity and hedge funds,
particularly in the Middle East and Asia. “Intuitively,
absolute returns make a lot of sense and we see that
more wealthy individuals are thinking in those terms,”
said a spokesperson.
The
findings also indicated that wealthy families are
encouraging children to gain a university education
and have their own careers, as they aim to ensure
their children strive to achieve their own success.
More than a third (34%) of those questioned think
it is a bad idea to leave large sums of money to their
children.
Interestingly,
those who have inherited their own wealth are even
less likely to pass on large sums of money to their
children than those who have earned their wealth.
Some 41% of respondents whose wealth was given agree
it is a bad idea to leave large sums of money to children,
compared with 33% of respondents whose wealth was
earned.
Barclays
Wealth surveyed 790 wealthy individuals, in partnership
with the Economist Intelligence Unit (EIU).
Due Diligence Before Opening an Offshore Account
First
and foremost, you should enlist the services of
a finance professional. They should be aware of
the risks and ongoing issues in the jurisdiction
in which you choose to locate, and should also be
aware of any suspect institutions. However, initially,
it is worth doing a little research for yourself,
and there are several things that you can do:
-
First of all, look at the established institutions
in your jurisdiction of choice. In this way, you
can gauge the standards of the industry there, and
in so doing, give yourself a frame of reference.
-
Although longevity is an important plus point for
an offshore bank in due diligence terms, it is not
the only factor to be considered. Keep an eye out
for any negative publicity in the media (this is
where the internet comes in especially handy!)
-
Don't do business with a 'brass plate' bank. Although
there has been a drive towards eradicating this
type of institution, you need to make sure that
the bank that you intend to entrust your hard earned
cash to is the real deal (i.e. has an office, staff,
a license, money, etc. Little things like that!)
If you have come across the institution via its
website, make sure that it is possible to make contact
by other means than e-mail. Although the presence
of a physical mailing address, and telephone and
fax details do not in themselves indicate that a
bank is legitimate, their absence may be a red flag.
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Be wary of banks or providers offering interest
rates that seem unusually high. Although there is
certainly scope for good returns in the offshore
arena, things that seem too good to be true usually
are. When dealing with your future happiness and
financial well being, it is a good idea to leave
your faith in human nature at home!
Due diligence
is not just a one way process, and the amount that
banks are required to conduct on potential customers
increased greatly with the advent of 'Know your Customer'
legislation in the last few years. If you are applying
to open a bank account through an intermediary, or
with an institution that has agreed to implement KYC,
you will need to provide at least the following:
It
is difficult to discern whether 'Know Your Customer'
legislation came about as a result of the efforts
of the FATF (Financial Action Task Force), as a result
of the efforts of the IRS, or as a combination of
the two. In some people's minds, however, it is inextricably
linked with the latter, and with the introduction
of 'Qualified Intermediaries' and 'Qualified Jurisdictions'
in 2001. Qualified intermediaries are primarily concerned
with US citizens, and those with US source income,
and are required by the IRS to implement KYC in return
for simplified reporting, and withholding tax procedures.
However, it all gets a bit complicated from here on
in, because it is possible to find a qualified institution
in a qualified jurisdiction, a non-qualified institution
in a qualified jurisdiction, and sometimes a qualified
institution in a non-qualified jurisdiction (although
this is only permitted if the institution is a branch
of a company resident in a qualified country). Got
all that? All that this really means is that unfortunately
US citizens have got the short end of the stick again,
in that some banks may choose not to take them on
as a result of the extra reporting requirements. However,
once again this is a complicated matter, and best
discussed with a qualified professional.
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