Wealth managers are not sufficiently equipped to deal with the rise in HNW demand for offshore investments. In particular, when it comes to the provision of advice on international taxation, providers must up their game, says GlobalData.
The proportion of HNW individuals who invest offshore has been on the rise despite the scandals that have shaken the industry and ongoing negative media coverage. This trend is not expected to change. As per GlobalData’s 2019 Global Wealth Managers Survey, a notable 50.2% of industry participants expect HNW demand for offshore investments to rise as it becomes increasingly easy to access offshore markets. In comparison, just 9.1% believe demand will fall.
Given that on average HNW individuals already book a third of their liquid wealth abroad, supporting investors in this regard is crucial to avoid losing assets under management to offshore businesses. Yet GlobalData’s research shows significant room for improvement. For example, only 44% of wealth managers that target HNW investors have the infrastructure in place to refer their clients to overseas branches or offices of their organization.
Meanwhile, only 58.6% have in-house capacities to advise their clients on the taxation of international assets. This is even more surprising given the increased focus on tax matters following numerous offshore scandals as well as rising governmental scrutiny and intergovernmental cooperation.
However, a fifth of HNW wealth is held abroad to either achieve tax efficiencies or for client anonymity reasons. Clearly, clients are becoming increasingly demanding when it comes to structuring their fortunes in a tax-efficient way. This comes at a time when realising tax efficiencies is harder as governments globally have picked up their game. As a result, the line between tax evasion and tax avoidance is increasingly blurry.
But this should not be an excuse for wealth managers to shift their focus inwards. As the complexity that comes with spreading wealth across multiple jurisdictions rises, so too will demand for sound advice. It’s time for wealth managers to review their offshore service proposition.
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