Clients seek wealth managers' help to avoid red cards from regulators

Here is the arbitrary statement of the month: football is redefining the wealth sector in Germany.

Surprisingly, this has little to do with the German triumph at the 2014 World Cup, although it has probably contributed to a few more individuals joining the ranks of the high net worths and ultra high net worths.

Instead, we start with Ulrich Hoeneß (Hoeness), the former Bayern Munich football club general manager, German footballing international and World Cup winner. Mr Hoeneß was convicted of tax evasion to the magnitude of €28.5m in March 2014 and began serving his sentence in June.

Although unfortunate for Mr Hoeneß, it appears the high profile conviction of the former footballer has worked. Initial figures for 2014 reveal that disclosures in the first four months of 2014 are greater than 2011 and 2012 combined. This surge in German tax disclosure is opportune given the announcement that the German Fiscal code will be tightening up in the coming years with stricter protocols scheduled for 2016.

Let us not lose sight of the wider perspective either. The issue of disclosure is not limited just to Germany. In Switzerland, Barclays has pulled out of the US account disclosure programme. Meanwhile, UBS is under fire for tax-evasion in France following a tax crack-down by Francois Hollande.

The OECD has seen the voluntary disclosure of Ä37bn in European assets since the organisation kicked off the country specific voluntary disclosure programme in 2009, but there is a still a way to go. One stumbling block is the complexity of disclosure and regulation with the constant trickle of changes.

In a survey conducted by Scorpio in 2013, more than 1,000 HNWIs in the UK were asked about their understanding of incoming regulatory changes. Of respondents, 42 per cent indicated that they only had a basic understanding of changes made as a result of the retail distribution review (RDR). Meanwhile, nearly one in four clients confessed to having no knowledge of the changes whatsoever.

Clients are looking to their wealth managers and, to an even greater extent, the relationship manager to be a source of market knowledge and expertise. Helping the client to understand incoming regulation, and the impact it will have is no longer something which banks can just assume their lawyer or accountant will cover.

In an era of value demonstration, relationship managers must prove themselves through the relevance and quality of information they provide to their client.   

Alexander Johnson is an associate at wealth management think-tank Scorpio Partnership