The globalisation of wealth

In wealth management, offering a multi-generational view on family wealth, which looks at the needs and objectives of the current and future generations, is a vital approach, states Northern Trust’s chief fiduciary officer Hugh Magill. 

A bank needs to offer not only private banking and portfolio management services, but also onshore and offshore fiduciary services, as well as advisory services, including family education and governance, tax and financial planning, and needs to be able to manage unique assets and provide asset servicing, particularly critical for portfolios of multinational families, he says. 

Philanthropic planning is also increasingly important to meet people’s growing desire to give back to society. Wealthy parents worry they risk extinguishing their children’s productivity, which is important for self-worth. And the question they increasingly ask themselves today is, when it comes to the transfer of their assets, how much is enough and how much is too much, explains Mr Magill. Many wealthy believe that wealth “has to serve as a safety net but not as a hammock, it is not a place to rest, but for protection.”

Increasingly families are international, with marriages crossing borders, and globalisation of people means globalisation of wealth. With increased transparency, planning becomes absolutely crucial. There are opportunities and pitfalls. 

Opportunities come in tax planning, in moving wealth across jurisdictions to minimise taxes, for example by establishing trusts, says Mr Magill. But at the same time, clients have to navigate an increasingly complex set of rules, and failing to do so can bring significant penalties. 

“Wealth planning has become more complex in general because international mobility has clearly increased in the past decade,” says Tobias Wehrli, head of wealth planning for Europe at UBS Wealth Management. “Clients have assets spread around the world in different jurisdictions, which means we need to review succession plans more often than in the past, and cope with different laws and tax regimes.” 

This is a challenge but also an opportunity, he says, explaining that UBS relies on “a huge network of external service providers”.

 “Globalisation has really changed the game for wealth planning and for the succession of capital,” states James Quarmby, head of private wealth at international law firm Stephenson Harwood in the UK.

 “With strong anti-money laundering laws, a lot more has to be known about the client, his wealth, how he came about it, whether he has paid tax on it, succession and tax rules in his country, the political situation, levels of corruption and safety levels.”

This is why structures such as trusts in offshore financial centres will always be popular, regardless of the negative reputation fuelled by governments and the media, says Mr Quarmby, as they enable clients to consolidate assets, and provide a tax-neutral situation. With clients increasingly holding assets in several countries, a trust enables them to cut out a lot of probate procedures, which in many jurisdictions mean unwanted publicity, at the time of a person’s death.

Further reading: Wealth transfer: Looking after the next generation