Angelo Venardos of Heritage Trust looks at some of the key trends and challenges in wealth planning in Asia today, including what he calls a jurisdictional arbitrage between Hong Kong and Singapore.

Date: Mar 2012

Tags: Wealth planning, Regulation

• With lower tax rates in Asia compared with Europe, a more important driver for setting up wealth planning structures is privacy
• There is a jurisdictional arbitrage between Hong Kong and Singapore – and some clients, through their private banks and other advisers, will choose one jurisdiction over another
• Those people who have come from a mindset of transparency and ethics are most likely to be successful within today’s regulatory framework

When looking at the key topics in wealth planning today, Angelo Venardos said in an interview that from the European, OECD and US perspectives, the relevant authorities are chasing any offshore taxes which haven’t been paid.

However, in Europe, for instance, where the focus is on declared funds, it can be quite difficult for later generations to comply given that it might not be possible for them to know where the money originally came from.

However, explained Venardos, tax rates in Asia tend to be a lot lower, so aren’t a primary driver for setting up wealth planning structures.

Instead, a more important factor in the region is privacy, given, for example, that he said issues such as kidnap and ransom are very real.

Jurisdictional arbitrage

On the surface, Venardos said banks are being told the same messages by the relevant regulators in Hong Kong and Singapore – that they must do the right levels of due diligence and compliance.

However, given what Venardos describes as the “100-pound gorilla sitting at the back of the room” in Hong Kong – referring to China – he said the mainland authorities might not want Hong Kong to sign up to every programme as part of being a good global citizen.

This puts pressure on Singapore, he explained, which while on the one hand wants to compete with the Europeans, also needs to keep in mind what is happening with the competitive market of Hong Kong.

As a result, Venardos said there is a jurisdictional arbitrage, and some clients, through their private banks and other advisers, will choose one jurisdiction over another.

An evolving industry

When referring to how the industry has developed over the years, Venardos said that in his earlier days, in corporate banking, the focus was about not letting money out of the bank without a detailed risk assessments and credit worthiness report.

The reverse is happening in private banking today, he said, where the compliance departments control the process of telling the bankers whether they can take in a client’s money.

The process of satisfying the ticks and boxes is therefore getting more robust, he explained.

For those people who have come from a mindset of transparency and ethics, Venardos said they are most likely to be successful within today’s regulatory framework.