The Future for International Financial Centres

Hubbis, in conjunction with Jersey Finance, conducted two private, off-the-record roundtable discussions and a comprehensive Survey to reveal the vital matters which have been affecting and that will directly impact the future of IFCs and their use for structures and other services by wealth advisers and Asia's wealth management clients.

Executive Summary

Hubbis, in conjunction with Jersey Finance, conducted two private, off-the-record roundtable discussions and a comprehensive Survey to reveal the vital matters which have been affecting and that will directly impact the future of IFCs and their use for structures and other services by wealth advisers and Asia's wealth management clients.

The twin developments of global regulatory proliferation, as well as media leaks and revelations of information on offshore structures, have presented a major threat to the world's IFCs. Are IFCs and the structures they facilitate still relevant, or even acceptable today? Are onshore or midshore jurisdictions winning more business as a result? Or can the higher quality, well managed, robustly compliant IFCs fight back with a drive towards transparency and excellence throughout their product and service lines? 

What do Asia's wealth clients need for the planning of their wealth preservation and for wealth transition amongst generations of family members? 

There were numerous fascinating findings, insights and nuances revealed through this process. It became clear very early on in the first of our roundtable discussions, in Hong Kong in April 2018, that IFCs do indeed remain both viable and of considerable value to the global wealth management community. This thesis was then verified in the Singapore roundtable in May 2018 and then given the seal of approval throughout the Survey we conducted in June 2018.

However, there are more caveats than ever before. The IFCs themselves, and the structures and services they house or provide, must be robustly assembled and allied to optimise local and global regulatory and compliance practices. 

The new era of global regulatory propagation combined with a more all-encompassing, digitally-enabled global compliance edifice means that reputational excellence for IFCs as well as operational rectitude and transparency are of paramount importance. 

Underpinning many of the views expressed and the Survey replies was a clear consensus that the motivations for HNWI and ultra-HNWI clients to go offshore are predominantly for estate planning and transition, with a focus on some degree of privacy and tax planning. 

But crucially, the motivations are no longer what might have been perceived as virtually forensic secrecy and/or tax avoidance that many argue may have motivated some clients in decades past. 

Transparency, simplification, efficiency, reputation, quality and consolidation are the new watchwords for IFCs, the wealth management community and their HNWI clients. 

In this new world, wealth planning is becoming increasingly professionalised, transparent and robust. Those IFCs that adapt to this new world, that develop their products, their services, their people skills, and their digital expertise and interface will not only survive but, given the immense expansion of the world's wealth and the globalisation of that wealth, will prosper for many years to come. And for IFCs consolidating and building their client bases in Asia, the potential is especially dynamic.

As financial market indices have continued to rise across the globe, so too has broader global economic activity and so has the wealth of the wealthy. According to a Capgemini and RBC Wealth Management report, the number of HNWI clients around the globe grew by 7.5% in 2017, while their private wealth increased by 8.2%.  

On June 18 this year, Capgemini's financial services global strategic business unit released its World Wealth Report 2018 estimating that global HNWI wealth would exceed US$100 trillion by 2025. Capgemini reported that the combined wealth of the world's millionaires rose for a sixth straight year and topped US$70 trillion for the first time ever in 2017, due to strong economic performance and bullish conditions in the world's financial markets. 

The number of HNWIs - which Capgemini defines as having investable assets of at least US$1 million, excluding homes and collectible assets - grew nearly 10% to 18.1 million in 2017. Their total wealth stood at just over US$70 trillion. 

The United States, Japan, Germany and China are the four largest markets for millionaires, accounting for 61% of the 18.1 million HNWIs. The Asia-Pacific region has the most HNWIs overall, with Japan, China and India leading the pack.   

Meanwhile, the assets under management (AUM) of the private banks has also surged. In fact, the AUM of the top 25 private banks in the world increased by 17% in 2017 alone to more than US$16.2 trillion, according to Scorpio Partnership's 2018 Global Private Banking Benchmark. The same study showed that Asia produced the highest gains.

Hubbis invites our extensive wealth management community in Asia and globally to read the two roundtable reports and the findings of our Survey and to form their own views on how they will interact with the IFCs and with their clients, as we all strive to adapt to and address the many challenges ahead.