Last updated: 08:35 / Monday, 26 September 2016
Says Verdict Financial

Despite Global Offshore Financial Market Growth Slowing in 2015, Unrest will Keep Industry Afloat

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 Despite Global Offshore Financial Market Growth Slowing in 2015, Unrest will Keep Industry Afloat
  • Safe havens, such as the US and Switzerland, are rising in prominence
  • After the Panama Papers, investors and wealth managers are turning away from traditional offshore centers
  • Britain leaving the EU, the coup in Turkey, continuous unrest in the Middle East, slowing economic growth in China, and uncertainties surrounding Russia’s geopolitical ambitions – have all contributed to funds flowing back into Switzerland

While 2015 was a weak year for the global offshore financial market, with growth slowing to 1.6% over the previous year, there are notable differences between offshore centers and their propositions and performances, and wealth managers need to understand these differences to service customers more effectively, according to financial services research and insight firm Verdict Financial.

The company’s latest report found that safe havens, such as the US and Switzerland, are rising in prominence, while more traditional offshore destinations, such as the Bahamas, are experiencing declines in offshore assets.

Heike van den Hoevel, Senior Analyst at Verdict Financial, notes: “Understanding the unique selling points of each offshore center is key to determine not only their performance, but also future prospects, and the reasons why investors will want to invest there.”

For example, the Bahamas, which is mainly known as a tax haven, has struggled in recent years. In light of recent scandals, in particular the Panama Papers, as well as increased media attention on tax evasion, investors and wealth managers are turning away from traditional offshore centers to avoid being tainted by association.

Switzerland, one of the world’s largest safe havens, represents another interesting example. Traditionally known for banking secrecy and numbered accounts, the Alpine state felt the full brunt of the increased pressure on offshore centers after the 2008 crisis, and retail non-resident deposits declined by 24% between 2008 and 2013. However, the tide is turning, and the Swiss government has made efforts to increase transparency and end bank secrecy in recent years, most notably committing to the automatic exchange of tax information as part of the OECD’s Common Reporting Standard, which will begin in 2018.

Van den Hoevel continues: “These efforts combined with the country’s safe haven status have seen non-resident deposits return in recent years. Various international developments – including Britain leaving the EU, the coup in Turkey, continuous unrest in the Middle East, slowing economic growth in China, and uncertainties surrounding Russia’s geopolitical ambitions – have all contributed to funds flowing back into Switzerland as investors seek a safe haven for their money.”

 

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