Offshore wealth management as an industry remains under intense and increasing pressure, particularly from tax authorities in the U.S. and Western Europe. In its latest Global Wealth Report BCG notes how many European countries have agreed to share citizens’ bank-account and tax data, and U.S. tax authorities, through the Foreign Account Tax Compliance Act (FATCA), have become much more aggressive in tracking the foreign accounts of U.S. citizens.
To fight against this backdrop BCG highlights that offshore centers must position themselves not only as possessing skills and expertise that cannot easily be found onshore but also as embracing full transparency and integrity. Larger centers such as Singapore are already touting their reputations as trusted financial centers—for example, by revising tax treaties with other countries—and smaller offshore centers may need to make similar moves.
According to the report, UHNW and HNW client segments hold the bulk of today’s offshore money. And although these segments will invest part of their new money onshore, they will continue to seek diversified solutions, ensuring that some new wealth will continue to flow offshore. There is limited offshore growth potential from other wealth segments, which for the most part will seek improved onshore-banking offerings.
BCG highlights that one overarching trend in Latin America is that the wealth management market is becoming far more competitive than in previous years. There are several reasons for this. First, offshore offerings in the region are becoming more sophisticated as international offshore players enter the market and develop an onshore presence. Other new players are breaking into the market as well, such as asset managers that are moving into the wealth management space and universal banks that are developing new wealth-management products. Family offices are deepening their own offerings. Overall, concludes this report, the global relevance of regional Latin American players is increasing.