The Global Elite ”Rising Stars” Membinar in early August focused on the future of the international private client and the consequent advisory work. Here are the updates from our community:

Jurisdictional Update

  • UK: Very difficult for the Conservative government, after making election promises not to change income tax, national insurance and VAT. Inheritance tax is also up for discussion, as it only forms 5% or so of UK revenue. 

  • US: COVID-19 has impacted youths, women and those without degrees the most. Taxes in general are a politically divisive topic during election year, with huge debt building in COVID support efforts. Is it inevitable to increase taxes? Or will there be a delay to let the economy recover? If the Democrats have a sweep, will we see a tax increase?

  • Switzerland: With unprecedented restrictions, Switzerland will have to generate new revenues, likely via increase in taxes to top earners and general wealth taxes. The inheritance tax issue has resurfaced too, on a federal level to cover the cost of the crisis. 

  • Eastern Europe and LatAm: Clients are more interested than ever in the foreign asset protection structures. Funds and assets are being sent to safe havens. In Brazil, lots of tax bills in Congress are proposing further wealth taxation. Brazilian clients are very interested in estate planning and trust structures at the moment.

  • Are we all in this together to repair our economy? If so, it might lead fruitful Brexit talks, with good levels of cooperation. 

How are our clients responding?

Philanthropy

  • We are seeing a surge in philanthropy and the social impact of client wealth. Are current and future generations becoming more fiscally aware of their positions and the impact they can make through tax? Especially in the UK, we have seen a new found appreciation of public services, particularly the NHS. With the increase in social unrest however in certain public services, will client attitudes shift towards private philanthropy versus paying higher taxes?

Fight or flight?

  • To prepare for the next pandemic, will there be a flight to safe harbour jurisdictions amidst social unrest, economic and political turmoil? Families will also need to consider the health and safety of the family.

  • Holding assets: Early backlash against offshore companies asking for governmental assistance, which may come back on the agenda. 

  • Hong Kong: Increase in clients moving assets away from HK due to security concerns with China. Where are they moving to?

  • Art sales are booming this year- Cadell & Co state that 10m + unseen pieces have been bought online in lockdown, which is very new. Is it an increase in boredom? Or due to the value in art when they can’t get a return elsewhere? 

Insolvency

  • We are set to see a number of insolvencies – with lots of cases involving aspects of Re Z Trust and DBS

  • Warren Buffett – “only when the tide goes out do you see who has been swimming naked” – fraud will go hand in hand with this recession, too.

  • Where we will see business: anti- Bartlett clauses and trustees hiding behind them. 

How are we responding?

How we work and how we get new work:

  • The private client world is very personable with lots of collaboration, as sharing work and clients is inevitable. Existing networks are easy to maintain once it is there, but it is becoming tricky to build new networks and relationships, without knocking on doors. 

Working from home:

  • WFH will help bridge the generational gap – the Next Gen don’t necessarily prescribe to the 9-5. This situation has forced us to rethink the way we work.

In Court:

  • The court system in the UK has managed well – remote hearings are fine for directions, but anything contentious is better in person, as it is hard to get a read on the judge virtually. 

  • Taking instructions is also far more difficult (separate WhatsApp groups with endless notifications).

  • One of the advantages is that it allows clients who would normally not travel for a hearing to be able to join if they choose to. Powerful to see it first-hand rather than just having our report afterward.

  • Are virtual mediations the new way forward?