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How to Manage Family Wealth in a Shrinking Offshore World

08 January 2019

How to Manage Family Wealth in a Shrinking Offshore World

Our Managing Director Don Wijsmuller was recently interviewed by Tax Linked on the subjects of how to manage family wealth in a shrinking offshore world. You can read the full interview here:

Taxlinked (TL): What are your top three tips for individuals looking to manage their family wealth in the best possible way?

Don Wijsmuller (DW): My tips for individuals looking to manage their family wealth in the best possible way is firstly to build a good working relationship with a professional adviser, preferably a multijurisdictional one or with multijurisdictional reach. They need to look to invest in areas that they have extensive knowledge of or employ a trustee to assist with the selection of the right adviser for the right asset class. It is also important to clearly state their risk appetite and ensure that when they invest, they stay within appropriate risk parameters.

TL: How have the OECD and EU-led anti-tax avoidance initiatives affected family wealth management in Jersey and beyond?

DW: I don’t think it really has affected family wealth management other than increased costs associated with compliance and underscored the need for good tax and/or legal advice and appropriate substance in relation to any offshore structures, so that families can demonstrate that mind management and control, plus key activities, are carried out in Jersey.

TL: What are some of the main challenges to be faced by professionals involved in the wealth management industry moving forward?

DW: In my opinion, some of the key challenges facing professionals involved in the wealth management industry moving forward will include the unpredictability of Brexit and the unknown impact of OECD new substance legislation, as well as developments in Fintech and changes in international reporting.
 
With regards to beneficial owner’s registers, changes in international regulations and greater transparency will add pressure to make beneficial owners registers public. In Jersey, the registers are currently private and shared between tax authorities. To make these registers public will cause additional risk to clients, particularly those clients who reside in high risk jurisdictions. Questions over how registers are maintained in the UK will be raised, as there is a lack of policing there in comparison to Jersey where the Financial Services Commission vets all registers.
 
All changes do not have to be seen in a negative light and there are many positives that can be attributed to changes in industry regulations and advancement in technology.

TL: On the flipside, what are some of the main challenges to be faced by clients looking to protect their family wealth?

DW: Some of the main challenges currently facing clients looking to protect their family wealth come in the form of Transparency. As the regulations push for increasing transparency, client confidentiality is in turn becoming increasingly difficult. This can be a challenge for clients as they could see an increased risk to their privacy.
 
Another challenge will be governments changing tax legislation on a regular and more frequent basis. Families will always need to make sure structures are efficient, which can be expensive or have to accept that they will be required to pay more tax in the future. This is not an issue for Jersey as it holds a tax neutral status and so it is more about ensuring that clients are paying the right level of tax in other jurisdictions or in other parts of their family structure.
 
In order to ensure this, clients must obtain the best quality of advice and professional administrators, find jurisdictions where laws and courts are benevolent and protective towards families, and understand international structuring. Jersey has enacted good legislation and the Courts have created substantive precedents that can be relied upon to give certainty to beneficiaries and settlors alike to support beneficiaries of trusts. Some jurisdictions aren’t as well placed to offer this. A combination all of these factors contributed to Jersey being voted number one international offshore centre for the third year in a row.

TL: How can Jersey and other “offshore” jurisdictions remain attractive to HNWIs and corporations considering that the offshore world is shrinking?

DW: In order to remain attractive to HNWI and corporations, Jersey needs to maintain a leading position through consistently evolving its strong regulatory infrastructure while staying a stable jurisdiction in an unstable world. Jersey will continue to attract and develop top talent amongst professionals and develop first class infrastructure that supports the jurisdiction.
 
The introduction of FiberOptics and the work continually being carried out in the Fintech area make Jersey an attractive place for HNWI and corporations. With strong flight connections to other finance centres, a strong legal system that supports the industry producing judgments seen as world-leading decisions, and a strong and stable economy and political systems which is seen as democratic, Jersey is a safe haven for wealth and tax neutral regimes, which is attractive to investors and families alike.
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