A wealth management centre (WMC) is a hub for managing investments and structuring wealth for high and ultra high net worth individuals. They typically have a highly-sophisticated financial services offering generally, for both individuals and corporates; they also tend to engage in a lot of cross-border business, and money and clients from all over the world flow through them. As a result, a HNW’s financial horizon clearly extends well beyond ‘home’ country borders they may select Asian banks or other hubs to match their complex needs.
There are wealth management centres dotted all around the world. Some, like the Swiss city of Geneva, are well-known and inextricably linked with the business of managing money for the wealthy, while others, such as the Malaysian island of Labuan, many people may have never even heard of.
What you might also call international financial services centres have attracted a lot of largely unwarranted bad press, particularly since the financial crisis. The mainstream media tends to use the term “tax haven” as an umbrella term for global wealth management centres, yet the vast majority have made it very difficult to carry out financial crimes like tax evasion and are cooperating fully with regulators and tax authorities on moves to make it virtually impossible to hide or launder money. Furthermore, while it is true that many wealth management centres are very appealing from a tax perspective, they boast many other attractions for all kinds of clients.
How it works
There are lots of reasons why an affluent individual may want their money managed outside of their home country, and perhaps even in a different place to where they are currently residing if they live abroad. They may be working across various countries and need a stable hub for all their financial affairs where the tax regime is hopefully also favourable; they may need specialist wealth management expertise which is not available in their domestic market; or they may live in a troubled country where they have reason to fear asset seizures or kidnap if their wealth was kept at home and subject to prying eyes.
You may be surprised to learn that there are over 40 wealth management hubs internationally. There are many factors which affect clients’ choices and it is important to choose the right financial centre to meet your needs.
- The reputation and stability of the jurisdiction is paramount when investing outside your home market; some are very much safer than others.
- An attractive tax regime may be top of your priorities, but make sure you take professional advice to get a sense of the full implications of your choice.
- Time-zone is also a significant consideration, as you need to be able to speak to your advisers conveniently, as is proximity if you plan to meet in person.
- The availability of expertise is crucial and you may need to consider legal and other professionals in your assessment if you are likely to need their services for administering a trust, for example.
The top five global wealth management centres
The precise ranking of the world’s top financial services centres is hotly debated, but the top five cities stand as below, according to the think tank Z/Yen. It is interesting to note that cities, individual US states, offshore territories and even whole countries are variously known as international financial services centres.
- London is known for being a tightly-regulated financial services centre with a wealth of expertise. It has excellent links to the rest of the world, which are bolstered by English being a business lingua franca and London sitting between New York and the Far East. There is also the close relationship London has with the Crown Dependencies, such as Guernsey, which are themselves very attractive centres and offer unique wealth structures to assist clients in ordering their affairs.
- New York tends to jostle with London for the top spot and both offer very similar levels of access to international markets and a pool of talented professionals.
- Hong Kong is a thriving banking centre which upholds high standards of regulation and is popular with highly-diverse client base from all manner of markets. It’s proximity to China makes it a go to offshore centre for access to the region.
- Singapore has an excellent standing in terms of regulation and professionalism, and – like Hong Kong – its skills base and infrastructure attracts funds from all over the world. Singapore is now a serious rival to Switzerland as a go-to centre for offshore wealth and indeed it is forecast to be the largest global wealth management hub by 2020 (Source: WealthInsight).
- The Swiss city of Zurich is arguably the foremost financial centre in a country which is regarded as the home of wealth management. Its abundant wealth management expertise is coupled with a very attractive tax regime and time-honoured connections to other centres internationally.
While there are many wealth management centres for you to choose from, there will be very good reasons for you to select on over another – and this will depend on what you are trying to achieve and how jurisdictional decisions would affect your overall wealth, along with many other factors. Your financial adviser will be able to take you through all the implications of the centres open to you and, if your institution is an international one, they may even have a business unit that can help. Offshore capabilities are, in fact, a feature many of our users are looking for when they come to findaWEALTHMANAGER.com and we are proud to be able to match clients to leading international and domestic wealth managers as their needs dictate.