Within the private client world, prudent firms in all jurisdictions have remained alert to changing wealth patterns across the globe, paying attention in particular to the performance of growth markets.
Part of the challenge is keeping pace with these trends and staying ahead of the game. The Boston Consulting Group predicts that private wealth will continue to grow significantly in new emerging economic countries and the IMF had pointed to emerging markets overtaking developed economies in terms of share of global GDP in 2014.
The question for many institutions across the globe is which markets to focus on. As a business offering internationally-focused private wealth and family office, as well as funds and corporate services, it’s been essential to invest the time in identifying where the strengths of the firm are to best serve the needs of clients. As far as our Swiss office is concerned, that has meant drawing on the extremely well regarded Swiss brand and making a commitment to cementing strong client relationships.
The end result is both a sustained focus on key markets and sophisticated private client wealth management business, and growing business flows with carefully identified newer markets.
With more billionaires coming from emerging economies than European ones, there is clearly demand for high quality cross-border Swiss wealth management services – something that we have witnessed at JTC since opening an office in Geneva in 2007.
Overall, the view is that Switzerland can maintain its popularity across a wide spread of markets.
Some of the steadiest business for Switzerland continues to be from the Middle East where Swiss tax neutrality, long-established relationships, and an intense focus in the region on succession and estate planning are continuing to support vibrant family office sectors.
However, a number of markets are of increasing interest. The Latin American market is a growing area of private client business, with the number of High Net Worth Individuals (HNWIs) in the region now standing at over 0.5 million holding approaching $8 trillion in wealth (RBC WM/Cap Gemini World Wealth Report 2014). Thanks to its stability, political neutrality, security and sophistication of its legal and tax systems, Switzerland is growing its appeal amongst the Latin American private client community.
A rapidly growing number of HNWIs in Mexico combined with a complex domestic tax regime, have led to a rising demand for clear, robust wealth management support, whilst Venezuela is reflective of the region as a whole in its political uncertainty, where there are concerns surrounding expropriation and personal dangers to HNWIs and their families.
In both cases, HNWIs are understandably looking for solutions that can provide safe and secure succession and inheritance planning, asset protection and privacy, fully compliant with international standards. First generation wealth is now being passed on to the second generation in the region, and holding assets securely offshore is increasingly attractive.
Meanwhile, global trends also reinforce Sub-Saharan Africa’s position as a leading emerging market, with Africa now having the fastest growing middle class in the world. This has had an impact on the number of wealthy African individuals and families looking for specialist support – the 2014 Knight Frank Wealth Report for example – predicts that the number of multimillionaires in Africa will grow at a faster rate than anywhere else over the next 10 years.
Whilst Switzerland has had a relationship with Africa for some time, private client business with the continent is now growing quite quickly. Figures from New World Wealth show the total wealth in Nigeria for 2013 was an impressive USD$227.5 billion, whilst other African nations meriting attention include Ghana, South Africa, Kenya and Zimbabwe – something that has become increasingly clear to the team at JTC during the past ten years.
There is also a growing trend for real estate investment amongst African private clients. This commonly involves both inward investment into property within Africa and outward into overseas real estate. Again, thanks to its flexibility as a booking centre, Switzerland is well positioned to help facilitate these kinds of cross-border transactions.
There are compelling reasons as to why Switzerland is witnessing success in these overseas markets and why there is confidence in its longevity as a finance centre.
Given its strength in international wealth management services, its strong rule of law, powerful network of intermediaries and fiduciaries, prestigious reputation as a centre for private wealth and its accumulation of specialist private client knowledge – all backed up by the stability of the Swiss Franc – Switzerland has found itself in a strong position when it comes to supporting a rise in the wealthy populations in those identified markets. There is a sense, though, that Switzerland is re-positioning itself due to global drives towards greater transparency
Backed up by its technical strength in wealth management, Switzerland is setting out its stall as a gold standard jurisdiction, one that is aiming solely at the highest end of the HNW sector and that simply isn’t competing with the smaller private client jurisdictions.
Products can no longer simply be sold off the shelf. Whether they are established clients in the Middle East or newer clients in Latin America or Africa, solutions need to be bespoke and much more sophisticated – not least because the implications and costs for not doing wealth structuring properly are far higher than they were previously. The end result for fiduciaries in Switzerland is less clients, but clients that are much higher in value.
It is for this reason that we’re seeing a rise in demand for a technically adept, tailored family office service. This is particularly important for the modern day family, which might have roots in Africa, the Middle East or Latin America, but involves complicated family relationships. Planning in such scenarios has to be seen as part of an overall family strategy, and a family office model through Switzerland can help achieve that.
With this in mind, one of Switzerland’s overriding attractions is its impressively flexible framework that enables it to offer structures from different jurisdictions, but administered from Switzerland with all its benefits and expertise. An overall family solution, bringing in structures in various jurisdictions but booked through Switzerland, is proving appealing amongst clients in overseas markets.
The wealth structuring needs of private clients in growth markets are moving increasingly towards asset protection and security, and all of Switzerland’s traditional appeal – its political and economic stability, legislative flexibility, on-tap expertise, and experience – will stand it in good stead. As the world’s growth economies continue to produce wealthy families, however, key to Switzerland’s future success will be its ability to differentiate itself in growth markets as a premium wealth management centre. The indications are that this approach is working and that there remains confidence in a model of high quality, professionally managed business that Switzerland offers.