AROUND THE WORLD, UHY MEMBER FIRMS SERVICE THE INCREASINGLY COMPLEX NEEDS OF PRIVATE CLIENTS AND THEIR FAMILIES
For those looking for insight into the current needs and priorities of high net worth individuals, the most recent Knight Frank Global Wealth Report provides interesting reading. According to the company’s research, wealthy individuals are more mobile than ever, with a record number (26%) planning emigration in 2019.
At the same time, the report notes an increasing anxiety on the part of governments around the world with regard to tax evasion and avoidance (often mistakenly conflated with legitimate wealth management), and the tightening of rules in some jurisdictions in relation to foreign nationals and property investment. All in all, the report suggests that while high net worth individuals are, increasingly, citizens of the world, lawmakers are scrutinising
their financial activity in ever finer detail.
Staying compliant while legitimately protecting wealth can be fraught with complexity for private clients. Tax efficiency, cross-border compliance, personal and family finance, succession planning and wealth protection are all of concern. Coupled with this, the individuals involved may not necessarily be very wealthy, but simply people who want to protect the money they have earned and make it work harder on their behalf. We asked a panel of UHY experts from our member firms in Costa Rica, the Isle of Man, the UK and the US about their approach to supporting private clients.
Trust and Concern
Nigel Rotheroe, director at UHY Crossleys LLC, Isle of Man, believes that the increased complexity of tax and compliance laws, in the UK and abroad, is behind an increase in the number of private clients seeking professional advice on how best to approach tax, wealth
protection and estate management.
“Individuals and families often create trusts for wealth and estate protection, as well as for confidentiality reasons. Trusts are a good way to pass on the family business, protect assets from creditors, and pass on wealth in a careful, considered way,” says Nigel.
The recent establishment of UHY Trust & Corporate Services Limited, a joint initiative between UHY Crossleys and UHY Farrelly Dawe White Limited, Ireland, designed to aid the formation and administration of companies, trusts, foundations and partnerships in Ireland and the Isle of Man, is helping to support this, Nigel explains.
In the US, Joe Falanga, managing director, UHY Advisors NY, Inc, agrees that while private clients approach him for a variety of services – personal tax strategy management, life management services (such as asset management), and philanthropic planning and
administration among them – some of their concerns are more acute today than they have been for many years.
“Private clients face economic uncertainty, changing tax laws, issues with children and inheritance, and geopolitical issues,” says Joe. “Add to that an increasingly complex cross-border trade and tariff situation – and of course they still want their wealth to work for them, to generate the highest returns while managing risk. This is why they need the best professional advice.”
The Right Relationships
Joe emphasises that finding the right solution is based on developing the right kind of relationship with the client, which requires rather unique skills and knowledge. Discretion and sensitivity is key, because to delve into the financial affairs of individuals and families is
to open a window into their lives.
“Private clients do not want to trust another professional with their financial information unless that individual is personable, real, smart, understands family dynamics and has empathy for them,” he says. “To understand a private client, whether an individual or a family, you need to build the relationship and build trust. We, as professional advisors,
need to show that we understand wealth and how the responsibilities associated with it are important. And we need to show a human side – clients like to know what an advisor does outside the office.”
Joe and Nigel also agree on another important aspect of working with private clients: the necessity of working with other professional services providers. “The type of work we undertake often involves lawyers, accountants, other professionals and financial institutions,” says Nigel. “One has to be a team player, especially if the service a client is seeking is to be provided on a timely and cost-effective basis.”
“You have to be able to work with a client’s full team of advisors, which might include an investment manager, a solicitor, an insurance advisor and bankers,” says Joe. “We might recommend solicitors to draw up paperwork for a transaction, prepare wills and trust
agreements.” Joe acknowledges that this is beneficial to all involved – but most importantly, this collaborative approach is key in enabling clients to access the precise expertise they need.
An International Outlook
Neela Chauhan, private client tax partner, UHY Hacker Young, London, UK, has also built up trusted contacts in a number of areas, from banking to property. Based in the city that claims the world’s largest population of ultra-high net worth individuals (people whose net worth exceeds USD 30 million, excluding the value of their primary residence), she believes that working across national borders will also become increasingly important in providing services to private clients.
The world is shrinking, according to Neela. Wealthy individuals lead an increasingly international lifestyle, as the Knight Frank report suggests. They might live in several countries over the course of a year, or work in one jurisdiction and live in another. By doing so they inevitably encounter the complexities of divergent tax systems. Without the right advice, this can lead to double taxation and an excessive tax burden.
“As an example, a US citizen renting out a property in the UK must absolutely obtain the right advice, or they may end up paying income tax in both countries without unilateral relief, as there is a mismatch in the domestic reliefs available. This also applies to capital gains tax on the sale of the property,” says Neela. She also points to similar mismatches
between tax systems in various European countries and the UK, too.
Individuals who reside, invest or work abroad need specialist advice or risk paying far more than they need to. This is not tax avoidance, Neela adds – it is simply organising tax affairs so as to avoid punitive charges when overlapping between different fiscal regimes.
Global and Local
Nigel Rotheroe also notes the increasingly international nature of private clients, which he says puts an onus on members of a global network like UHY to work together to offer the very best private client service. “Crossleys has provided assistance in relation to client
structure work to other UHY member firm offices, and has in recent years assisted UHY offices in Ireland, Israel, Italy, Malta, the UK and the US with various client offerings,” he says.
Neela adds: “The advantage of being part of the UHY network is that, while you can only ever expect to be a true expert in the tax regime of your home country, if I need information about the nuances of the tax system in another country, I can quickly pick up the phone and ask a colleague in that part of the world.”
This is especially important, because it is not just the arcane details of tax or property law that differ between jurisdictions. The culture of wealth protection and inheritance practice is
highly dependent on local circumstances.
Around the world, UHY member firms offer private client services shaped by local priorities. In Saudi Arabia, for example, UHY Abdul Jabbar specialises in establishing ‘family offices’, a type of financial device to manage family wealth, plan for family financial futures and provide other services to members of the family under their ongoing oversight. In Australia, UHY Haines Norton has expertise in the creation and management of Testamentary Trusts, which provide more control over the distribution of assets to beneficiaries, as well as tax advantages.
In Costa Rica, Omar Pérez, partner at UHY Auditores y Consultores, S.A, explains that the estate planning services his firm offers to private clients, in some ways, is fundamentally different from that offered in Europe or America.
Omar says: “The interesting thing with Latin America is most people manage their personal wealth through their companies. I am pretty sure that is because we do not have a liquid stock exchange in Costa Rica, so if you have your money in a personal bank account or personal investments, you will not have the same return as if you have it in a business. And it is so much easier to handle inheritance this way too. It is important to remember that the majority of businesses here are family businesses.”
An Informed Choice
Both high net worth individuals and less wealthy individuals keen to make the most of their money are increasingly well informed. “People are more financially astute, with information
being more readily available through advanced technology and media coverage,” says Neela Chauhan. “They know that there are more ways to make their finances more efficient. They realise they have more choice.”
It is against this background that UHY member firms around the world are developing specialised private client services. The number of financially literate individuals and families seeking to exploit new opportunities, while remaining fully compliant with ever more complex rules and regulations, is growing. They demand real expertise and a relationship with their advisors that is built on trust.