Research wire

Research wire

Too few wealth managers in China offer inheritance planning

Analysts at GlobalData Financial Services provide expert commentary, insight and data on the global private banking and wealth management industry that is engaging, actionable and informative

Analysts at GlobalData Financial Services provide expert commentary, insight and data on the global private banking and wealth management industry that is engaging, actionable and informative

Discussing one’s mortality is not a conversation people want to have – especially in China. But this has to change. Too few wealth managers offer inheritance planning in a country where half of the HNW population are entrepreneurs who are about to hand over the reins, according to GlobalData Financial Services.

Few things are as certain as death, yet the topic remains a taboo in Chinese society. At least, to some extent, this explains the low proportion of financial services providers offering inheritance planning services. According to our data, only half of wealth managers that target HNW investors offer this type of service.

Yet there is a significant business opportunity. Our proprietary Wealth Management Service Opportunity Index, which rates the potential for additional wealth management business across 10 different services, assigns the highest rating to inheritance planning.

China is home to a substantial entrepreneur community, 71% of whom are 51 years old or above.

This means a large number of Chinese business owners will need to find successors over the next few years. This challenge is further exacerbated by the country’s one child policy, which was only relaxed at the end of 2013, leaving patriarchs with a smaller pool of family members to choose from.

First and foremost, the lack of a detailed succession plan puts the continuity of the entire business at risk, meaning any business owner must give serious thought to the issue.

The situation also represents a missed opportunity for wealth managers to build ties with the next generation early on, which is important given the propensity for individuals to change advisors at the time of inheritance.

In addition to the 106,500 business owners who have already hit retirement age, we estimate that another 219,500 will retire within the next 10 years.

If providers fail to ensure the continuation of the relationship with successors, this will amount to a significant chunk of their current business being lost. Time to start having those unwanted conversations.

For more insight and data, visit the GlobalData Report Store ( Verdict is part of GlobalData Plc.

Tax avoidance: Germany continues the fight, but regional differences persist

A slew of tax avoidance scandals over the last year have seen German financial institutions in the headlines for all the wrong reasons. The government continues to harden its stance on tax avoidance, but regional responses differ. Regardless, local wealth managers need to ensure that they are whiter than white in tax matters, for both their and their clients’ sake, according to GlobalData Financial Services.

As our report Wealth in Germany: Sizing the Market Opportunity 2018 details, Germany continues to harden its stance towards tax avoidance and evasion.

A new tax avoidance bill (Steuerumgeheungsbekämfungsgesetz) prompted by the Panama Papers came into force in early 2018, requiring more stringent reporting on foreign holdings.

Meanwhile the new coalition government between the center-right Christian Democrats and the center-left Social Democrats has promised a major crackdown on tax evasion.

These developments come among a series of scandals, some of which highlight systemic issues among institutions themselves.

In 2017 news of illicit tax rebates on share trades emerged, which involved an international web of banks, broker-dealers, and lawyers; meanwhile 2018 started off with a series of raids on fake gold-dealing companies in a tax-dodge scandal dubbed ‘Goldfinger.’

Then there is the high-profile case involving former secret agent Werner Mauss, who was found guilty in late 2017 of tax evasion. Mauss was investigated after one of his aliases was found on a compact disc containing details of UBS clients sold by a whistleblower, and his name also came up in connection with the Panama Papers.

Little wonder then, that German authorities are promising to play it tough; this no doubt contributes to our finding that over 85% of German wealth managers interviewed in our 2017 Global Wealth Managers Survey agreed that “local regulatory changes will be a big concern for wealth managers.”

Regional responses

Yet while the national approach is hardening, there are notable differences between the regional responses to tax avoidance.

North Rhine Westphalia’s finance minister Norbert Walter-Bojans has become a noted scourge of those evading tax.

The state has purchased numerous compact discs containing details of those holding offshore accounts, actively pursues institutions that repeatedly come up on the voluntary disclosure forms of those declaring offshore holdings, and is taking a hardline approach to those institutions involved in the illegal tax rebate scandal on share trades.

Other regions, such as Hesse, are less aggressive. Following the 2017 share trading scandal, for example, North Rhine Westphalia sought to back-date charges as far as possible for as many players as possible, while Hesse focused more on select cases which it felt it had greater chance of winning.

With the second wave of Common Reporting Standard adopters commencing with their first exchange in 2018, the Bundeszentralamt für Steuern (German Federal Central Tax Office) will be receiving data on more offshore accounts than ever before (including for the first time, Swiss, Singaporean, and Hong Kong-based accounts).

Getting tax affairs in order before this happens is therefore critical for wealth managers looking after German tax residents.

For wealth managers, the adoption of new rules and regulation naturally brings its headaches, but given the reputational battering these scandals bestow on the industry as a whole and the impact on clients of being non-compliant, now is the time to be whiter than white for all concerned.

For more insight and data, visit the GlobalData Report Store ( Verdict is part of GlobalData Plc.