International wealth management firms are likely to accelerate their reshaping of business models and recruitment strategies so they are best placed to capture any move towards onshore banking at the expense of embattled offshore jurisdictions, people in the industry say.

The industry is adapting because offshore centres are under attack. Earlier in April, the Group of 20 major industrialised and emerging market nations threatened to use sanctions – as yet not clearly defined – to crack down on so-called tax havens.

The hostile climate in which some private banks now operate means they will have to consider whether they need to put more people in onshore centres to avoid falling foul of governments’ wrath as well as deal with issues like bank-imposed travel restrictions, said Sophie De Ferranti, head of international private banking for executive search firm Carpenter Farraday.

“Migration of wealth cross-border, once the [offshore countries’] decisions on tax standardization rules come to light, will undoubtedly put pressure on the private banking world to re-assess where the most profitable centres for investment and money management are,” De Ferranti said.

“This shift will almost certainly in turn create more recruitment activity in onshore centres of growth such as Italy and central and southern Europe. Onshore centres will become much more attractive as the exclusivity and discretion offered by tax havens/offshore centres is de-valued," she said. 

“Forward-thinking headhunters will almost certainly be giving some thought to this now and will be gathering market intelligence to help position themselves for when the shift begins,” she added.

Adaptation

It is important to point out, however, that many wealth management firms have anticipated the changes to the offshore world and have been adapting for some time, said Stephen Wall, director at Scorpio Partnership, a wealth management consultancy.

“The offshore model [of private banking] has already been adapting. The private banks realise the onshore approach is the way forward. We expect that to continue,” Mr Wall said.

A number of offshore jurisdictions, such as Monaco, Liechtenstein, Switzerland and Singapore, have moved to sign exchange of information agreements that will help governments hunt down tax evaders and weaken bank secrecy. The Paris-based Organisation of Economic Co-Operation and Development has drawn up a “grey list” of nations that have yet to fully implement information sharing agreements but that say they will do so.

And in a further twist, UBS, the world’s biggest wealth management firm, has banned its client relationship managers from visiting international clients until the Zurich-listed bank has completed its legal wrangles in the US. And its rival, Credit Suisse, is reportedly following UBS’s example in ceasing to offer offshore banking in the US, although Credit Suisse has yet to confirm this move to WealthBriefing.

Tim Gibson-Tullberg, who runs the eponymous Gibson Tullberg recruitment firm in London, is confident that wealth managers will continue to have a strong business case to operate out of offshore centres.

“Onshore banking is as discredited as its offshore brethren but for differing reasons so clients remain looking for reliability and service,” he said.

"Our main clients have largely diversified their business sufficiently over the last 3-5 years and are well positioned to accept the OECD driven changes, which for the most part, were fully part of normal practice already, depending on the jurisdiction,” Mr Gibson Tullberg said.

“For some the pickings are rich, for others lean, but opportunity abounds.  The underlying private clients are still booking offshore in the main centres for solid, practical and transparent reasons. The service ethos and international structure of the offshore banks facilitates the client needs and they remain centres of excellence. We see the European offshore market as active in recruitment terms.  It mirrors the corresponding onshore market in as much as it is ‘polarised’, with banks in good health and other under structural or balance sheet strain emanating from wider liquidity issues,” Mr Gibson Tullberg said.

“If there is a medium term trend, we see it as continued migration of bankers and assets between institutions this year and into next.  Any bank from a nation applying curbs overzealously will lose business, clients and revenue to competitors who adopt a fully compliant but less draconian approach,” he said.

Mr Gibson Tullberg added: “There is a good argument that the ‘effect’ required has already been achieved within offshore markets and that further measures are now damaging the overall structures more than is necessary, to everyone’s detriment, including the onshore tax authorities.”