Offshore

Jersey Finance Opens Dubai Office; Flags Wealth Transfer Challenge

Tom Burroughes, Group Editor, London, 15 November 2018

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The organisation has opened an office in the DIFC and used the launch to release a study raising hard questions about how well prepared Gulf families are for wealth transfer.

Jersey Finance, the organisation promoting the European island's banking and wealth management industry, recently set up an office in the Dubai International Finance Centre, a sign of how different IFCs are marketing to each other.

To coincide with the launch, JF launched a white paper called Wealth Structuring and the International Financial Centres: Perspectives from the GCC. It is based on a survey ot 70 wealth industry practitioners, showing that 92 per cent of them say that high net worth clients in the Gulf region are poorly prepared to shift wealth to the next generation.

The study also says that only 6 per cent of family businesses will make it to the third generation if current structures are not made more effective and compliant.

The stakes for getting wealth transfer right are high because there is an estimated $1 trillion of wealth due to shift between families and generations in the Middle East during the next decade, the report highlights the opportunities that await HNW investors and wealth managers.

Looking at the sentiment of clients in the region, the report shows that they are gradually refining their views on their current structures. 75 per cent of clients now stress test their existing wealth structures, whilst 42 per cent see reputation as a critical factor when selecting an IFC.

Use of offshore jurisdictions is highly driven by the geopolitical climate and fears of instability (25 per cent) and succession planning (25 per cent) followed by privacy and confidentiality (17 per cent), asset protection (17 per cent), tax efficiency (8 per cent), and diversification of jurisdictions and assets (8 per cent).

Other findings:
-- The more sophisticated HNWI clients in the GCC are concerned about the cost of having multiple structures in multiple jurisdictions, according to one third of respondents. Some 75 per cent of industry experts said that, increasingly, clients want to concentrate their assets and structures in one centre;

-- Offshore corporate structures and private trust companies appear to be the preferred options for the core of GCC HNW individual wealth structuring, while trust structures are considered the next most important, alongside citizenship and residency planning; and

-- There is a gradual move towards Shariah-compliant structures such as foundations, and tax transparent structures. There is also a shift away from jurisdictions that are coming under scrutiny, such as those in the Caribbean due to privacy concerns and the fear of unwanted disclosure of their assets.

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