Brexit continues to roil the wealth management industry. What does it portend for those working in the sector, and its clients? A London Breakfast Briefing recently discussed the issues.
The UK electorate’s decision to quit the European Union in the 23 June referendum creates considerable uncertainty for wealth managers and their clients, and may hamper the ability to plan ahead, but some of the forces at work on the sector prior to the vote remain, a Breakfast Briefing event hosted by this news organisation heard recently. (To see more about this and related events, click here.)
Arguably the most important political event in Europe since the launch of the single European currency in 1999, “Brexit” will bring an end to a 43-year period of UK membership of the European Union, throwing up questions about market access, freedom of movement, as well as economic and financial connections to the continent. Wealth managers in London and in those jurisdictions closely affected by the UK have a particular stake in the outcome.
The choice of venue for the Breakfast Briefing, the Carlton Club in St James’s Street, is an appropriate place to discuss Brexit. The club has been associated for decades with the UK’s Conservative Party (portraits of statesmen such as Sir Robert Peel, Sir Winston Churchill, George Canning and Lord Castlereagh adorn the walls). The European issue has been a bitterly contested matter for that party, creating divisions that affected the careers of a succession of Prime Ministers, notably Margaret Thatcher, John Major, and most recently, David Cameron.
To discuss Brexit and what it means for the UK wealth industry and beyond, were Alex Fray, chief executive of Boston Multi Family Office; Dr Jean-Philippe Chetcuti, managing partner, of Chetcuti Cauchi Advocates (member of Finance Malta); Kate Clouston, director, international business development, Guernsey Finance; Nadine Goldfoot, partner, Fragomen Worldwide, and Rob Lockhart, managing director, Lendinvest Capital. The panel was chaired by Bruce Weatherill, chairman of ClearView Financial Media, publisher of this news service. The event was sponsored by Boston Multi Family Office, Finance Malta, Fragomen, Lendinvest and Guernsey Finance.
Much debate of late has been around whether the UK goes for a “hard exit” and quits the Single Market (and the associated requirement of complete free movement of labour) or a “soft” version, where such market access, and free movement, remains.
The models employed by countries such as Switzerland and Norway, which have Single Market access, could, given the right conditions, be used by the UK and what these show is that EU laws have to be accepted by the countries taking this route, Fragomen’s Goldfoot said. She went to state, when asked about whether might move to become more of an “offshore” financial jurisdiction in future, that the current trend towards global enforcement of rules on matters such as money laundering meant that the UK would not gain a particular advantage by Brexit. In fact, the trend is for clients to choose financial jurisdictions seen as robust from regulatory point of view, she said.
One possible consequence of Brexit is that it might prompt a resurgence in the government’s use of the investor visa regime, under which high net worth individuals can gain accelerated residency rights in the UK in exchange for committing a minimum amount of money to the country, she said. (In the past two or three years, take-up of investor visas has decelerated quite sharply.)
Fray said he expected some delays in the Brexit process but said he did not expect it to be a negative issue for the UK in the long term. He drew attention to the fact that as of the time of the Breakfast Briefing, some 102 jurisdictions had adopted the information-sharing regime of the Common Reporting Standard, showing that inside or outside an entity such as the EU, global regulatory standards will be important.
Jean-Philippe Chetcuti said one area of concern at present has been the rise of political populism. In general, however, in reflecting on how the UK will be affected by Brexit, he stated the country started forming a “position of strength”. He also reflected on how Malta, an EU member state for just over a decade, and a former UK colony and home to financial services, was well placed to serve the needs of people seeking an EU jurisdiction in which to do business. He also stated that leaving the EU will not free the UK from having to honour certain obligations, including those involving compliance with regulations.
The panellists were asked whether the UK might be willing to embrace ideas such as sharp cuts to corporation tax and other taxes as ways to attract inward investment post-Brexit. Guernsey Finance’s Clouston said “you have to take into account the willingness of the electorate to co-operate…there’s no real appetite among people to make the UK more attractive on the corporate tax side”.
Turning to issues such as London’s property market, Lendinvest’s Lockhart said there has already been slippage in prices at the top end of the prime market, but this is more a consequence of stamp duty tax hikes and other changes, such as the moves around non-domiciliary status, rather than from Brexit as such.
At some point, some non-doms will consider “leaving the UK and going outside the EU,” he said.
“We have had a degree of correction to commercial property prices,” he said. As of residential prices, these were being affected prior to the Brexit vote, Lockhart added.