The data leak from offshore law firm Mossack Fonseca has made headlines around the world. But it will have little direct impact on the amount of wealth offshored as HNW clients no longer book assets abroad to shelter wealth from tax or prying eyes.
Once again the banking world has been rocked by leaks. The Panama Papers leak is, by all accounts, the largest to date and appears to have snagged a number of high-profile clients. No doubt another round of investigations by tax authorities will be forthcoming, followed by hefty fines and, in a few rare instances, criminal charges.
However, the leak is not likely to significantly impact the offshore wealth management sector. Offshore wealth managers have been dealing with the decline in client anonymity for quite some time, and the Panama Papers are simply the biggest leak to date. Ever since automatic disclosure became the standard in the wake of the financial crisis, the industry has been transitioning away from client anonymity as an impetus for investing offshore.
Indeed, as per our most recent Global Wealth Managers Survey, in 2015 the top two reasons for investing offshore globally were HNW clients expecting both better returns offshore and access to a better range of investment options. Client anonymity barely registered, way down in eighth place.
As long as HNW clients remain focused on the search for yield and superior investments, they will be attracted to the more freewheeling offshore sector. Offshore financial centers such as Singapore, Hong Kong, the UK, and the US (and even perennial whipping boy Switzerland) that can offer the sophisticated investments prohibited in more tightly regulated onshore retail investment markets will continue to see strong inflows.
By Andrew Haslip, Head of Content for Asia Pacific