The footprint of the financial advisory industry is expanding beyond the boundaries of traditional onshore markets.
Singapore, Dubai and Miami are at the heart of this burgeoning onshore/offshore dynamic. Driving this cross-border model are domestic-based regulations in Europe, the United States, and China, with a focus on tax evasion (FATCA) and increased transparency (CRS).
On the one hand, high-net-worth and ultra-high-net-worth investors seek protection in these highly regulated offshore markets, and on the other hand, some investors are and are beginning to repatriate investments back to the domestic market. Local tax system. As a result, wealth management leaders in asset collection and distribution are pursuing strategies to customize offshore solutions alongside domestic-based services.
The onshore and offshore movement has also whetted the appetite among wealth gatekeepers and advisors for non-U.S.-based investment products, such as Cayman and Bahamas-based UCity and private market funds. Flexibility is also required in underlying asset holdings, thematic investing, custom indexing, and access to asset classes typically reserved for institutional investors such as private equity, private credit, and hedge funds. Tax benefits can also be obtained through reduced withholding tax on dividends, exemption from inheritance tax, and simplified tax filing.
Despite the size of the offshore advisory prize, the demand in these domiciles for onshore/offshore platforms that can span the needs of international advisors has historically not been met by the supply of off-the-shelf solutions. In fact, usually the platforms offered in the international field are only compatible with his one jurisdiction, which frustrates the wealth manager in achieving his goal of truly catering to the needs of international business books. Office and securities processing systems faced.
gain traction
Products such as individual separately managed accounts (SMAs) and investment advisors such as overlay managers have recently begun to become viable options for offshore participants looking to meet the needs of overseas investors. These solutions differ from previous transaction-based solutions in that they charge fees based on the level of assets rather than a per-transaction fee.
Wealth advisors and product executives looking to implement paid programs, especially those coming from institutions with established advisory platforms, are looking for flexible, technology-centric solutions with timely “go-to-market” deployments. . They are looking for an experienced partner who understands the nuances of building an advisory program and can adapt it to specific market needs.
In line with these trends, Morgan Stanley and others are creating managed account products for Latin American and other offshore clients that allow advisors to offer third-party investment management to offshore and onshore investors. It is reported that. Related to these trends, top executives like BlackRock have pointed to the potential for growth in fee-based advisory, with asset-based fees increasing at the expense of commissions from 2022 to 2024, with the former It expects the latter to decline by 4.3%. Increased by 5.9%.
Going forward, companies that are successful in targeting the offshore/onshore opportunities prevalent in Miami and other major offshore centers will balance industry experience and flexibility in the evolving global financial advisory industry. will be approached. While no two markets are the same, there are some core managed money components that translate across borders and enable the rapid growth of global advisory.
