World of Private Clients report 2021

World of Private Clients report 2021

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

PRIVATE CLIENT SERVICES

WORLD OF PRIVATE CLIENTS

JANUARY 2021

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

CONTENTS

FOREWORD: THOUGHTFUL DECISION-MAKING AMIDST CHANGE OUR RESEARCH 2020 AND COVID-19: DISRUPTION AND

WORLD OF PRIVATE CLIENTS

DECISION-MAKING 1. TRANSPARENCY X The default setting is disclosure X Privacy concerns persist and deepen. 2. RELOCATION X Competing concerns

JANUARY 2021

X Navigating public policy and political unrest X Longer term trajectory, short term disruption. 3. FAMILY &GENERATIONALWEALTH X New values, legacy and risk X Questions linger over ESG & impact X Philanthropy transformed X The impact on legacy X The succession planning struggle. 4. ADVISER OF THE FUTURE X Understanding, trust and a 360° perspective. X Technological acceleration. BDO’S OUTLOOK

WORLD OF PRIVATE CLIENTS | JANUARY 2021 2

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

FOREWORD: THOUGHTFUL DECISION MAKING AMIDST CHANGE

January is typically a time for making plans and thinking about the year that lies ahead. With 2020 now firmly behind us, it is time to look back on our research undertaken in 2020 which should help us to carefully put plans in place for the future. Private clients have always had to find a careful balance of risk and opportunity in the face of uncertainty and change. In 2020 this became more true than ever. Thank you to all of you who contributed to our research either by completing our survey or undertaking an interview. This report is for both private clients and their advisers - we hope that it will assist in their planning over the coming years. Wealthy individuals and their advisers face a new, more complex global landscape. Longstanding generational changes, huge economic upheaval, a global pandemic and a stronger emphasis on doing the right thing for society and the environment have collided to create an unprecedented global challenge. We are sure that almost every one of us has been personally affected by the events of last year.

To succeed in our business and personal lives, we must understand and adapt to change, all the while retaining clarity around our purpose, principles and long-term objectives. We feel that the need for thoughtful decision-making and being mindful of how best to adapt has never been greater. UNDERSTANDING THE SHIFTING LANDSCAPE AROUND US Against this backdrop, we carried out in-depth research in order to best understand how wealthy individuals and their advisers are meeting this myriad of challenges and preparing for what the next 12 months may bring. The research, underpinned by quantitative and qualitative analysis in more than 25 jurisdictions, has given us invaluable insights that we are delighted to be able to share with you. These include: X How an initial wait-and-see attitude toCOVID-19 and trends is giving way to detailed and actionable plans X The extent to which increases in international taxation are expected X How wealth is seeking more diverse portfolios and new investment opportunities

X How the competing demands of transparency and privacy and reputation management are coming to a head X How wealthy individuals are placing more weight on socio-political stability and lifestyle factors in relocation strategies X How new generations are driving an increased focus on environmental, social and governance (ESG) issues and philanthropy despite some scepticism around rhetoric versus impact X How wealth owners are frequently the barrier when it comes to succession planning X Why the HNWI community expect themselves and their advisers to become more agile, more multi-skilled and more technologically-savvy. This is the first instalment of an ongoing plan to provide intelligence that helps wealthy individuals and their advisers confidently plan and implement successful strategies. Our ongoing research will track how the challenges and opportunities they face evolve over time. We hope that you find this report insightful and useful as you prepare for the future. We also hope that the next 12 to 18 months are more positive and bring us recovery, renewed growth and prosperity.

wendy walton head of global private client services | bdo uk

jeff kane chair of global private client strategy group | bdo usa

In many respects, 2020 represented a perfect storm of short and long-term disruption. The seismic effects of COVID-19 continue to rock the global economy. Meanwhile, our research shows that generational change is driving new attitudes towards the role of private wealth and its part in delivering beneficial, social and environmental outcomes.

WORLD OF PRIVATE CLIENTS | JANUARY 2021 3

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

OUR RESEARCH | KEY FINDINGS AT A GLANCE

OUR RESEARCH

The actions that wealth owners take nowwill define the private client landscape for years to come and influence everything from regulation through to wider societal trends that develop in tandemwith economic recovery. Through quantitative and qualitative inspection and analysis of where we are today, and what brought us here, we will be better equipped with the understanding and foresight to navigate the road ahead. As part of our research, we conducted an online survey to gather the views of 350+ private clients and professional advisers across 16 jurisdictions globally. We also undertook more than 25 in-depth qualitative interviews with wealth owners, the next generation and intermediaries from key private client hubs including Hong Kong, Singapore, Switzerland, the UK and US. To help encourage the open sharing of thoughts and insights, interviewees were informed that they would be quoted anonymously in this report.

BDO’s World of Private Clients research programme was launched to provide an

SURVEY RESPONDENT AND INTERVIEWEE OCCUPATION

private client 49%

understanding of sentiment among the global private client community. In particular, we sought to understand how private clients, next generation wealth holders and the professional advisory community are seeking to navigate the plethora of short-, medium- and long-term risks and opportunities that define the global economy. While initiatives aimed at better understanding the trends driving the private wealth landscape have come before, never has such research been conducted at a time that is so drastically defined by the radical upheaval and cultural and economic reset that we see today. A huge amount of change is upon us, which is both impacting, and being impacted by, the wealthy. This level of change warrants a deeper exploration of both its underlying drivers and its future implications.

private client: next generation / family member 4% member or employee of family business 8%

SURVEY RESPONDENT AND INTERVIEWEE LOCATION

other 8%

community 32%

professional adviser to family office / private client

sweden

uk

ireland

netherlands luxembourg switzerland

canada

belarus

austria

france monaco

liechtenstein

greece montenegro

usa

azerbajan

spain

malta

cyprus

afghanistan

china

bahamas

anguilla

cayman islands

bvi

antigua & barbuda

philippines

grenada

panama

malaysia singapore

trinidad & tobago

australia

south africa

new zealand

WORLD OF PRIVATE CLIENTS | JANUARY 2021 4

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

OUR RESEARCH | KEY FINDINGS AT A GLANCE

OUR RESEARCH: KEY FINDINGS AT A GLANCE OUR GLOBAL SURVEY OF MORE THAN 350 PRIVATE CLIENTS AND PROFESSIONAL ADVISERS YIELDED A NUMBER OF KEY TAKEAWAYS

FOLLOWINGTHE IMPACT OF COVID-19 OF SURVEY RESPONDENTS expect significant or thoughtful alterations to wealth strategies 57%

71%

92%

80%

OF RESPONDENTS IDENTIFIED

BELIEVE WEALTHY INDIVIDUALS ARE

OF RESPONDENTS BELIEVE CONCERN

moderately or very concerned about the privacy and safety risks posed by tax transparency and reporting requirements

primary criteria in relocation decision-making political stability as the

for personal or family reputation is critical when making decisions around tax structuring and compliance

(72%) AHEADOF LIFESTYLE

(65%) ANDTAX LANDSCAPE

SAYING IT 59%

9%

SAYING IT EITHER “ MODERATELY ” OR “ VERY MUCH ” IMPACTS THEIR DECISION-MAKING

EXPECT NO CHANGE

LESS THAN

2%

ARE ‘NOT AT ALL CONCERNED’

A MERE

prompt a trend towards individuals relocating over the next 12 months political and social instability 63% (17%) (46%) OF RESPONDENTS SAID ECONOMIC WILL VERY MUCH OR MODERATELY

AHEADOF NEWNEXT GEN ATTITUDES TO SOCIAL RESPONSIBILITY AND PHILANTHROPY (48%) diversify investments a midst economic uncertainty is the principal factor driving changing attitudes to legacy among wealthy families 69% OF RESPONDENTS SAID THAT THE NEED TO

RESPONDENTS WERE to which rhetoric AROUND THE IMPORTANCE OF over the extent ETHICAL INVESTING is typically matched by concrete investment with

RESPECTIVELY (not particularly) 41%

(moderately) 50%

WORLD OF PRIVATE CLIENTS | JANUARY 2021 5

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

2020 AND COVID-19

DISRUPTION AND DECISION-MAKING 2020 AND COVID-19

GRAPHIC 1:

2020 delivered a radical shock to the global economy, described to us by one investment management professional as an “existential jolt”

But what, specifically, was causing concern? Graphic 3, overleaf, highlights that the cooling investment climate is a worry for most (63.2%). Stock market commentators were quick to caution against underestimating the impact of COVID-19. In March 2020, Standard Life Aberdeen Chief Executive Keith Skeoch told CityWire that while we had reached “peak panic” in relation to the pandemic, peak pessimismwas still to come. Although the subsequent news of a vaccine caused global markets to rally. The prospect of increasing tax burdens is also toward the top of the agenda (Graphic 3) and we are already seeing such concerns materialise, with proposals for the introduction, or raising, of wealth tax levies around the world. Canada and New Zealand are among those actively considering tax policy changes while, in the US, the 2020 election was underpinned by conversations around the correct and acceptable level of taxation for the nation. However, there is also a level of misinformation, rumours and speculation, so it is necessary to navigate through all of this when planning for the future.

One corporate services provider told us how they urge wealth owners to assess how high the risk of becoming “cannon fodder” is. “Ostentatious displays of wealth will not be well-received.”, they added.

TOWHAT EXTENT HAS COVID-19 AND THE LOCKDOWN RECESSION FORCED ALTERATIONS TO HNWI WEALTH PLANNING STRATEGIES OVER

representing a “global heart attack”. The full effects of COVID-19 and the global lockdown recession are still to be understood by all of us, no matter which jurisdiction we are based in. It is nevertheless anticipated that the road to economic recovery will include

THE COMING 12 TO 18 MONTHS? RESPONDENTS CHOSE ONE ANSWER.

“Shifting attitudes to wealth are playing out at global, national, local, community and family level. Private clients must respond appropriately.”

Political and social unrest continues to develop, not least in relation to racial justice, gender equality and ethical capitalism, serving only to further heighten scrutiny of wealth holders. Indeed, shifting attitudes to wealth are playing out at a global, national, local, community and family

44%

34%

tax policies built upon the expectation that those who can pay more, should pay more. Also, recent research in the UK on wealth tax evidenced that public attitudes show a clear desire for wealth to be taxed more relative to labour. There is an acknowledgement, as one wealth management director told us, that “changes stemming from COVID-19 will be higher taxation and that there will be a drive for the wealthy to contribute more”. Non-compliance is being met increasingly with punitive measures, not least in the court of public opinion.

level. Private clients must respond appropriately. More than ever, careful decision-making is paramount. Wealth owners should identify the threats and opportunities, establish their priorities in response to emerging concerns, and make sensible alterations to longer term thinking. Our survey reveals that COVID-19 is causing private individuals to rethink planning strategies in some way (Graphic 1). The majority of respondents (57%) are planning either significant or thoughtful alterations, while less than 8% plan to do ‘nothing at all’.

13%

8%

very much / significant alterations

moderately / thoughtful alterations where necessary

not particularly / minor alterations

not at all / no change

WORLD OF PRIVATE CLIENTS | JANUARY 2021 6

FOREWORD

OUR RESEARCH

2020 AND COVID-19

1. TRANSPARENCY

2. RELOCATION

3. FAMILY & GENERATIONAL WEALTH

4. ADVISER OF THE FUTURE

BDO’S OUTLOOK

2020 AND COVID-19

DISRUPTION AND DECISION-MAKING 2020 AND COVID-19

GRAPHIC 3:

GRAPHIC 2:

In response, and presumably in an attempt to mitigate these concerns, our survey >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30

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