The population within the Gulf Cooperation Council (GCC) region has seen significant growth, reaching 56.4 million people in 2021, up from 26.2 million in 1995 (Source: ISI World Statistics). This surge is attributed to the influx of expatriate workers, drawn by favourable local taxation rules and expanding business opportunities.
Notably, the population balance has tilted in favour of non-citizens, constituting 50.9%, with an annual growth rate of 3.1%, compared to 1.4% for citizens. This shift, from 46.6% in 2010, suggests that the non-citizen population could double in about 23 years, reaching 57.6 million people by 2044 (Source: ISI World Statistics).
This population boom, particularly within the expat market, is driving a heightened demand in the financial services industry for top-tier advice, wealth management, and associated services and products. Among the available options for advisers to support their clients' financial goals, investment platforms are gaining significant traction.
Following my recent trip to Dubai, along with our Commercial Director David Noon, I wanted to share some insights on the trends and limitations our clients are facing. We work closely with our clients, and it is our commitment to understand their needs and the challenges they encounter.
Death and Taxes
Situs is defined as “the place to which, for purposes of legal jurisdiction or taxation, a property belongs” (Source: Golding & Golding). Despite the increasing awareness of situs tax, not everyone is cognisant of its potential impact on a client's assets upon death.
Did you know, for example, that a person holding over $60,000 in US stocks could face US situs tax of up to 40% of the value of their holdings? Likewise in the UK, if your combined UK domiciled assets total more than £325,000 then similar taxation can apply?
Situs isn’t just applicable to physical property but to a range of asset types. With clients wanting exposure to popular global stocks, or obtaining share options from their employer, it’s important to keep situs in mind and understand the associated risks involved.
To mitigate situs, options like an insurance wrapper or an international pension exist, though each comes with potential drawbacks. Our 'Kinesis Service’ aims to assist advisers and their clients in mitigating potential situs liability while harnessing the benefits of an investment platform.
UAE Sheds its Grey
The removal of the UAE from the Financial Action Task Force's 'grey list' (Source: Reuters) marks a significant achievement for the jurisdiction, signalling positive strides taken by the country. This development opens wider opportunities and fosters closer collaboration with other international jurisdictions.
Despite this success, the EU still designates the UAE as a high-risk country (Source: Reuters), emphasising the ongoing work required. The UAE's commitment to diversifying beyond the oil sector bodes well for industries like financial services, boosting investor confidence locally and internationally
Facing Tightened Constraints
Navigating international waters exposes companies to higher risk factors, with constraints ranging from clients returning to their birth country to stringent limitations on investment choices. As companies grapple with these challenges, it is crucial for advisers to scrutinise providers' outlook on risk and their policies.
I firmly believe in advisers and clients being given access to an open-architecture solution, allowing them to tailor investment solutions to their financial goals and risk appetite, both now and in the future.
Planning for Succession
Succession planning is a recurrent theme in nearly all my meetings, underscoring its significance in comprehensive financial planning. The importance of succession varies among clients, contingent on their unique circumstances. Fortunately, most providers present viable solutions, whether through life insurance policies with designated beneficiaries from the outset or platforms offering 'death bed' trusts. However, it's paramount to understand the tax implications for beneficiaries.
A word of caution is in order – always seek legal or tax opinions on prospective solutions to validate their legitimacy and safeguard against potential liabilities in the future. I've encountered instances where proposed beneficiary nominations, upon scrutiny, could falter as trusts, triggering unforeseen inheritance and probate obligations. In the intricate realm of wealth management, meticulous planning today ensures a lasting legacy tomorrow.
In conclusion, the offshore investment platform market is experiencing an exciting phase of growth. The prevalence and utilisation of platforms are steadily increasing, and at Capital International Group, we are dedicated to supporting this upward trend. With substantial plans for 2024 and beyond, stay tuned for future blog posts as we unveil more details about our exciting developments.
Disclaimer: The views, thoughts and opinions expressed within the article are those of the author and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any productor security or to make a bank deposit. Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations. CIG, its clients and officers may have a position in, or engage in transactions in any of the investments mentioned. Opinions constitute our views as of this date and are subject to change.
Regulated investment activities are carried out on behalf of Capital International Group by its licensed member companies. Capital International Limited and Capital Financial Markets Limited are licensed by the Isle of Man Financial Services Authority. Capital International Limited is a member of the London Stock Exchange. CILSA Investments (Pty) Ltd (FSP No. 44894) trading as Capital International SA, is licenced by the Financial Sector Conduct Authority in South Africa. All subsidiary companies across both jurisdictions are represented under the Capital International Group brand.
