Global wealth firms will see offshore clients pull an additional $1.1 trillion on the back of tax transparency laws, with assets from Latin America and Asia the most at risk, according to a new report.
The report, from consultancy Oliver Wyman and Deutsche Bank, predicts wealth managers will lose out on around $13 billion of annual revenue as a result of the outflows, as tax amnesties and avoidance clampdowns around the world make it harder for the wealthy to use offshore accounts.
It said this trend was already in evidence as Europeans and North Americans repatriated assets over the last five years, and now a similar move would be seen in emerging markets.
‘We estimate that $ 1.1 trillion of assets under management will flow out of offshore accounts as a result of the second regularization wave. Offshore asset under management originating in Asia Pacific (ex-Japan) and Latin America will suffer most with almost 20% of assets at risk,’ it said.
The $1.1 trillion is roughly 10% of total assets held offshore today, said the report (see chart above).
The report estimates the amount that will flow out from current offshore Latin American accounts is around $210 billion.
It added that repatriation rates vary by region, but remain below 15% on average. Onshore managers in Latin America and Asia Pacific are ‘likely to benefit’ from $200 billion in repatriated flows.
Large Swiss players in Latin America have been hit by tax amnesties in Chile, Brazil and Argentina, as well as its own transparency law changes. Peru has also recently started seeing results from its own program.
UBS Wealth Management reported outflows of $ $13.89 billion from emerging markets in 2016, while Credit Suisse saw outflows of nearly $5.7 billion over the same period.
The report predicts that onshore growth will outpace offshore growth in emerging markets, especially in Latin America, where ‘most global players were never able to establish a significant onshore footprint’.