Bahamas must look to ‘trust-plus’ solutions

By added on 25/03/2010

The Bahamas' financial services future lies in providing "trust-plus" services for high net-worth individuals and their families, STEP Worldwide's chief executive told Tribune Business, with this nation needing to focus on creating a workforce able to provide "holistic" asset management solutions across multiple borders.

David Harvey, speaking with this newspaper during a two-day visit to the Bahamas, where he addressed a Bahamas Financial Services Board (BFSB) conference, said this nation's financial services industry needed to realise its competition was "the entire world", not just its regional international financial centre rivals.

Mr Harvey said a number of Bahamian professionals he had spoken to during his visit indicated they believed their main competition came from the likes of Bermuda, Cayman, the British Virgin Islands and Barbados - a view he "definitely" did not agree with.

"The competition is the entire world," Mr Harvey told Tribune Business, adding that to focus solely on regional rivals was "setting a lower standard" than if the Bahamas raised its sights to focus on competing with the world's major financial services jurisdictions.

"The competition is London, San Francisco, New York, Switzerland - the big centres," he said. "That is where the competition will come from."

Pointing out that the global financial services market was vast, Mr Harvey told Tribune Business that even "if the Bahamas gets a small slice of the cake", it would "provide increased employment and provide for the development of the Bahamian economy. Those are the positive benefits to look for".

To grow its slice of the financial services pie, Mr Harvey said the Bahamas already had a strong position and reputation in the Latin American market, outside its core North American and European client bases.

The Far East and Asian market also "offers a lot of prospects" for the Bahamian financial services industry to grow, the STEP Worldwide chief executive telling this newspaper he had spoken to several Bahamas-based executives who either saw - or were actively exploring - growth opportunities in this region.

To cement its niche in international financial services, and build upon its private wealth management/estate planning foundation, Mr Harvey said the Bahamas needed to look at providing "trust-plus" solutions for client needs.

Clients, he added, were increasingly seeking more than traditional trusts and estate planning, instead wanting "better advice and holistic advice" that was geared towards the management of their assets and business via a 'Family Office' type structure.

In addition, Bahamian financial services professionals and those who supported them, especially attorneys and accountants, needed to have the skills, and ability to operate, in a multi-jurisdiction environment, working across borders. One-jurisdiction professionals, Mr Harvey added, were ultimately likely to find themselves becoming obsolete and cut out of the market.

"I think the biggest single threat [to the Bahamas] is not keeping the workforce properly skilled," Mr Harvey said. "It's having the right people and the right competitive skills."

He emphasised, though, that the Bahamas "has a good reputation", being one of STEP's (the Society of Trust and Estate Practitioners) 10 largest branches in the world, and providing a strong cadre of local professionals - attorneys, accountants and the like - with the ability to provide the solutions and service quality international clients are seeking.

While many felt the Organisation for Economic Co-Operation and Development's (OECD) tax agenda would ultimately move to the automatic exchange of information, Mr Harvey told Tribune Business that "there are two major stumbling blocks" to that.

"Governments say it is not possible, as they do not have the capacity to do that kind of record-keeping," Mr Harvey told Tribune Business. "Secondly, where does it stop."

The automatic exchange of information, he explained, could infringe human rights laws, since in countries such as Mexico, tax-related information "becomes public very quickly" through falling into the wrong hands.

Numerous data losses and breaches in major OECD countries such as the UK, involving personal financial data, had also occurred recently.

Mr Harvey said "the capacity of data to get into the wrong places" could also forestall the automatic exchange of tax information, adding: "Once that happens, the threat to people's human rights will be considered."

Still, the STEP Worldwide chief executive told Tribune Business that "it was critical" for the Bahamas to escape the G-20/OECD 'grey list' for the reputation of its international financial services industry.

"I don't think anyone could afford to be on the 'grey list'," Mr Harvey said. "It was important to get there [the 'white list']. It's no so much the network of Tax Information Exchange Agreements, but what it says about commitment and reputation.

"Clients want certainty, and want jurisdictions to be safe destinations for business and investment for the long-term, and by being on the 'grey list' there were doubts."