My time on Air

Last week I was invited to the BBC in Regent Street to take part in the ‘Weekend Program’. I arrived, was screened and checked and then taken to the second floor, where we were squeezed into a tiny broadcasting studio amongst a sea of researchers and journalists all working on current affairs and news.

Before we went ‘live’ and while we were waiting for a computer glitch to be fixed, the few of us in the room had a general discussion ‘Are people not bored with stories on offshore financial centres and leaks – haven’t they heard it all before? Everyone knows the rich evade taxes, do they need to hear it again?’

The discussion went on ‘Surely it is not fair that the rich can squirrel their surpluses offshore leaving those with no surplus to foot the bill for health, education and the safety of our nation?’

When on air, I drew Julian to what the law says on the question of tax avoidance and quoted Lord Clyde in the Ayrshire Pullman Motor Services:

‘No man in the country is under the smallest obligation moral or otherwise so as to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in its stores’,

The argument his Lordship makes, with which I concur, is that Governments are powerful – if they do not like something they can change the law to compel a person to change and pay more tax.  I went on to say that people are free to move their money where they chose; exchange controls were lifted in 1979, Governments cannot legislate over other countries.

Gordon Brown when in power was messianic about blocking any form of tax planning. Under his stewardship the anti-avoidance legislation mushroomed. The UK now has more anti avoidance legislation than anywhere else in the world, bar India.

In response to the ‘Paradise Papers’ leak Gordon’s response was ‘trillions are still being siphoned off to dodge tax in the most shadowy places in the global economy.’  He challenged people to put a stop to it by appealing to the G20.

It is easy to see why people like Gordon Brown get so hot under the collar. Governments believe there is a whopping $7,600 billions of wealth in offshore financial centres. Africa, for example, it is surmised has 22% of financial wealth offshore and Russia 50%.

Most of this financial wealth is in trust. Governments are of the view that trusts are ‘sophisticated tax avoidance arrangements’ and they are committed through the OECD to stamp them out. What is alarming however, is that they now have the information they need to investigate, the methodology and the strategy as to whom, why and when to attack.

The automatic exchange of information (CRS) gives Governments the identity and contact details of the settlor, the trustees, how much wealth is settled what transactions are made, and the name and contact details of the Protector.

The importance of the Protector in this mix, is critical. This is the proof tax authorities across the globe need to claim that the settlor did not have the necessary intention to create a trust. They will first go to the trustees to collect and collate information on the set up of the trust and then will issue the settlor with a claim.

If following the claim the tax authority is successful the settlor will be taxed as if there was no trust and the trustee will be compelled to return all fees and pay all its own legal costs without access to the trust fund under a trust indemnity. If this puts the fiduciary out of business – Governments will shed no tears.

However, not everyone is convinced by my concerns; ‘Surely the UK Government would not wish its Dependencies or Crown territories to go out of business?’ said someone in our discussion last week. From my first-hand experience of dealing with the Treasury and HMRC –  Governments care little for third parties so if business happens to suffer for these industries, then tough luck.

Of course, there are steps which can be taken now to ensure that a specific trust will be less likely to be investigated – but if you or your trustees are not convinced about the intentions and power of HMRC to attack trusts offshore and do not fear the dire consequences for anyone caught up in it – trustees will continue to do nothing – which they may live to regret!

To get an independent trust review or discuss all matters relating to privacy, control and protection of your assets please contact us direct.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

Poor rich guys!

As regular readers of my Note will know, the ultra-high net worth community is little understood and is one of the few minority groups where prejudice flourishes. Just open any newspaper and observe countless scurrilous stories about the rich and powerful. But the stories are no longer today’s news and tomorrow’s chip paper. There is a sinister side to what is written.

All news is now collated and added to your profile on websites such as Wealth Check, owned by Reuters. If a financial institution needs to check you out to satisfy its anti-money laundering obligations, it will study your profile to see if it wants you as a client. With too many scurrilous stories - whether true or not, you will be unable to open a bank account – anywhere in the world, instruct a lawyer to assist or an accountant to do your returns. It is now more important than ever to keep your name out of the press, social media websites or any other form of publication.

Lord Howard Flight in the forward to my ‘Super Rich’ book says ‘I never thought I would feel sorry for the Super-Rich. Caroline Garnham has exposed ‘the other side of the coin’ in identifying the issues they face. This is a book which every self-made successful individual should read and digest – preferably before they cash in their fortunes.’

My other book ‘Uncovering Secrets’ is my challenge to the industry to review their existing ways of doing business. The private client industry, since 2008, has been fined $504 billion, not enough to put them out of business, but enough to stop them doing anything Governments don’t like – good or bad!

The private client industry simply cannot continue to absorb these fines, on top of the increasing costs of compliance. It urgently needs to rethink what and how it is doing business. The old model is broken. Each chapter in the book challenges the adviser to understand their clients, give them what they want, build trust and win new business.

But the book goes further than old fashioned ‘know your client’ strategies. It deals with the psychology of getting your message across and what is effective in winning business. But it also drills down to some specifics in the industry such as the stark fact that each adviser spends from one-third to one half of their time – on non-client matters which, at best is poor at delivering a return on investment and at worst, increases costs.

The book looks at ways of minimising time wastage and maximising returns on investment. For example, every adviser spends a considerable amount of time ‘networking’ and yet most advisers confess that they follow up only once or twice and do nothing further with the business cards so assiduously collected, other than to put them in a drawer. BConnect Club recognises these concerns and gives the industry what it needs to stay connected.

BConnect Club is an innovative, investment platform and information resource used as a tool by UHNW individuals, family offices and for the industries which serve them.

This hard to reach community wants to explore new ways to invest, manage their money and indulge themselves. It is joint venture between Bespoke Connections and Garnham Family Office Services. The aim is to provide a platform of investments, luxury products and relevant information which they may not otherwise find.

BConnect Club is the only online platform where industries which serve this community, can promote their products, investments and expertise direct to their target audience, while at the same time connect with their colleagues and network.

Digital technology is so often used to improve the ‘user experience’ but in a way which distances the client from their adviser. My challenge is to free up the time of advisers so they can spend more time with the clients. Digital technology is then used to stay in contact with colleagues and contacts.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

In trusts we trust

The last time I was at Queen’s Club was for the tennis tournament which I thoroughly enjoyed with friends and family. But on Wednesday evening with the stands and tents gone, it looked eerily quiet in the pale moonlight. I had come – not to play tennis, but to hear a debate.

Normally, I am content to read what journalists and commentators have to say about current affairs or listen to them on the TV, or radio. However, on this occasion, I wanted to hear directly what Isabel Oakshott, presenter on the BBC, Daniel Johnson editor of Standpoint and Alan Lockey former adviser to Labour MP Tristram Hunt and former senior adviser to the Labour Party – had to say.

The topic was Brexit, but neither Isabel nor Daniel seemed particularly perturbed about Brexit – what was really of concern for their country was the threat of Corbyn getting in to No 10!

Isabel said ‘There is no ‘money tree’ - other than what you can borrow’.

But Daniel was more forthcoming,

‘If Jeremy is elected’ he said ‘there will be queues to leave the country - 90% wealth taxes’. It was clear that in his view with swingeing taxes everyone who could make money for the country would leave.

Alan meanwhile, confessed that he had never voted any party other than Labour all his life, but could not and would not, vote Corbyn.

Following the debate, deeply disturbed by what I heard, I telephoned a friend who is high up in the Tory establishment ‘Surely now is the time for the Tory party to speak up for Britain; a world class financial centre – the new Singapore or Switzerland – post Brexit’ – Her reply – ‘There is no political appetite for appeasing the rich!’

 Given that no political party seems to want to support our biggest tax payers, it is time to go back to the drawing board.

I have been serving UHNW clients for over three decades and this is no time to be defeatist.

Trusts have been used for centuries to protect wealth for future generations and if they can be used in Britain as recently as August of last year on the death of the 6th Duke of Westminster to save for his family the lion’s share of their £9.35billion they can continue to be used for our clients, whether Brit or not – with one massive word of warning.

Governments across the world are united in their enthusiasm to stamp out tax evasion – and quite right to. But within the ambit of tax evasion, they want to lump aggressive tax avoidance – and under this umbrella they wish to include trusts. But even Governments cannot step outside the law, although we must be mindful as to what laws they intend to use to get what they want!

From the manual written for tax inspectors across the world for the financial information they will automatically receive when CRS kicks in – any trust of any significance – with a Protector – is to be investigated – if the Settlor is still alive.

Why, is this combination so relevant - because if the trust has a Protector, the Government is justified to investigate as to whether the trust is genuine or a sham? If a sham, then the trust can be ignored and the settlor taxed as if the monies were still owned by him or her.  

Trusts are an invaluable tool which, when set up correctly, is superior to most other wealth ownership structures. What we do for our families is to use trusts as the core of their set up but include corporate elements which give the proper checks and balances, the Ring of Confidence and it is a scenario they feel more comfortable with.

To quote Lord Tomlinson in the case taken by a former Duke of Westminster concerning planning in 1936

‘Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it would otherwise be. If he succeeds in ordering them so as to secure this result, then however, unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax’

In other words – the law is the law – and if in planning we, in the industry, can stay well within – not only the letter of the law, but also the spirit, and here I mean watching out for what HMRC and other tax authorities are up to, our clients ‘cannot be compelled to pay an increased tax’.

If you would like to meet Caroline and hear how the world has shifted in its approach to UHNW individuals over the years, join her to celebrate the launch of her two books at the Institute of Directors on Tuesday 7th November 2017 at 6.00pm. We will also be celebrating the launch of BConnect Club, the digital tool used by UHNWIs, their Family Offices and the industries which serve them.

To get an independent trust review or discuss all matters relating to privacy, control and protection of your assets please contact us direct.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

Press Release videos for our books below:

'When you are Super-Rich who can you trust'

'Uncovering Secrets: Winning business from Private Clients' 

The grandfather who saved the day

Last Tuesday I was introduced to a new client who I will call Arpad. His father, who lives in Kenya, set up trusts for his son and his family which were now being administered in the Isle of Man. Arpad and his family were pleased with his trustees which had operated the trusts smoothly for the last twenty-two years.

Arpad’s children are now adults; Tina lives with her husband in the US and Franki is thinking of moving to Portugal with his family. Arpad, his wife and youngest daughter Amie continue to live in the UK.

A few months ago, Arpad was contacted by his trustees in the Isle of Man who asked him to fill out some forms. He did not like how the frequently the trustees had began asking for more and more information which he did not like giving, he was paranoid, especially at the thought of it being exchanged.

Arpad was particularly anxious that his father would be exposed in Kenya to queries and was not comfortable with this idea. His father was well-known nationally and had always been an outspoken person. Even though very successful, he was not universally liked.

During our long meeting I asked how the trusts had been set up; Arpad told me that twenty-two years ago, his father had been working for Arpad’s grandfather in Kenya. They worked well together and Arpad’s father was put in charge of one of his grandfather’s companies. Due to his hard work, the company was a great success and his father and grandfather found a buyer and sold it.

It was about this time that Arpad’s father decided to immigrate to the UK with his young wife and family and he took advice as to what best to do. Arpad’s father was advised to set up a trust before becoming resident, which he did, but the trust was in fact funded by his grandfather, which makes the grandfather, not his father, the economic settlor.

I told Arpad that this distinction is in fact quite material. Whereas there is no express guidance on the position, it is logical from the Implementation Handbook and the responses to the Frequently Asked Questions issued in June 2016 that the year in which the settlor dies his ‘equity interest’ (such as it is under the CRS) is regarded as having closed. It follows that if his equity interest has ceased, there is then no ‘equity interest’ capable of being reported and equally he cannot be a Controlling Person of a trust. This position is understood and accepted by HMRC – which is hopefully the same position in other countries as well.

Arpad looked relieved. I said he would need his trustees to seek independent legal advice to confirm what Arpad believed to be correct to back up a decision not to report the grandfather as a Controlling Person. He may also need to seek tax advice to know what the tax consequences of his grandfather having been the economic settlor rather than Arpad’s father and whether there were any tax consequences on his death.

Arpad quizzed me about his exposure as a Protector. I told him that we were seeing an increasing number of clients giving up their role as Protector as we advise them to have a more hands-on role that does not leave them exposed. Our structure is far more robust and flexible and gives him the opportunity to have a meaningful involvement without the danger of sham argument. Arpad was keen to find out more.

Arpad had seen the press release for my book ‘When you are Super Rich – Who can you Trust?’ and wanted a structure in which his Ring of Confidence – close circle of advisers would be represented. I suggested he join us for the book launch on the 7th November at the Institute of Directors and for us to arrange a time to discuss further.

To get an independent trust review or discuss all matters relating to privacy, control and protection of your assets please contact us direct.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

Press Release videos for our books below:

'When you are Super-Rich who can you trust'

'Uncovering Secrets: Winning business from Private Clients' 

Got a bodyguard yet?

Last week I went to a private exhibition at the Serpentine Sackler gallery. I started a conversation with a Dutch lawyer Reinier who expressed an interest in my book ‘When you are Super Rich who do you Trust?’ In Reinier’s opinion ‘The Dutch trust no-one; they are paranoid about privacy. None have profiles on Facebook and they do everything they can to keep away from publicity’.

This paranoia stems, so he told me, from Willem Holleeder known to the Dutch as the ‘Nose’ who faced trial in May this year in Amsterdam, for a number of gangland killings after years of ruling the Dutch underworld. He is the most famous gangster in the Netherlands; best known for his role in the kidnapping of the beer tycoon Freddy Heineken in 1983.

Freddy Heineken’s daughter, Charlene de Carvalho-Heineken, was so disturbed by it that now aged 63, she is a reclusive figure; her alleged net worth is said to be around $10 billion.

Holleeder’s crime was years ago but he still lives on in the minds of the wealthy Dutch. It all started on 9th November 1983, when Freddy Heineken and his chauffeur were kidnapped in broad daylight. They were eventually released on payment of a large ransom; 35 million Dutch guilders (US 21.73 million) which was buried in woods near the town of Zeist.

It is not so much the kidnap which has instilled terror into the hearts and minds of the Dutch because Freddy and his chauffeur were released unharmed, it is knowing what Holleeder was capable of. He is accused of six murders and four attempted murders. His long-time friend and fellow conspirator Hout was shot dead in 2003 and another friend Willem Endstra, whose real estate business was allegedly being used for money laundering, was seen on a bench in front of Endstra’s office with Holleeder, only hours before he was killed. Endstra, was said to be worth 350 million euros.

In 2015 a film was made of Holleeder and Hout ‘The Kidnapping of Freddy Heineken’, which Holleeder tried to prevent being distributed because he was apparently unhappy with the way he was portrayed. His nickname is "The Nose", because of his prominent proboscis, but in the film he was played by the handsome Australian actor Sam Worthington. British actor Jim Sturgess starred as Van Hout. Holleeder is not intimidated by the publicity, he is feared, that is all he needs to know. The publicity only increases his reputation as ruthless, and the fear of him amongst the rich and famous.

The attitude of the Dutch is not unique. In 2008, a total of 4,820 people held close protection licenses in Britain. Now there are 14,073. Before this surge of business, the only people who wanted close protection were those who needed it - due to their political profile or public opinion, and those who wanted to be seen to need it – pop stars, celebrities and other people who seek attention.

Now, however, there is a third type; the ordinary, rich, anxious. The type of bodyguard they are looking for is covert surveillance; bodyguards who blend into the background, who are trained to have peripheral vision – who can see tension building or who know when something is out of the ordinary. They are there to avoid trouble, to pull you out of danger, once suspected. They are there to protect wives on shopping trips, kids to and from school and teens on a night out.

Where I live there has been a sharp increase in bodyguards – I see them sitting in halls, walking up and down the street and riding in escort vehicles, some have tell-tale earpieces, but others are just ordinary folk, ‘hanging around’.

The private client industry should be keen to serve this growing concern of their clients. They need protection not just against physical attack, but from information getting into the wrong hands. Our clients are being villainised as ‘fat cats’.

Tax authorities around the globe have combined forces to eradicate offshore structures. Regardless of their legality, governments now have the means and power to investigate and impose heavy fines on anyone with a trust structure. Trusts are seen as a vehicle to avoid tax and should therefore be eradicated. This puts the responsibility on us to protect our clients and their freedom - as well as our industry.

Governments, the press and the public think it is ok that the privacy of the rich is compromised – whether financial or personal. It is not ok, for the personal safety of anyone – whether rich or poor, to be compromised without good reason!

At GFOS we view CRS as an opportunity to plan, think of new ideas and find solutions to protect our clients. It is however, essential that our clients are tax compliant, with this as our benchmark, we then do what we can to protect their privacy, in an honest, law abiding manner.

Please watch the Press Releases for our books below:

'When you are Super-Rich who can you trust'

'Uncovering Secrets: Winning business from Private Clients' 

Feel free to contact us if you have similar concerns or would like to discuss matters surrounding privacy and control of our wealth ownership structure or any other relevant matter.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423