Leonardo Braune explains how uncertainty after the Brexit referendum gave way to hope for the future for HNWIs
London has always been an attractive jurisdiction for high net worth individuals, either as a home or destination for investments. How will the Brexit decision change that? Leonardo Braune, Managing Director of consultancy firm Intercorp Group, explains that the short-term impact of the UK referendum is just a bump in the larger global trend towards more transparency and international tax cooperation. He discusses the changes that Intercorp is seeing in its work thanks to the conversation around ultimate beneficial ownership, and explains how Britain’s non-dom process will continue to attract HNWIs to its shores.
European CEO: London has always been an attractive jurisdiction for high net worth individuals; either as a home, or destination for investments. How will the Brexit decision change that? Joining me is Leonardo Braune from consultancy firm Intercorp Group.
Leonardo – how has the Brexit decision changed high net worth individuals’ relationship with London and the UK?
Leonardo Braune: It was a very big surprise. We have a lot of ultra-high net worth people who have been living in London for quite some time. There are people who were actually relocating to London a few months before, and also planning to move a few months after. So the first reaction was of uncertainty, and trying to look and see what was going to happen, what was the real impact?
After that, people calmed down and they realised that despite some of the implication that this may have economically, there’s a chance for the UK to position itself more attractively in terms of efficiency, economics, and tax.
European CEO: What have been the biggest trends changing the wealth management landscape?
Leonardo Braune: The world is changing dramatically, in terms of how they view net worth. And governments are extremely focused on collecting more, taxing more, and at the same time being fair enough so that they don’t simply scare off these individuals.
There’s also a very strong trend for compliance, for transparency. We have countries trying to adopt amnesties – like Brazil – in the process of trying to become more and more compliant with tax.
One thing is for sure: wealthy individuals want to remain wealthy. They want to remain efficient. But at the same time they have to deal with all these different variables at once, now.
European CEO: How has the conversation around ultimate beneficial ownership changed your work?
Leonardo Braune: Well it has increased dramatically, because we’ve always focused on transparency, since the beginning. Our practice has been a very efficient practice in terms of finding the proper loopholes within the legislation that would allow individuals to benefit in terms of efficiency, but at the same time still be compliant.
What has changed now is that the rules are more open; at the same time they are more detailed. And this brings in differences between one country and the other. And we have to try to manage that the best way possible.
So now a lot more people are looking into that. They’re trying to find out, what’s the best place for me to be looking at, from a tax perspective?
European CEO: What is the best place for people to go, then?
Leonardo Braune: To find the best place we need to first understand what people are looking for, and what exactly is bothering then, what’s even driving them to relocate?
It’s a balance between personal desires, and also at the same time, efficiencies in how their assets are going to be taxed.
Finding the right balance is challenging. So we basically do simulations: all the way from tax returns to tax cost, to dealing with succession. So that they get a feel of this place that they think would be good.
Very basic example: they have their returns, let’s say they’re making five percent a year net of tax. Would you be prepared to be making three percent, because now your tax cost is higher? And the other question is, is that really going to change your lifestyle? Because obviously that extra cost has to bring some benefit. And it’s balancing these things that makes these families really challenge all their values, and how to deal with that.
European CEO: Looking at the UK, we’ve always been extremely aggressive on financial services, but now, positioning ourselves in competition with the EU rather than as a passport into it: what do you think we need to do, what do we need to change?
Leonardo Braune: I think the UK is in the right direction. I’ve always believed that, since we first positioned ourselves here in London. Because it is an attractive jurisdiction that basically has one key element, which is: time to adjust.
The non-dom system, which has been in place many years, is clearly a transition from a no-tax environment, where basically the family is not even here; into a full tax environment when they are fully domiciled.
And because of that, they can benefit, and they can enjoy basically a transitioning tax impact. That attracts people.
Now, it will attract people who will be here just for that transition period. But we’re talking about people who will make investments, who will generate jobs, who will bring their businesses. And maybe they won’t stay here forever, but some of them will actually stay. They’ll actually make this their home, and they will deal with the consequences of that just like they would anywhere else.
European CEO: As you say, London is a home for Intercorp – one of your three homes, anyway. Are you looking at exploring an office on mainland Europe now?
Leonardo Braune: That’s a possibility, but we have so much on our plate right now, just trying to balance between Brazil, the US, and London.
The main thing right now is choose the right clients, and at the same time continue to increase and expand the network of specialists that we rely on.
Our business is focused on specialists in local expertise in different jurisdictions. We have become the experts of, basically, finding the experts. And understanding the client’s desires and needs.
So basically what we’re planning to do next year is consolidate these relationships, and somehow become more and more efficient in managing these different types of projects that we have to deal with.
European CEO: Leonardo, thank you.
Leonardo Braune: Thank you very much.