New stricter compliance laws in some Latin American countries confront local net high worth families with serious problems, with offshore assets being their main headache, according to Martin Litwak, founding partner at the Litwak & Partners law firm.
“Tougher compliance rules, increased transparency and automatic exchange of information have dramatically transformed the legal environment in the wealth management field making this last year a very challenging one for most wealthy families, especially those based in countries that have approved tax amnesties (i.e. Chile, Brazil, Argentina, Colombia, Peru, etc.),” Litwak said in an interview with the marcus evans corporate communications company, which kindly made a transcript of it available to EmergingMarkets.me.
Litwak & Partners, a boutique firm that is headquartered in Montevideo with offices in Miami, Buenos Aires, Lima and the British Virgin Islands and specialises in cross-border transactions, took part in Latin Private Wealth Management Summit 2017 in Panama City, Panama, this April.
Litwak said in his interview that the new compliance legislation requires most NHW families to declare all their assets, both domestic and offshore, in their country of residence, which means that “offshore and onshore estate and succession planning must be consistent”.
However, “many families have been left with local and international wealth planning structures that are not consistent with each other and consequently are not working well with each other”, he said.
According to Litwak, there is a shortage of legal and accounting expertise in Latin America to guide NHW families through this new environment.
Major and traditional trust companies do not usually provide advisory services while domestic legal and accounting advisers do not necessarily have the skills, experience or desire to deal with international issues, Litwak said.
Litwak & Partners has stepped in by offering a package that purports to provide all the legal, fiduciary and administration services that Latin American NHW families need to tackle the new problems.
Developed by Litwak & Partners itself and called Wealth Structuring Program, the package complements the services of local lawyers and accountants, Litwak said.
It also saves NHW families the trouble of “spending time coordinating the services from different legal and fiduciary providers”, and helps them avoid the risk of enlisting the services of advisers lacking in competence or resources, he said.
Other problems facing Latin American NHW families are higher taxes and reduced privacy, “which, in Latin America, implies less personal security”, Litwak said.
Privacy is one of the reasons for the offshoring of assets by Litwak & Partners clients, he said. He suggested that, from the standpoint of privacy, regulated investment funds are better places than trusts to keep one’s money in.
Lower taxes and succession planning are other reasons, and trusts are the best option for succession planning, he argued.
“We try to identify what matters to [NHW families] the most, but they must also understand what can and cannot be achieved in this new transparent world,” he said.
One more problem for NHW families is the overall economic slowdown in Latin America.
“The environment is more risky. The next few years will be tough, with more mergers and acquisitions, as prices will be cheaper. Most of our clients now own distressed assets, real estate and interests in private equity funds,” Litwak said. “This trend will continue for a couple of years.”