Prime Cap recently attended a panel discussion of relocation, tax and legal experts held by The Private Client Dining Club (PCD Club) at the Rosewood over breakfast. The subject of the event was HNW relocation and global mobility.
Whist conversation tended to focus on tax and structuring for both resident non-doms and non residents, a number of trends were touched on which we think bear closer inspection given their proximity to matters of foreign exchange, movement of capital and inward investment into various stall-wart sectors of the UK HNW and UHNW purview.
Stability and the very real threat of a lefter leaning political agenda seemed to weigh heavy on the minds of the talking heads comprising the panel.
Whilst it was agreed that it was unlikely Mr Corbyn would make it to No. 10, it was acknowledged that noises from main street with regards to imaginative, let alone aggressive, tax planning and structuring were filtering in to political rhetoric which, in turn,
was translating in to second thoughts being given as to whether England was the right place to relocate to. It was the general consensus that no government would do away with things like the UK's non-dom regime, but, The Channel Islands in particular seem to be benefitting from uncertainty.
One thing not talked about in much detail was the emergence of residency by investment programmes and their future. Did the panel think that the programmes of Malta and Austria, to name but two, would have any meaningful effect on the economies of those countries (thereby increasing the veracity with which agents and mobility advisers might push them as post-Brexit alternatives) and has the peddling of these programmes made any sort of impression on where the rich were relocating to...was a question we regret not asking.
Another interesting point to note was the consensus that the UK's AML and KYC policies and directives mean that we stand amongst the most revered when it comes to questions over legitimate placement of capital.
Of course, Prime Cap is concerned with the exchange of currencies, so it was reassuring to learn that Hong Kong is beginning to emerge as a source of relocation planning uptake.
The value of the pound was discussed little, however, this was on the morning that the Bank of England emitted some strongly bullish sentiment.
At the time of composition GBP remains largely unchanged vs. EUR, but a fraction down against USD from a near 1.40 top at the time of the MPC meeting.
We're left to conclude that the market had firmly and confidently priced in such sentiments on the back of the heavy sell of in US equities earlier in the week.
So, growth forecast revised upwards and rates due to increase sooner and higher to prevent overheating of the UK economy. This is potentially positive for GBP which puts those holders of USD on the back foot.
We suppose that aside from interest rate 'specking', there is an inherent fragility to the pound and the political mud slinging going on in Westminster is serving only erode what confidence tentatively remains. Any correction across the UK capital markets, one greater or more organic that that which rippled across the pond from the US, could well see GBP drop back below 1.35. Mrs May is hanging on tooth and nail and we're wondering whether she is the only thing in the way of a more sizeable sell off.
An increase in the exchange of money is a symptom rather than a source. We've often seen the lag between shifts in investment appetite and increases or decreases in frequency and volume of currencies exchanged. The panel in today's discussion did not seem phased by the headwinds facing the the UK in the face of Brexit, so, it would be wrong to conclude that any noticeable increase in the number of people converting money means necessarily that Brexit is to blame.
It is also fair to say that diversified family offices are not going to liquidate all their holdings in one currency just because interest rates might go up in one jurisdiction. Sure, their bottom line might be pinched, but, as economies are growing, 'getting out of dodge' isn't the logical reaction to price volatility in the retail foreign exchange space.
If you would like to discuss the markets and what shapes and changes the value of global currencies then we invite you to get in touch and talk it through with our broking team. We can assure you the conversation will be lively, if caveated to the fullest extent.