Photo: St. Peter's Bay Barbados
The global economic downturn has undoubtedly affected the stability of the financial services sector. Over the past five years, the wealth management industry, like other industries, has faced challenges related to investor confidence. However, in recent times, the industry appears to be rebounding. According to the 2013 World Wealth Report by Capgemini and RBC Wealth Management, High Net Worth Individuals (HNWIs), i.e. individuals with more than US$1 million in financial assets, enjoyed solid market returns in 2012 despite weak global GDP growth. As outlined in the Deloitte Wealth Management Centre Rankings for 2013, Panama and the Caribbean maintained a third place ranking among the leading global wealth management centres.
As one of the leading financial centres in the region, Barbados is the headquarters of several prominent local, regional and international financial institutions. The country has direct air routes to international financial centres, such as New York, London and Toronto and is a popular travel destination. Considering the rising demand for investment products and services on the island and the growing sophistication of its investors, it becomes evident that there are several natural advantages that enable Barbados to fulfill its potential as a centre of excellence for wealth management.
Barbados is well known for its stable social, economic and political environment and its finance and business services industry is one of the largest contributors to the country’s Gross Domestic Product (GDP). Based on the June 2013 press release by the Central Bank of Barbados, the average contribution of the finance and other services sector to GDP was 20% for the period 2006 to mid-2013. Not surprisingly, over the years, the government of Barbados has demonstrated its commitment to the development of the country as a leading international financial centre.
Barbados is home to the Barbados Stock Exchange, the third largest stock exchange in the Caribbean region, which has fostered an investment culture by facilitating wealth creation via participation in equity markets. Over the past 20 years, Barbados has established an extensive and expanding network of investment and tax treaties, which are attractive to international investors seeking tax efficiencies.
Barbados’ good governance practices are well respected internationally. The country is recognised for its well regulated business environment due to its transparent policies and enactment of legislation that covers international banks, captive insurance companies, private trust companies and foundations, among others. This has been accompanied by legislative amendments that facilitate better supervision and greater flexibility in doing business in Barbados. Trust and finance companies, merchant banks, offshore banks and commercial banks are regulated and supervised by the Central Bank of Barbados, which was established in 1972 and has become the country’s premier financial institution. In 2011, the Financial Services Commission (FSC) was established with a mandate to efficiently supervise and regulate the non-bank financial services sector, to improve the competitiveness of the financial services sector and to promote public confidence, awareness and the stability of the operations of financial institutions, inter alia. In late August 2013, the Central Bank of Barbados and the FSC signed a Memorandum of Understanding bolstering their joint commitment to further safeguarding the stability of the country’s financial system.
Recent budgetary proposals by the government seek to improve the enabling business environment in Barbados, while increasing its attractiveness as a wealth management centre. In 2012, the government announced the establishment of indefinite special entry permits for HNWIs, where the net worth of the applicant must exceed US$5 million. The 2013 budgetary proposals also announced increased licence periods for international business companies, as well as special entry permits for non-residents who own substantial residential property or investment in Barbados of US$2 million or more, where investments include property development projects, rental real estate, bonds and mutual funds.
In addition to the country’s competitive regulatory and tax infrastructure, other innate advantages lie in its well trained workforce, characterised by high calibre qualifications in wealth management and a strong support network of highly skilled professionals in accounting, law, financial advisory, banking and tax.
Many of the wealth management institutions in Barbados, including insurance companies and international banks, have established relationships with renowned global wealth management institutions and provide a diverse offering of wealth management instruments and services to HNWIs, families and small business owners. Services include financial planning, private banking, investment management, tax strategy development and estate planning. In the provision of high quality customised wealth management solutions, these institutions also benefit from the country’s well developed telecommunications infrastructure, which facilitates seamless cross border expansion, efficient client communication, real time strategy execution and access to superior research and resources. While catering to existing markets that include overseas based nationals and expatriates, there are also opportunities for these institutions in markets such as Latin America that have remained largely untapped until recently.
Therefore, while the recession has hampered the financial services industry, it has also served to underscore the key indicators for the survival and success of wealth management centres worldwide. According to the Deloitte Wealth Management Centre Rankings for 2013, for any wealth management centre to survive and excel in this global competitive landscape, it must possess:
- a thriving business environment with excellent infrastructure, strong capital markets and attractiveness as a travel destination;
- a supportive tax and regulatory infrastructure that facilitates protection of investors;
- excellent service capability in terms of its human capital, effectiveness of wealth management providers and high service quality; and finally
- monetary, political and financial system stability
Barbados’ business-friendly environment, modern evolving legislative and tax framework, strong human capital, high quality infrastructure, sound financial reputation, good quality of life and overall stability firmly position it as an investor friendly location that enables the efficient realisation of significant value for its clients as it navigates this turbulent economic environment. These factors are all critical components of its success in advancing its position as a centre of excellence for wealth management.