59 percent of financial advisers say clients are concerned about the Common Reporting Standard
Research with international financial advisers, carried out by Old Mutual International, part of Quilter, reveals that 59 percent of advisers say that their clients are concerned about the Common Reporting Standard (CRS) in some way.
While clients may be concerned about the CRS, advisers said that they themselves either had a good understanding of the Standard (47 percent), a slight understanding (25 percent) or a strong understanding (19 percent). Only 9 percent of advisers surveyed said they had no understanding at all.
Advisers say the main reasons why clients are concerned about the CRS are that they don’t understand it (25 percent) or that they want to simplify the process, with less personal data being shared (22 percent).
Over a fifth (22 percent) of advisers also said that clients worry about their personal data being breached. Research shows that in 2017, over 2.6 billion records were breached worldwide in 1,765 separate incidents.The vast majority of these breaches were caused by malicious outsiders gaining access to the data, but another major cause was accidental loss.
The complexities of the financial affairs of high net worth individuals means that they may have assets held in multiple jurisdictions around the world, the details of which may be shared with multiple tax authorities in a manner that may or may not be sufficiently secure. With each transmission of data, the potential for a breach rises.
Such risks can be mitigated through the use of effective wealth planning tools, such as offshore bonds. Assets such as bank deposits, exchange-traded funds, open-ended funds and hedge funds can be held in a portfolio bond, allowing high net worth investors to consolidate and simplify their wealth. Rather than the managers of these individual assets reporting back and forth between various tax authorities, only the provider of the portfolio bond is required to report the surrender value to the relevant authority.
Jason Pearce, head of technical sales for Hong Kong and Northeast Asia at Old Mutual International, said:
“Although it is reasonable that customers are concerned about some of the potential ramifications of the Common Reporting Standard, it is incredibly positive that many advisers feel they have a good understanding of what’s required.
“The standard is designed to help combat tax evasion and therefore any customer who is not infringing the rules should feel that they have nothing to worry about.
“It is interesting that concern has been raised about potential data breaches. With the CRS there is a lot of data moving around the world, not necessarily in a secure fashion, and this could lead to devastating consequences if people’s records are compromised. We know that data is at its most vulnerable when it is being transmitted, so it stands to reason that someone with complex financial affairs will want to find ways to mitigate the risks of their personal data being intercepted.
“The data breaches experienced by companies such as Tesco Bank in the UK and Equifax in the US drive home just how badly things can go wrong. If the same thing were to happen to personal data being transferred by tax authorities around the world, the consequences could be exponentially higher.
“High net worth individuals can mitigate these risks by using wealth solutions that help them to simplify their affairs and provide the safety and security of their data.”
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