The Bahamas: Prepared For NextGen Wealth

The Bahamas has always sought to provide superior financial products and services and a world class client experience. It has proven itself to be nimble and responsive to global changes – always mindful of the need to adhere to international standards with respect to compliance, cooperation, and transparency. This is complemented by the fact that the Bahamas is not only somewhere that offers bespoke private wealth management, but is also a beautiful place to live and work in.

Three vital features are at the heart of what distinguishes The Bahamas as an international financial centre of significance:  Expertise, Innovation and Location. Everything that comprises The Bahamas’ value proposition and continued success as a leading international financial services centre is guided by these distinguishing factors.

These three core elements guide the jurisdiction’s financial services industry and has positioned The Bahamas to deal with NextGen HNWIs, respond to their changing needs, whilst having regard to their specific interests and passions for areas such as Philanthropy, ESG Investing and FinTech. Just as outside forces continue to present ever evolving challenges to IFCs, NextGen HNWIs are entering the scene with their own ideas and perspectives on how business should be conducted. Strategies used to manage and preserve the wealth of this next generation of HNWIs, in fact, will one day be viewed as another chapter in the history of IFCs.  In fact, how well IFCs embrace this demographic will likely determine their competitiveness and sustainability.

“The Bahamas’ success as a IFC emanates from its lengthy history in the wealth management sphere and its carefully crafted and innovative wealth management legislation which is informed by that history,” said Kamala Richardson, Attorney in the Private Client practice with Higgs & Johnson. “Today, The Bahamas’ added strength as an IFC lies in its highly educated and experienced professionals, who understand the new cohort of HNWIs on an intrinsic level.

“The majority of the Bahamas’ wealth management experts are 40 and under and highly adept at sophisticated wealth management. Not only are they able to engage with the new HNWIs on a professional plain but they also share similar philosophies as to how wealth should be generated, utilised, and preserved.  We have a workforce that is naturally in tune with the desire of the young wealthy set to acquire wealth, protect it and disburse large amounts of it in a socially conscious manner and who are also readily equipped in terms of education and expertise to do so.” 

Countless studies exist on the differences between new and old generational wealth, but several common factors seem to be at play:

• NextGen HNWIs are technologically savvy and in an age of high-speed technology and instant Google answers, they expect not only investment information to be immediately accessible but their advisers to be as savvy as they are.
• With the largest transfer of wealth in history underway, major attitudinal shifts are emerging. Interests are swinging from local to global, smart philanthropy is taking hold, and impact and alternative investing are going mainstream.
• Focusing on financial education at an early age is a key part of setting younger generations up for success.

The Importance Of Jurisdictional Professional Development And NextGen Education

With an 80 plus year track record in financial services, few jurisdictions offer the wealth management experience that The Bahamas has to offer and the ability to be responsive to the factors driving NextGen wealth planning. Professional development and education have always been areas of investment for the more than 250 financial institutions that call The Bahamas their home, as well as the various professional associations covering all industry sectors. In recent years this investment has sharpened its focus in preparing the country’s wealth management professionals for the influx of next generation wealth individuals.

“We recognise that sustained success for our industry in The Bahamas is very much dependent on preparing current and future generations of Bahamian professionals to not only understand what drives NextGen individuals but equip them to be responsive to their needs. In addition to specific ongoing seminars and workshops on industry trends and issues we have our annual Nassau Conference as the premier professional development event dedicated to preparing and enhancing professional staff for continued success in the industry. An extension of this event is The Bootcamp focused on training the next generation of leaders in the sector. There is also an annual summer internship programme and six- week language immersion for qualified students and young professionals,” said Bruno Roberts, Chairman of the Association of International Banks and Trust Companies in the Bahamas (AIBT).

While The Bahamas views its commitment to professional development and education as vital elements for its cadres of wealth management professionals, such training applies equally for NextGens according to Wendy Warren from Caystone Solutions. “Development of financial literacy is such an important aspect of successful wealth transitions,” said Ms. Warren. “The training of NextGens is the responsibility of all financial service firms to prepare for inheriting wealth to ensure boom to bust does not occur. The goal is to help the next generation, and those that follow, to be able to gain the skills, confidence, and independence they need to be able to manage whatever wealth they ultimately may earn or inherit.”

Technology In The NextGen World

The Bahamas has long been an attractive destination for HNWIs due to its tax structures, longstanding pedigree of wealth management, and its picturesque scenery but recognises that if it is to remain a choice destination for this niche market, technology and technological advancements are critical in dealing with the next generation of HNWIs.

For several years, there has been an influx of digital tools transforming the way people approach wealth management. Today’s digital and mobile financial technology enables users to receive the latest financial news, manage their budgets and investments, and even receive personalised financial advice via artificial intelligence and programmed algorithms.

But more technology won’t necessarily bridge these gaps for the next generation of investors according to Ms. Warren. “Financial services firms need to explore tools that are designed for an emerging customer base that expects a new kind of wealth management experience—one that is transparent, collaborative, and most importantly, personalised. The new generation of investors want solutions based on their life goals and events.  The next generation not only expects this personalised information, but they want it free and accessible across all digital platforms.”

In this regard, with the advent of the COVID-19 pandemic, many institutions were forced to revolutionise their business models according to Andrew Smith, an Associate Attorney with Nassau-based McKinney Bancroft & Hughes. “In The Bahamas, this has led to the birth of several digital platforms created for the purpose of accessing services from various government departments at the click of a button.

“This has established an overall ease to conducting and transacting business assisting in the management and operation of corporate vehicles created by HNWIs in The Bahamas,” said Mr. Smith. “Service providers such as legal advisers, private banks and corporate service providers have also adapted with a general enhancement of technological infrastructure to further facilitate video conferencing, electronic submission of forms, online banking platforms and mobile workstation accessibility.”

IFCs must also show leadership in data protection and security to safeguard against data breaches. “In that regard The Bahamas appears to be well ahead of the game,” according to Ms. Warren. “A Data Protection Act was legislated in the early 2000s which protects the privacy of individuals in relation to personal data and regulates the collection, processing; keeping, use and disclosure of certain information relating to individuals.”

Family Office Considerations

Wealth management accounts for a large part of the jurisdiction's financial sector. For many high-net-worth individuals (HNWIs), banking and wealth management outside one’s home country are simply good business and a wise avenue for investment. There is a compelling reason for this.

Multi-national and multi-generation families and family businesses find that they can preserve their wealth for the long term and transmit it to younger generations with ease when they site some of their assets in a jurisdiction with trust laws. Their home jurisdiction might be subject to civil unrest or have a history of political or financial instability, while its government might want to expropriate their wealth and subject them to capital controls.

For these reasons Family Offices, for which The Bahamas has become a growing hub for long established wealth, should be on the radar screen for NextGens.

Creating an environment where family offices can operate efficiently has been designated as a key growth area for The Bahamas as families and their advisers have begun to recognise that there is flexibility in the “size” of the family office footprint in The Bahamas.   They can choose to build their family offices around one or any number of structures or licences which provide a true and regulated presence in The Bahamas. These include private trust companies, foundations, a financial and corporate service providers licence, being approved as a securities adviser and or investment manager, and the ability to obtain a bank and/or trust licence to meet family needs.

“As NextGens seek to engage more closely and gain greater control over their financial and personal affairs, family offices have risen to play vital roles in the cohesive and coherent management of business interests in tandem with domestic and personal affairs,” according to Linda Beidler-D’Aguilar, partner at Glinton Sweeting O’Brien. “Family offices provide NextGens with a range of personal and wealth management services that are very much in keeping with how they view the world in which they want to invest and live in.”

Sustainability And Impact Investing

Sustainability and impact investing have gained significant importance for NextGen HNWIs. More and more they are making specific allocations in their portfolios for environmental, social and corporate governance priorities and investing. This is actually the yardstick being used to assess the companies that they do business with and the service providers that they will utilise. This means that service providers must adapt and address these priorities in their own practices if they wish to attract this new client demographic.

Conclusion

This NextGen client does not want a “one size fits all” approach. Rather, they seek bespoke products and services to meet their individual needs. The Bahamas has always been an innovator in the financial services space, deliberate and measured in its approach. It cannot be ignored, however, that clients regardless of their demographic are seeking value. This NextGen is no exception. They want a service provider who can handle portfolio management, fiscal and compliance matters as well as administration. This is the strong suit of The Bahamas. Unlike other financial centres, it is not a “one product shop”. Rather, The Bahamas offers a diverse range of products and services to meet the needs of institutional and private wealth clients. Despite the pace of change, increased regulation and evolving client demands, The Bahamas is positioned to aid the NextGen HNWI with navigating the complexities of today’s economic environment. Ultimately, it is about ensuring that value is added by service providers to ensure that their financial future is secure.

Dr. Tanya C McCartney
Dr. Tanya McCartney is a UK trained barrister and chartered banker who since 2016 has served as the CEO and Executive Director at the Bahamas Financial Services Board. Over the past two decades Tanya has distinguished herself as a hardworking professional with expertise in the law, regulatory and gaming compliance, risk management, banking, and international financial services. She holds a Doctor of Business Administration from Edinburgh Napier University (Scotland, U.K.) for a programme of work entitled “Perspectives on Leading change: Exploring Change Readiness Strategies used in the Bahamian Financial Services Sector”. Tanya was appointed to the Senate of the Commonwealth of the Bahamas in 2001 being one of the youngest persons ever appointed to the Upper House where she served for five years. She vied for a seat in parliament in the 2002 general elections. She is a former President and founding member of the Bahamas Association of Compliance Officers. She is the co-chairman of the Bahamas Chapter of the global Association of Certified Anti-Money Laundering Specialists. Tanya is also an adjunct professor in the School of Business at the University of the Bahamas. She has served on several government boards over the years including The Public Hospital’s Authority, The University of The Bahamas and currently serves as Chairman of The Police Complaints Inspectorate and Deputy Chairman on The Airport Authority.