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October 17, 2017updated 23 Oct 2017 4:51pm

Monaco’s appeal for HNWs is growing

By Christopher Silvester

Monaco is an increasingly popular destination for single and multi-family offices, as well as HNWs and UHNWs relocating from the UK, an exclusive gathering at the Monaco Embassy has been told, reports Christopher Silvester

The Monaco Embassy in Mayfair hosted another of its evenings aimed at raising awareness about the principality among HNWs and UHNWs considering relocation from London.

Monaco’s Ambassador to the UK Evelyn Genta welcomed the guests, reassuring them that while Monaco is currently undergoing a great deal of construction, particularly to increase the amount of its residential space, this will wind down in about four years from now.

The event was supported by the Monaco Economic Board and chairman Michel Dotta. The principal speaker was Hervé Ordioni, President of the Committee for Promotion of Monaco as a Financial Centre and CEO of Edmond de Rothschild Monaco, who gave an illustrated talk about current plans and trends.

As he explained, the number of banks in Monaco is currently around 30 and the number of portfolio and asset managers is around 50. The contribution of the banking business, asset management and insurance business to Monaco’s GDP is about 20 per cent, which is important because Monaco uses corporate rather than personal taxation to fund its exchequer. No country should be over-reliant on any one sector and indeed the Monegasque economy is well diversified.

‘The banking business in Monaco is mainly a private banking business and a growing part of Monaco’s landscape, with 120 billion euros of assets under management, most of them deposited in the principality. It has seen growth of 70 per cent over a ten-year period and 300 per cent over fifteen years. The growth of credit facilities has been even faster (200 per cent in ten years). Financing granted to residents includes mortgage financing for properties located in France as well as Monaco, and back-to-back financing (collateralised with financial assets).

‘The Monegasque labour force has increased by 20 per cent over the past ten years. Banking and asset management is a niche business employing about 3,600 people out of a working population of 54,000 people (about 7 per cent of labour force), so it is an added-value business.

‘Twenty years ago Monaco banking was mainly a retail business. Nowadays it is a wealth management and private banking business. If we want to keep on attracting clients and family offices we need to offer world-class services. The result of a collaboration with the international University of Monaco is a new certification that all front officers working in a bank or asset management company have to comply with.

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‘Monaco’s customer base is well balanced between residents and non-residents from all over the world. Banks located in Monaco are generally subsidiaries or branches of big international banking groups.

‘The marketplace is highly regulated, and it has to be, because we need the trust of our clients and of the international community. Monaco follows the same rules as the French banking regulatory authority. Locally, there is a regulator for investment businesses and another for confidentiality data protection. Monaco also complies with international regulatory standards for anti-money laundering and terrorism.’

Ordioni sees two key opportunities for growth. Monaco is in Europe and in the eurozone, but not in the EU; however, it is seeking agreements with Brussels about offering financial services in Europe.

Another opportunity is to attract single family offices and people in the multi-family office business. The principality has established a new legislative framework for family offices and multi-family offices that is very favourable. Monaco intends to attract international wealthy families who will use the principality as their home but also as the centre for their wealth management.

One member of the audience recognised that it is hard to find a place to live and that Monaco property is three times Mayfair prices, but asked about the cost of support staff and where they live.

A Swiss banker resident in the principality said that he pays 50 per cent less for his hairdresser in a first-class salon in Monaco than in Zurich. Apart from property, he said, everything else is significantly cheaper. The Ambassador endorsed this and explained that most support staff live in France and commute into Monaco each day. (There are 33,000 residents and 45,000 persons come to work in Monaco on a daily basis.)

The Swiss banker welcomed the visible construction work in the principality as a good sign of a vibrant economy and of the continuing demand. ‘I’m very patriotic about Switzerland,’ he said, ‘but I’m even more enthusiastic about Monaco as a financial centre. I have rarely seen a government that is so entrepreneurial to attract good business and to make sure that the good business finds it comfortable with the best possible arrangements. It manages to be innovative, entrepreneurial and yet strictly adheres to rules. I don’t know many places like that.’

One member of the audience identified three barriers to attracting residents. One was the high cost of property, the second was the high level of corporate taxation (at 33 per cent), and the third, from an exit point of view, was the principality’s specific prohibition against the sale of a share in an asset management business to a larger asset management business.

Ordioni explained that there is indeed a substantial 20 per cent VAT charged on the sale of properties, but that is how the principality makes its living and is able to dispense with personal taxation altogether. He added that there were some generous deductions available from corporate tax liabilities, and that as far as exiting from a private equity stake in a management business is concerned, you simply need to apply for a special certification.

The Ambassador concluded by saying that the UK was currently the third largest source of new residents arriving in the principality and that number is increasing by 10 per cent each year. She did not put this down to Brexit so much as the change in the non-dom rules and the fact that so many UK non-doms are reaching the end of their 17-year allowance. She said that Monaco is mainly receiving new residents from Europe, some from the Far East, a few from Russia, but very few from the US.

‘We do haute couture. The person comes here [to the Embassy] and from that moment we are going to hold his hand and see what he needs and whom he needs to meet. You can even meet our Minister of Finance, which you can’t in big countries.’

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