“Recent years have seen huge changes in the offshore world,” the association for those advising families across generations said. It defined offshore as any jurisdiction where the bulk of business is for clients that are not tax resident in that jurisdiction.
Step interim chief executive, George Hodgson, said: "The offshore world is currently under intense scrutiny, and practitioners and businesses in these jurisdictions are facing a number of challenges."
These include, the report said: "Increasing public and media scrutiny of offshore, with the [Panama papers] affair in April 2016 leading to a fresh wave of criticism of those using offshore financial centres, even when they are doing so for wholly legitimate purposes."
The fallout has seen a “huge increase in compliance requirements; increasingly complex, and often hostile, tax legislation; and a growing aversion to risk with many financial institutions withdrawing both from jurisdictions they see as high risk from a regulatory perspective and from businesses where they perceive that the risk profile in unattractive”.
Offshore worse hit than onshore
The research, which was carried out in conjunction with First Names Group, reported that 70% of onshore respondents believe that compliance is a greater burden for offshore providers.
Nearly nine out of 10 offshore respondents said that compliance is impacting on charges to clients, with a similar number of offshore respondents saying compliance was impacting on the types of clients they serve, with lower value clients squeezed out by higher costs.
Half of the onshore respondents said they have seen clients moving onshore as a result of compliance costs raising charges offshore.
Public opinion, particularly after the Panama papers scandal, was found to be an important factor for both offshore and onshore providers, but more so for onshore, where 65% said clients are reluctant to hold structures offshore.
This compared with only 50% of offshore respondents.
Across the board, however, respondents said they see clients reviewing their structures in light of new requirements, cost, and reputational concerns. Many of the respondents think clients could relocate or consider relocating either to protect confidentiality of save on cost.
When asked if the pace of market consolidation will accelerate over the next five years: 93% of offshore and 89% of onshore respondents said it would.
Despite the challenges, 81% of respondents feel at least moderately positive about the future prospects of their jurisdiction, and 77% about the future of their business sector.
Asia, in particular, is well positioned with 90% feeling positive about their business sector and jurisdiction.
The main growth area, per 66% of onshore and 77% of offshore respondents, is the broad role of ‘trusted adviser’. This includes family office, structuring, and governance offerings.
Compliance and tax advice were also seen as important growth areas.
Step and First Names Group received 538 offshore and 503 onshore responses from across the globe.
The largest proportion of onshore responses came from the UK and Ireland (43%), with the crown dependencies making up the bulk (31%) of the offshore responses.