|The Bahamas Investor Magazine
July 3, 2008
July 3, 2008
Investing has never been as accessible and far-reaching as it is now. Communication capabilities, information flow and regulatory standardization have opened the door to sweeping global investment strategies. But with the increased ease to market comes increased competition. To remain competitive The Bahamas has to shout about its attributes and make sure the right people are listening.
It should be an easy sell. After all, the jurisdiction has a number of qualities that make it an excellent choice for investment. It’s a sovereign country with a stable democracy, over 6,000 financial service professionals and a favourable tax environment, to name but a few of its investor-friendly qualities. But people act on instinct, particularly when it comes to their money, and the factors that influence those decisions can be varied and difficult to quantify.
“You cannot put your finger on any one reason why one international financial centre is unique,” says Wendy Warren, chief executive officer at the Bahamas Financial Services Board (BFSB), whose task it is to promote and represent all aspects of the domestic financial services industry. “Lots of other countries are in the same position as us. Why someone would choose The Bahamas is a combination of factors involving relationships, history and perceptions. Those factors go to make up the brand, and it is the brand that compels people to choose us. It is a very soft factor, but one that is key.”
Speaking at the BFSB Retreat earlier this year, Bruce Weatherill, global leader in private banking and wealth management at PricewaterhouseCoopers, commented: “Brand value is crucial to any organization and it is similar for a jurisdiction. The emotional power of the brand should not be underestimated and The Bahamas has to ask itself—is it spending enough to promote investment in the region and is it spending it in the right way?”
So, is it?
One way the BFSB is working hard to promote The Bahamas on the world stage is to organize a number of excursions each year to key financial centres around the world. “Part of our job is to encourage global investment strategies,” says Warren. “Our coordinated programmes are designed to increase confidence and expand knowledge of The Bahamas among international businesses and investors. It is up to us to make sure companies and institutions around the world understand The Bahamas brand, the opportunities we can afford their clients and the range of services we have available.”
The number of trips abroad varies from year to year but in 2008 the BFSB is scheduled to attend between seven and 10 overseas events, including conferences and exhibitions. For each trip, the BFSB assembles a group of experts to travel with the delegation.
One such expert who has accompanied Warren on several trips to Europe is Andrew Law, president and chief executive officer of International Protector Group Ltd and former director at the BFSB. “The BFSB actively travels abroad specifically to places where there is a concentration of headquarters of companies that have a footprint in The Bahamas,” he says. “This provides the opportunity to show off what services and products are in our ‘toolbox’. If the head office gets enthusiastic, then ideas and products put forward by local managers here in The Bahamas will be fast-tracked.”
Since 2001 the BFSB has been making sure that The Bahamas has the best possible tools in that toolbox. “We are particularly strong in private wealth trusts, estate planning and corporate services, which are driven by both the jurisdiction and the institutions that are here,” says Warren.
Cooperation with experts from the private sector is essential to facilitate the creation of such cutting-edge financial products and services. “BFSB relies on the industry to partner with it, and this is a strength because it can go straight to the marketplace and ask what they want,” says Law. “There is a high level of industry participation at a very fundamental level and that means that when a piece of legislation is passed, for example, the private sector has been so involved that it has the enthusiasm to turn it into a product and go out and promote it.”
The briefing trips overseas give companies the opportunity to do just that. “The BFSB has created a product that allows companies that have a footprint in The Bahamas to promote themselves, the BFSB, The Bahamas and the products we have available here all over the world,” concludes Law.
Tapping in on Europe
With the strengthened euro piggybacking on a consolidated European Union (EU), the time has never been more ripe for The Bahamas financial services sector to tap the Continental coffers. “There has always been a lot of wealth in Europe and with more countries joining the EU, individual wealth is growing in new markets,” says Warren.
To do this, the BFSB makes regular trips to European financial hot spots such as London, Zurich, Geneva, Lugano and Vienna, attending seminars and setting up one-on-one meetings with key players at banks and institutions. “We tailor each agenda to suit the needs of our counterparts,” continues Warren. “The most important thing is for banks and institutions to be aware that we have a broad range of products that would suit their clients’ needs.”
Warren says the feedback has been very positive. “A lot of companies already have connections with The Bahamas and historically we have strong ties with Europe. Once The Bahamas is on their radar, it is up to the industry participants to promote specific products that will appeal to European clients.”
In the private banking sector, for example, institutions are seeking out a variety of solutions for asset management for European investors. “As far as banking aspects are concerned, The Bahamas has always been an attractive jurisdiction for clients’ assets,” says Brent Haines, chief operating officer at EFG Bank & Trust (Bahamas) Ltd. “For those that use The Bahamas for a tax-neutral or tax-efficient planning strategy, the jurisdiction pretty much offers the full gamut. This jurisdiction has trust capabilities and some more forward-thinking pieces of foundation law, and along with the recently revised Mutual Funds Act, means that a lot of legislation is now favourable. It makes The Bahamas very competitive.”
One profitable carrot to dangle in front of European investors is real estate. “With projects such as the Turnberry condominium-hotel development at Atlantis coming on line, we are seeing a lot of opportunity to lend to Europeans that have the assets, or net worth, but don’t necessarily have the liquidity,” says Haines. “We can offer them funds so they don’t have to liquidate their assets elsewhere but they can still buy a piece of sun, sand and surf.”
Such natural attributes mean that real estate here is to some degree buffered against the financial hurricanes conjured up by the meltdown of the US housing market and global credit crunch. “Real estate here rarely depreciates, particularly in the high end,” continues Haines. “Our clients still have the assets and the desire to buy a piece of the Bahamian dream.”
Targeting BRIC countries
Another pool of wealth that the BFSB is targeting is the countries allied together under BRIC—an acronym first coined by Goldman Sachs investment bank—consisting of Brazil, Russia, India and China. Although not politically aligned, as an economic cooperative the countries combined may become among the four most dominant economies by the year 2050, encompassing over 39 per cent of the world’s population and holding a combined gross domestic product (GDP) of $15.435 trillion.
Potential investment from new wealth generated in these emerging economies offers The Bahamas the chance to cash in. “In April we participated in a very significant hedge fund conference in Brazil,” says Warren. “We conducted a half-hour panel discussion on The Bahamas as well as having a major exhibit. We took a team of about 30 because this type of conference is such an excellent way to generate some interest in The Bahamas and really build the brand across all of our services.”
The exhibition and presentation part of the trip is one thing, continues Warren, but simply having a presence at these events is just as important as regards raising the profile and building valuable contacts. “We met with many institutions and we will probably visit again this year to strengthen relationships and develop more ties.”
It is also key to know which particular product or service will appeal to which type of investor. “In Latin America we have managed to get people to use trusts a lot,” says Warren. “You might think that a foundation is a natural opening into the market but trusts are now far more established in Latin America.“
Similarly, the way to garner some of the new wealth being generated in China is to build relationships and better understand what Chinese investors want. China’s epic economic growth in recent years has been unparalleled and it would be ill-judged not to court the generation of wealthy investors and high-net-worth individuals that have been at the heart of the boom. “China is now a well-educated and ambitious society,” says Michael Scott, partner in the Sino-Bahamian financial services company Malins Scott Li. “It is an increasingly affluent and sophisticated society where millionaires and billionaires are created every day.”
The BFSB is not blind to the opportunities. “We have scheduled a trip to the Far East,” says Warren. “However, it takes a lot to do such a trip and we have to be sure that we have the human and financial resources to make it count. We are very anxious to tap into that market but we have to get the most from it. You have to go at least twice a year once you start to build relationships or nothing will come of it.”
Promoting from home
Another effective way to promote the brand is to bring key representatives here. Once in the country, it becomes easier to convince delegates that this is the right place to invest.
“The BFSB identifies people who should be doing business with The Bahamas and brings them here to meet the key people, from the private sector and from government,” says Law. “They get a good idea of how our jurisdiction really works. Even people who had a negative view of The Bahamas have changed their minds once they come here and see the truth.”
The BFSB organizes key events for external intermediaries and institutions at least twice a year. “We want to see more conferences here—it is a great way of introducing or reaffirming the brand of The Bahamas,” says Warren. “When people come here they fall in love with the country, build strong relationships and that pays dividends for us.”
One such event is the annual Bahamas Briefing, which will be held in November this year. “We are planning on expanding it further, with at least 30 intermediaries and around 100 high level guests from the government and local business community,” says Warren.
Through such events and tireless travelling, the BFSB is spearheading efforts to keep The Bahamas competitive in an increasingly crowded market. “I think we have a very strong brand,” explains Warren. “There are areas where our brand could be enhanced and steps are being taken in regulation and legislation, and by attracting the right institutions. Not withstanding the challenges, we have a good business here and we still have a very strong brand.”