Book Review: Capital Without Borders

Capital Without Borders: Wealth Managers and the One Percent by Brooke Harrington takes a very interesting and scholarly look at the ways in which wealth managers influence the world through their advice to the very wealthy in society. The book is not specifically related to citizenship by investment, or cash-for-passports, as Harrington describes it, but does relate to the finances of the same group of people.

Harrington took the unusual step of studying for and passing STEP examinations as a way to gain understanding and trust in her subject. STEP is the professional body that oversees and educates trust and estate planners: wealth managers. They play a very interesting role in global financial services because they only cater to the very wealthy and as such are involved in the decision making process the moves and places enormous capital flows.

Needless to say, wealth managers and their clients require privacy and discretion, which has made them a difficult profession to reach and research. The unusual nature of both her research and research subjects provided many interesting articles (such as this one) when her book launched.

Wealth managers have a very close and intimate relationship with their clients which leads to a very deep understanding of the issues and problems that they face. One problem is that the rest of us – the ninety nine percent – imagine that they cannot have any problems because they are rich. The reality, of course, that lots of money and assets brings a substantial set of responsibilities and new problems – including not knowing who to trust. The wealthy people that I have known have mostly had very similar sets of problems as everyone else – they just have nicer watches, cars and bigger homes and their children get a more expensive education.

One of the main reasons for her research was to investigate some of the ways in which the one percent has changed in recent decades. The reduction in borders for capital has made it easier for money to flow around the world looking for opportunities. However, people have also tracked that rise in globalisation, allowing people and families with substantial resources to move and seek locations that better suit their needs. One of these needs is often reduced taxes. This, of course relates to both residency and citizenship for these individuals.

The word that she uses for these people is transnational, which is a way of saying that they operate in a space above nation states. In the connected world in which we live, a family and it’s assets can be (almost) scattered globally, making it almost impossible to impose normal laws upon it. We may all imagine that the wealthy are looking for ways to grow their money and invest profitably. They are. However, at a certain level, their focus is also on defence. Their wealth managers are generally tasked with ensuring that as few things as possible can interrupt their wealth and it’s stability. Those interruptions might include taxation, divorce and estate taxes upon death.

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To be fair, when talking about the very wealthiest in the world, multi-billionaires for example, they do have more financial resources than a number of the smallest nation states. This really does make it difficult to impose rules or laws on them when they can literally fly away at a moment’s notice.

Harrington visited a number of the world’s tax havens during her research and it seems clear that some of the smaller island nations that make up the tax havens of the world have made changes to their laws solely to benefit the wealthiest investors on earth. This means that while nation states each have the right to do as they please, some are being used to distort reality for the benefit of the wealthy.

While this mostly relates to trusts and companies (IBCs) it also is directly related to citizenship by investment – which is mostly good for us. While it was not mentioned in the book, it is worth pointing out that lawyers and wealth managers use their connections in other countries to help introduce clients to specialised firms that handle citizenship by investment applications.

If as a reader of this website you are someone for whom assets, asset management and citizenship are issues in your life, then it is very likely that Capital Without Borders will be a very interesting read for you. Though it may be too academic for most people’s needs, there are parts of the book that discuss some of the practical methods used by wealth managers to aid their clients and protect their wealth. If this serves as a way to decide whether or not you need to take such steps, or have the asset base to justify taking them, then it will have been of value.