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Nordic wealth market to grow 50% by 2010

There are currently more than 2,400,000 wealthy individuals in the Nordic region, holding more than €400 billion ($509 billion) in onshore liquid assets, according to new research from Dublin-based Research & Markets. The Nordic wealth market will grow to €615 billion by 2010 says the report.

Wealth management in the Nordic region, Denmark, Finland, Norway and Sweden, is concentrated and dominated by the domestic providers with Nordea, SEB and Danske Bank thought to be the dominant players.

Although Nordic wealth managers will focus on alternative investments, traditional investments, and financial planning in the next two years, they are missing a significant opportunity to generate revenue from their lending capabilities, according to the report.

Key findings include:

· Entrepreneurs represent biggest opportunity in the Nordic region

· The majority of clients put less than 10% of their portfolio offshore

· The main motivation for investors to put their assets offshore is tax avoidance

· Luxembourg and Switzerland are preferred offshore centers among Nordics

· Clients in the Nordic region are demanding a high level of service, influenced by personal relationships

· Personal relationship is the number one determinant of choice of wealth manager in the Nordic region

· Referrals from existing clients is the number one customer acquisition technique

· However, attracting clients does not mean keeping them: clients are more likely to change their wealth manager today than they were two years ago

· Clients are demanding to know more about their investments because asset protection is their main concern

· Quick problem solving and providing services for clients' families are the best ways to retain clients

· Failure to understand client needs and lack of proactive advice are the most likely reasons to leave a wealth manager

EU urges Hong Kong compliance with savings tax directive

The European Commission again pressed Hong Kong and Macao to comply with the EU savings tax directive in respect of tax interest earned by Europeans in the two Chinese special administrative regions.

EU ambassadors last month gave the European Commission a mandate to start formal exploratory talks on the savings tax with Hong Kong, Singapore and Macao.

Thomas Roe, the Commission’s envoy to Hong Kong and Macao, made an appeal on 31 October, only a fortnight after a Hong Kong official had stated it would be extremely reluctant to assist the EU to apply the savings directive.

The move follows the relative failure of the EU savings tax directive. Estimates of the extra tax to be collected anticipated hundreds of millions of euros in withholding taxes. But in the first six months of the law's operation, Switzerland raised only €100m on the vast savings held there by EU citizens. In the same period, Luxembourg collected €48 million, Jersey €13 million, Belgium €9.7 million, Guernsey €4.5 million, Liechtenstein €2.5 million, and Ireland only €400,000.

Martin Glass, Hong Kong’s deputy secretary for financial services and the treasury, argued that the territory was legally and constitutionally constrained in its ability to share information with other tax authorities, including China.

“The powers of the government and the commissioner of inland revenue are relatively limited and extend only to information which is required for our own tax purposes,” said Glass. “There might be huge ramifications that compliance with such a savings directive would have for our future as an international financial centre, which is also guaranteed under the Basic Law.

“Even if we were so minded, we would need to enact legislation which would be a significant departure from our existing tax legislation,” he added. “For that reason I would rate chances of us being included in the Savings Directive in the near future as being exceedingly small.”

Meanwhile Singapore has refused to discuss the issue, according to Benita Ferrero-Waldner, the EU’s commissioner for external relations. She said the EU had wanted to include the savings directive as part of wider ranging negotiations with the city-state over a potential economic partnership and co-operation pact. But Singapore had refused to include the issue on the agenda.

Laszlo Kovacs, the EU tax commissioner, wants to bring both Hong Kong and Singapore into Europe’s tax net by persuading them to apply the July 2005 Savings Directive, which aims to tax the interest on European citizens’ offshore savings.

Third countries can either exchange information with EU tax authorities or levy a withholding tax, which they then pass back to the saver’s European home state. Switzerland chose the latter route because of its banking secrecy laws.

The Commission estimates that, as of August, there were more than 37,000 EU citizens resident in Hong Kong – a figure that does not include Hong Kong citizens who also hold EU passports.

In July a Commission memo, citing 2005 data from the Bank of International Settlements, noted that there were “external” – or non-banking sector – deposits of $158.1bn (€124bn, £83bn) in Singapore and $82bn in Hong Kong.

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