1. Inequality and the Wealth Management Profession Brooke Harrington, PhD Associate Professor Copenhagen Business School

2. Global wealth inequality We are living in a world of historic extremes.

3. Why wealth inequality matters lasting (dis)advantage –income varies frequently; net worth more stable –access to education, jobs, life chances –inheritance of wealth stabilizes inequality wealth concentration makes the poor poorer –wealth inequality is driven by tax and debt avoidance by the rich –for everyone else, this means: cuts in public services, an increased tax burden, & higher borrowing costs, all of which hit poor hardest

4. How did this happen? more specifically, who made this happen?

5. The usual suspects the state –policies—particularly those related to taxation the “wealth creators” –high-net-worth individuals looking after their own interests

6. But also: wealth managers not the rich themselves—rather, their agents –emergent professional group composed of lawyers, accountants, tax advisers and bankers –one shared goal: keep wealthy clients’ assets out of the hands of states, particularly tax authorities –one professional association, STEP, representing 20,000 members in 95 countries –role in increasing inequality cited by OECD and US Congress—but speculatively, not studied

7. What people think wealth managers do…

8. What they actually do protect clients’ fortunes, privacy and autonomy –hiding wealth in complex structures around the world against what “enemy?” –taxation, creditors, courts, heirs how they do it –financial and legal innovation

9. How I studied them solution to data access problem with elites –trained as a professional wealth manager –learned the state-of-the-art techniques –most importantly, gained access to interview participants and archival materials dataset –65 interviews with wealth managers in 18 countries, including all the major world regions: Africa, Asia, Europe, and North and South America

10. Research sites Johannesburg: 5 New York: 4 Channel Islands: 4 London: 3 Zurich: 1 Vaduz: 1 Seychelles: 2 Mauritius: 4 Dubai: 3 British Virgin Islands: 3 Los Angeles: 3 San Francisco: 1 Chicago: 2 Geneva: 7 Hong Kong: 4 Shanghai: 1 Panama City: 4 Cayman Islands: 4 Singapore: 2 Montevideo: 1 Buenos Aires: 2 Cook Islands: 4

11. Suggestive findings “the laws are optional” –negotiating one’s tax rate with the government –buying citizenship to avoid debt and tax special investment opportunities for the rich –private markets worth billions, almost unregulated –huge profit opportunities, special downside protections strategies complex and opaque by design –use of offshore corporations and trusts –no public record of ownership or assets

12. What can we do? policy implications –by understanding how wealth managers make the rich richer, we open up possibilities for policy interventions to stop/reverse growing inequality focusing on the profession suggests new policy interventions –France failed by targeting the wealthy themselves –Israel succeeded by co-opting wealth managers

13. Outputs book –Capital without Borders: Wealth Management and the One Percent –will be published in July by Harvard University Press articles –2 published, 2 R&Rs, 1 in review –available to download at www.brookeharrington.com public outreach –June talk at OECD Forum, Paris

14. Your questions?