Since the beginning of the industrial revolution in the late 18th century, we have been trying to adapt to changing circumstances and to make the most of opportunities while avoiding risks wherever possible. In an age characterized by constant change, many are still talking about the buzzword, globalization, when promoting business activities, while the world has long since moved on to the next major industrial revolution – automation and digitalization. International business is not news to investors, companies or the advisory industry anymore. However, discovering new opportunities and dealing with new challenges while doing business across borders opens up a huge playing field for business, wealth and tax advisors.
We at FRTG believe that there are two major strands of knowledge that must be leveraged to succeed in the business/
financial world. Starting an international business or investment confronts us with an information overflow and therefore with an unknown number of risks. The one strand to follow to set a profound foundation for your activities across borders is the preparation of a business plan, which includes a serious investigation of the government, the jurisdiction/law, the tax system, the infrastructure and last but not least the attitude of the people. The other strand is to anticipate the changes resulting from current events in the world and how these might affect your business and your personal economic situation.
We are still living in the first pandemic in over a century and no investor or advisor has any experience with the kind of
eruptions this worldwide shutdown might have. This is why it is even more important to think one step further than everybody else to stay ahead.
The rise of digital and remote working
Since the world was hit by Covid-19 the majority of people no longer travel; they are working from home and shopping online. That results in a lot of missing information simply because we are lacking the personal contact between business partners, colleagues and customers. Many businesses were forced to change and adapt to digital to survive, resulting in major shifts in the business world. Start-ups in business areas we had no knowledge about are emerging, travelling is still at a standstill, we use less energy and produce less emissions. It is vital to assess which of these changes are here to stay and which will disappear as quickly as they came.
Therefore, it is necessary, now more than ever, for us as advisors to be entrepreneurs, not just people sitting behind their desks, waiting for business to come. There will be an increase in demand for business and tax planning, investment assessments and the advice on residency options for high net worth individuals to avoid losses from inflation, increasing interest rates, currency changes and firms going bankrupt. Since somebody will have to pay for all the money our governments are spending right now, we can expect an increase in loans in most countries this year and we can expect more and more laws with steering effects to be put into place.
Most likely, the world will not go back to its pre-pandemic state. Restrictions for money transfer, climate protection – including many different rules to protect from carbon emissions, to force the switch from cars to bikes – and new labour behaviour, like the desire for home office etc., will form a different landscape for investors and investments. Furthermore, we believe that the bottleneck for economic growth will not be money but human resources. People are getting older and want to live better, while calls for less working time are growing louder. The increase of salaries, the lack of personnel by number and qualification, the widening gap between the supply and the demand of raw materials and electronics like chips, hinders a strong increase of GDP, which would help to pay back what is spent for government corona programs.
The time will come when we all have to work more and longer again to repay the loans that states are entering in now.
Keep your clients close to you
What does that mean for us as advisors? Be closer with your client than ever, be much more informed about the global
development – it is not only the local circumstances that affect the local business and personal wealth – and notice: knowledge and brains is the real value we are selling. Therefore, cross border cooperation with excellent legal and tax advisors around the world is extremely important.
Our experience at FRTG as auditors, tax advisors, business and financial advisors during the pandemic is that clients are thinking about selling their firms, setting up trusts in countries like Switzerland and Liechtenstein to protect their property, refinancing with low interest rates and redirecting production back to Central or Eastern Europe. They do not want to be dependent on Far East countries regarding material, paired with high freight rates and confronted with political issues any longer. There will be a new trend of using more robotics and equipment instead of human labour; the labour cost factor will be shrinking, so that the lower labour costs in China or the tiger economies will become less significant. Moreover, China will also require its shrinking labour force for its own demands. Considering the high handling and freight costs, the difference in quality and the language and mentality barrier, the overall costs will no longer be so significantly lower as they used to be. The chances to get grants and government incentives for EU/US investments were never as high as they are now, as those countries are sensing their chance to bring production back. Our clients will take this chance with our assistance. Join us!