Basel Model of Wealth Creation

model of wealth creation


Base i.e. Client‘s objective

To maximise wealth preservation through the generations by means of a risk averse investment policy coupled with personal risk management by utilisation of a long term domestic trustee structure.

To maximise capital growth in this generation for the benefit of future generations by means of investing in both developed and emerging markets while utilising an aggressive currency management model coupled with a low exposure to nation state changes by means of an internationally based portfolio of holding entities administered from tax optimised jurisdictions.

1st Level - Investment control based on asset allocation

The Basel Model attempts to analyse and display the various elements employed in international estate planning. As will be seen, the first requirement is to carry out an asset allocation between the various different methods of holding wealth, i.e. stock, bonds, cash, real estate, etc.

2nd Level - Currency allocation analysis

Level one is then overlaid with a currency allocation model to hedge against domestic currency swings.

3rd Level - Risk profile analysis (e.g. creditor claims, family dispute, fiscal)

The next element in the model is to analyse the personal risk profile of the owner of the wealth. All holders of personal wealth are exposed to a series of unique risks which relate to their personal circumstances and life style. These risk factors may for example include taxation, expropriation, family dispute or business risk. The exposure to some or all of these risks can often be managed by transferring some assets into different legal structures, such as corporations, partnerships or trusts.

4th Level - Jurisdiction analysis for risk control

Once these planning objectives have been considered, then the risks associated with them can usually be addressed by transferring ownership of the assets into various types of vehicles such as corporations, trusts or partnerships.

However it may not be advisable to create the relevant entity in the offshore jurisdiction in which the “prime mover” permanently resides. This may be due to some uncertainty about various aspects of the legal system in which he/she habitually resides. To overcome this difficulty the relevant structure can be created in specific jurisdictions where the uncertainty can be minimised.

5th Level - Administration risk control (e.g. Jersey, London , Switzerland)

However, having decided the vehicle in question and which system of law will govern it, it is often possible to arrange to administer the said vehicle in yet another jurisdiction to facilitate asset management. For example, it may be that it is useful to set up a trust under, say, Bahamian Law to take advantage of a particular facet of that law and yet have the trust actually administered from Jersey, due to the fact that the asset manager has a subsidiary in Europe rather than the Caribbean.