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Book Reviews Finance & Development, September 2016, Vol. 53, No. 3

Control the Manager Brooke Harrington

Capital without Borders: Wealth Managers and the One Percent

Harvard University Press, Cambridge, Massachusetts, 2016, 358 pp., $22.95 (cloth).

Best-selling author John Grisham is famous for his detailed research before he even sits down to write a novel. Sociologist Brooke Harrington, the author of Capital without Borders, took the even more immersive approach of ethnography to try to understand wealth managers, who, she argues, helped create today’s enormous wealth inequality. Eight years of research, including earning wealth management credentials and conducting 65 interviews with wealth managers in 18 countries, have allowed her to lift the veil of the wealth management profession.

The history of wealth management goes back to the medieval era, when a landowner away on military service would transfer the title of his assets to a trust. The process of recognizing trustees as professionals started later, in the 19th century. In the past 20 to 25 years, protection of wealth from taxes and other regulatory authorities has become a worldwide business, requiring coordination among banks, law firms, and accounting firms. Harrington argues that this change demands a new kind of professional expertise serving transnational and hypermobile capital and clients. Established in 1991, the Society of Trust and Estate Practitioners, known as STEP, counts 20,000 such experts.

Harrington finds that wealth managers have been innovative in developing tactics and techniques that help their clients benefit from legal loopholes and conflicting rules in cross-border transactions (so-called regulatory arbitrage) to minimize tax payments, protect assets from creditors or divorced spouses, and transfer wealth to future generations. The use of offshore financial centers—which shelter trillions of dollars in private and corporate wealth—has become an essential component of wealth management plans for corporations and individuals. Wealth managers place each asset in the jurisdiction most favorable to the client’s interests and disperse these assets as widely as possible. Some even draft laws on behalf of foreign governments to enable them to attract more investment from abroad and have mocked Bill Gates’s failure to set up Microsoft overseas.

While the profession tends to regard tax avoidance as a form of self-defense against the excessive exercise of government...

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