Monthly Archives: November 2015

Thanks for the Feedback: The Science and Art of Receiving Feedback Well

Thanks for the Feedback

We swim in an ocean of feedback. Bosses, colleagues, customers – butalso family, friends, and in-laws – they all have “suggestions” for our performance,parenting, or appearance. We know that feedback is essential for healthy relationships and professional development – but we dread it and often dismiss it.

That’s because receiving feedback sits at the junction of two conflicting human desires. We do want to learn and grow. And we also want to be accepted just as we are right now. Thanks for the Feedback is the first book to address this tension head on. It explains why getting feedback is so crucial yet so challenging, and offers a powerful framework to help us take on life’s blizzard of off-hand comments, annual evaluations, and unsolicitedadvice with curiosity and grace.

The business world spends billions of dollars and millions of hours each year teaching people how to give feedback more effectively. Stone and Heen argue that we’ve got it backwards and show us why the smart money is on educating receivers – in the workplace and in personal relationships as well.

Coauthors of the international bestseller Difficult Conversations, Stone and Heen have spent the last ten years working with businesses, nonprofits, governments, and families to determine what helps us learn and what gets in our way. With humor and clarity, they blend the latest insights from neuroscience and psychology with practical, hard-headed advice. The book is destined to become a classic in the world of leadership, organizational behavior, and education.

Thanks for the Feedback:
The Science and Art of Receiving Feedback Well
by Douglas Stone and Sheila Heen
Hardcover: 368 pages
ISBN-10: 0670014664

The New UK Succession Rules – A Brief Overview

UK Succession

By David J Kidd


When a person dies “intestate”, that is without leaving a valid will disposing of the whole of his property, the distribution of his estate is governed in the UK by special legal rules. These intestacy rules typically prescribe that the estate passes to certain surviving family members or relatives in prescribed proportions and a prescribed manner, whether absolutely or in trust. The rules take effect automatically without the intervention of a Court application.

Studies have shown that in the UK up to two-thirds of people die without leaving a will, and thus are brought within the scope of these rules.

Applicants for financial provision

It does not follow, however, that making a will in the UK means that the estate necessarily passes entirely in line with the deceased’s will. There is no complete testamentary freedom in the UK. Since 1975 certain family members and dependants may apply to Court for reasonable financial provision from the estate. If successful, this results to a greater or lesser extent in the will being overridden. The persons who may make these applications are:

The husband or wife or former (not remarried) husband or wife; a person who lived in the same household with the deceased as man and wife; a child, or stepchild, provided in the latter case the deceased was married; and, most importantly, any person who was maintained wholly or partly by the deceased.

Such claimants must apply to the Court. Though bound to have regard to certain facts, it has discretion as to how much, if any, “reasonable provision” will be made. Naturally this uncertainty in the place of clear rules encourages disputes over deceased’s estates.

Example: The wife of a man, both with previous dissolved marriages, left her entire £2.3m estate, including a family home in London, to her two sons from a previous marriage. Her surviving husband received no other benefit from her will than to live rent-free in the family home. Application to the Court resulted after three years dispute in the husband receiving £375,000 in cash as well as reasonable provision for his daughter from a previous marriage. The stepsons shared £235,000 and any property bought with the proceeds of the London family home when the husband dies.

Law Commission and statutory changes

The UK’s Law Commission, a body established to review areas of law and make recommendations for amendments, recently made proposals in these two areas, part of which were enacted in late 2014. This was in the Inheritance and Trustees’ Powers Act 2014.

Intestacy changes

  • Spouse entitlement where deceased leaves no issue

Where a married person dies leaving no children, his entire estate will now pass to the surviving spouse. The prior position was that the surviving spouse received personal chattels, a statutory legacy, and one half of residue absolutely. The remaining half-share of the estate passed to the surviving parents or brothers or sisters or their children.

Thus the most significant change is that neither parents nor siblings nor the latter’s children will have any entitlement; they have been disinherited on intestacy in favour of the surviving spouse.

  • Spouse entitlement where deceased leaves issue

Where children are left, personal chattels, a statutory legacy, and one-half of residue will go absolutely to the surviving spouse. The other half of residue will be held on trust for the children. The former position was that the surviving spouse had no more than a life interest in one-half of the residue, so that the capital was in principle preserved ultimately for the children on her death.

The change represents a further move in favour of the surviving spouse, whilst affecting adversely children’s long-term entitlement to capital.

  • Trustees’ powers changes

As part of its review of intestacy, the Law Commission had to consider trustees’ powers. Where a settlor is living, the extent of trust powers is largely a matter of choice, but a person who dies intestate never considers the position. It is currently governed by Trustee Act 1925, dealing with powers to apply income, and advance capital. The provisions are, however, widely regarded as technical and restrictive, and rather than restrict the changes to intestacies, they have been generally changed, so that the wider new versions in relation to powers of maintenance or advancement apply to any intestacy, will or trust created after 1st October 2014.

Changes concerning Court applications by dependants for financial provision

One of the categories of persons who can apply to the Court to make a claim against a deceased’s estate is a person who was wholly or partly maintained by the deceased, “dependants” for short. An existing hurdle on such applicants succeeding was removed.

The Courts had held such dependency could not be demonstrated in cases where the parties benefited each other, such as by contributing roughly equally to a household budget. There needed to be a net benefit to the person claiming to be dependant, which was often difficult to show. This restriction was removed. Only commercial arrangements are now excluded from qualifying, e.g. an employed live-in nurse.

Stepchildren where stepparents not married or are single parents

Another category of applicant was a stepchild, but only if the stepparents were married. This restriction was removed and now any child may apply provided the deceased stood in the role of a parent, even if there was no marriage, and even if the deceased was the only person apart from the child i.e. single parent.

Extension of powers of Court to vary deceased’s trust

There is added a power to the Court to make an order varying for the applicant’s benefit the trusts on which the deceased’s estate is held (whether under a will or on intestacy).

Matters not enacted

  • Jurisdiction change from UK domicile to habitually resident

The Commission recommended that the Courts have jurisdiction in financial provision cases whenever the applicant was habitually resident in the UK. Currently the Court only has jurisdiction if the deceased was domiciled in England and Wales. ‘Domicile’ essentially means that a person of foreign origin can remain domiciled overseas, and thus not subject to jurisdiction, whilst remaining for long periods of residence in the UK. In one case a Cypriot had been in the UK for forty-three years and lived with the applicant for ten years, but as the applicant could not show that the deceased Cypriot had become domiciled in England and Wales, her claim against his estate could not proceed. The Commission’s recommended change to use the applicant’s “habitual residence” in the UK was not enacted.

  • Cohabitation and intestacy

The Commission recommended that intestacy rules be extended to cohabitants, but the matter has not been taken forward by the government. However, a privately sponsored Bill was introduced to this effect in Parliament in 2014, but has made no further progress towards enactment.


Citroen Wells

Auditing & Accounting, Tax, Advisory, Corporate Finance, Fiduciary & Estate Planning

London, United Kingdom

David J Kidd


25-28 February 2016: GGI ITPG winter meeting High level tax meeting in Barcelona


By Oliver Biernat and Carlos Frühbeck

All tax experts at GGI member firms are cordially invited by the GGI International Taxation Practice Group to its famed winter meeting. Back in spring 2015, senior members at ITPG voted in a poll to decide the venue for 2016: Barcelona was the winner and Carlos Frühbeck from Ficesa Treuhand, S.A.P will be your host.

Barcelona is one of Europe’s most popular tourist destinations, offering an outstanding mix of culture, gastronomy and shopping. No matter which district or neighbourhood of Barcelona you may find yourself in, there is always something of interest to see and experience. For example, a vast array of architectural jewels: Gaudi features prominently and the modernist movement is stamped across the city. Food markets and relics dating back to Roman and medieval times are also popular with tourists. Barcelona is located on the Mediterranean coast and enjoys a mild winter climate. The average temperature in February is between a low of 6 ºC and a high of 14 ºC. Barcelona has an international airport with direct connections to most European capitals in addition to many destinations in North America and the Middle East.

Delegates and their guests can also enjoy the gastronomical and cultural delights Barcelona has to offer should they wish to extend their stay. For example, there are several walking tours dedicated to subjects including Roman and medieval history, the artistic movement of Modernism as well as specific Gaudi or Picasso routes. There are also places of interest in the vicinity of Barcelona, such as the Benedictine Abbey located atop the mountain of Montserrat, the historic city of Girona and the Dalí Theatre and Museum in Figueres.

The Gallery Hotel has been chosen to host the conference. It is a boutique hotel located in the heart of Barcelona, a three minute walk away from La Pedrera and the most exclusive shops of Passeig de Gràcia. The hotel offers comfortable and recently renovated meeting rooms perfectly suited to our conference needs. The hotel is located only 20 minutes from the airport by taxi.

On Thursday evening all delegates and their guests are invited to a welcome reception in the lobby of the hotel, followed by a walk to “Miguelitos” restaurant where we will enjoy traditional Spanish tapas and good wine.

The technical agenda starts on Friday morning at 9 a.m. with an overview of current ITPG projects in the various regions and a discussion on potential future projects. As requested by the majority of senior members, the rest of the morning session will again be spent discussing an international tax case, this time presented and moderated by Ashish Bairagra from India. Ashish will run a problem solving session focusing on a mix of transfer pricing and cross-border income and inheritance tax issues. Several groups will work on various problems and be tasked with finding different solutions. When the groups present their work, the aim is ultimately for all participants to have learned something new about tax issues in many different countries.

After the lunch break, further tax related PG meetings such as “Immigration & Expatriate Services”, chaired by Huub Kapel and “Indirect Taxes”, chaired by Steve McCrindle and Toon Hasselman, should be of interest to delegates. The PG meetings will take place consecutively in the conference room with each scheduled to last one hour.

In the evening, delegates will have a little time to relax before a 25 minute stroll to “Els Quatre Gats” (The Four Cats), a restaurant which was at the heart of the modernist movement of Barcelona and a favourite haunt of Picasso. The restaurant serves traditional Mediterranean fare with live music in the background. After dinner, delegates are free to walk back to the hotel or enjoy the nightlife in one of the many bars in Barri Gòtic (the Gothic Quarter). A taxi back to the hotel will cost around EUR 10.

On Saturday morning, various speakers will deal with recent national tax issues which involve cross-border effects in the framework of a general discussion on international tax topics. And of course, Oliver will show funny YouTube films as per usual for a little light relief between presentations.

Later in the morning we will focus on marketing aspects for tax experts. Marketing professional Paul Atkinson from Lawrence Grant, Chartered Accountants, has been invited to talk about online marketing. His talk will cover several areas including: increasing website traffic, SEO vs SEA, company logos and social media. Paul is also happy to offer one-to-one sessions after the presentation if you would like to receive general feedback on your website or help setting up a social media page. If this is of interest, you may of course bring along your own marketing experts to learn some tips and tricks first hand or exchange ideas with other experts.

After lunch, a two hour guided sightseeing walking tour of Barcelona is available to all delegates. We would recommend bringing appropriate, comfortable footwear for the tour. After enjoying a little free time, we will meet for dinner at the restaurant “El Tragaluz”, where the conference will be brought to a close in good company and with delicious food and drink. For those wishing to make a night of it, Carlos can recommend a few places to extend the evening’s festivities after dinner.

Barcelona 2

On Sunday, there is the option of going on an excursion by bus to the Bodega Alella winery, which will include food and wine tasting for those delegates who wish to make the most of the final day in Spain and catch an evening flight home. The winery is located just 20 km from Barcelona.

The last few ITPG winter meetings have combined high quality tax work with opportunities for fun, and there is no reason to think that Barcelona won‘t live up to previous years’ standards, with its Mediterranean climate, not to mention excellent flight connections and convenient journey time from the airport.


Benefitax GmbH, Steuerberatungsgesellschaft, Wirtschaftsprüfungsgesellschaft

Auditing & Accounting, Tax, Advisory, Corporate Finance, Fiduciary & Estate Planning

Frankfurt/Main, Germany

Oliver Biernat




Ficesa Treuhand, S.A.P. Auditores y Asesores Fiscales

Auditing & Accounting, Tax, Advisory, Fiduciary & Estate Planning

Barcelona, Las Palmas de Gran Canaria, Madrid, Marbella, Palma de Mallorca, Spain

Carlos Frühbeck Olmedo



Tagged ,

Why are Indian citizens and businesses being asked to sign FATCA Declarations?


By Raghu Marwah

On 9 July 2015, India entered into an Inter-Governmental Agreement (IGA-1) with the United States of America under which it has been agreed to share data on a reciprocal basis with regard to the financial holdings and interests of U.S. residents in India and Indian nationals in the USA. Similarly, on 3 June 2015, the Indian government signed the OECD’s Multilateral Tax Treaty aimed at establishing a Common Reporting Standard for all partner jurisdictions.

But what is FATCA and why does it sound so alarming? Well, the Foreign Account Tax Compliance Act (FATCA) is a United States federal tax law initially aimed to curb money laundering and with the stated purpose of catching the “fat cat” tax cheats s who hide their money abroad. The Act was ratified in 2010 and came into effect from 2014 onwards. However, does the world’s foremost superpower really believe that its “fat cats” are going to park their wealth in India – a jurisdiction well-known for its obstacles to doing business and high rates of taxation? In this globalised world, money flows across borders quicker than cars can get across New Delhi. Furthermore, with the ever-increasing number of wealthy non-resident Indians (NRI) based in the USA, cross-border financial interests continue to increase and gain traction. The perception of the “fat cat” has also undergone a significant change in the last decade. Nowadays, it would not be too outlandish to expect an Asian to be included a list of the USA’s wealthiest people.

But the question remains as to why India is jumping on the FATCA bandwagon and amending its local laws to suit the Americans. After all, it is not as if India does not already have to cope with the burden of its own compliance legislation and process reams of paper work. International cooperation comes at a cost; given that India wants to catch its own “fat cats”, preventing them from concealing their fortune and using it to buy fancy hotels and villas across the globe, it needs American assistance. That is why the Indian government is so enamoured with FATCA.

Financial institutions in India are to publish staggered reports on data from financial accounts such as bank accounts, custodial accounts, deposit accounts and insurance accounts. This data includes interest, dividends, sales, redemptions, surrender values and any other income generated in accounts pertaining to specified U.S. persons or non-U.S entities controlled by one or more persons who qualify as a specified U.S. person. This means that Indian financial institutions now need to identify exactly who among their millions of customers would be regarded as a specified U.S. person and then start reporting data on them to the Indian Competent Authority. In addition, the financial institutions in India will need to ensure proper tax withholding on any U.S. source withholdable payment to any non-participating financial institution.

Accountants in the USA are laughing all the way to the bank now that the U.S. Government has obliged by opening up international tax compliance opportunities from across the globe. But is it really helping the Americans, other than reinforcing their image as the “big bully’ of the world? There have been a few Republican senators and Democrat party papers which have advocated the scrapping of FATCA due to the negative impact of its roll out. However, in the post-9/11 environment, this heady cocktail of national security interests and money laundering restrictions takes precedence.

This enhanced inter-governmental co-operation heralds a sea change. It is now the case that governments will have transparent access not only to the population’s digital, but also financial, footprints. The age of Big Brother looking over your shoulder and watching your every move has truly arrived. Issues surrounding privacy, hacking and data abuse will become an increasingly important theme going forward, especially given that there will be so much more data available on Indian interests at home and abroad.

Team RNM recommends that specified U.S. persons with financial accounts in India seek professional advice with regard to implications for tax compliance in the USA.


Chartered Accountants
Auditing & Accounting, Tax, Advisory, Corporate Finance

New Delhi, Bangalore, India

Raghu Marwah




Buyer and Seller Beware! A New Zealand IRD number is now required for transfer of land

For Sale

By Bryce Town

The sale or purchase of all land in New Zealand is now caught by new legislation as of 1 October, 2015. All sellers and buyers must provide their lawyer with a completed and signed tax statement before possession of the land can be legally transferred.

The completion of the tax statement requires every buyer and seller to provide a New Zealand IRD number which will create problems for those who do not have one and do not apply for one in time to meet the settlement date of the contract. Most New Zealand residents will have a New Zealand IRD number but difficulties may arise where the buyer or seller is a trust, company, partnership, charitable trust or an “offshore person”. Application for a New Zealand IRD number could cause delays to settlement, which in most cases, will result in costly penalties.

Furthermore, for an “offshore person” to obtain a New Zealand IRD number, they must have a New Zealand bank account. Obtaining a New Zealand bank account can be a lengthy process and this timing also needs to be taken into account when agreeing upon a settlement date for transfer of the property. Due to the unpredictability of this time frame it is advisable that a New Zealand bank account and IRD number are secured in advance of a decision to purchase or sell property. Be aware that “offshore persons” include New Zealand citizens who have not been living in New Zealand within the last 3 years and New Zealand residents who have not been living in New Zealand within the last 12 months. Tax residents outside New Zealand will need to also provide their Tax Identification Number (TIN) from their country of residence. Where overseas countries do not have TIN numbers, further time delays will need to be factored into the process to establish an acceptable TIN equivalent with New Zealand authorities.

Which contracts are caught under this new legislation?

This legislation applies to all property sale and purchase contracts including commercial property entered into on or after 1 October, 2015. It also applies to all property sale and purchase contracts which settle on or after 1 April, 2016 (regardless of when the contract was entered into).

Are there any exemptions?

An individual purchasing or selling their main home is exempt from supplying their IRD number. The main home exemption cannot be used for trusts, companies, partnerships, charitable trusts, “offshore persons” or persons selling their main home for the third time in a two year period.

What will be required before settlement can occur?

To enable settlement to proceed smoothly, advise your lawyer as soon as possible:

  • If you are nominating another person or entity to complete the purchase (also advise your bank early who the nominees are if you require finance)
  • If you think there isn’t sufficient time between the unconditional date and the settlement date to set up a New Zealand bank account or produce a TIN (if applicable)
  • If you intend to instruct someone else (ie. your accountant or lawyer) to set up a New Zealand bank account and/or to obtain an IRD number
  • If you, the settlor, any of the trustees, beneficiaries, directors, shareholders or partners are based “offshore”
  • If you have sold your main home twice since 1 October 2015


Morrison Kent

Law Firm

Auckland, Wellington, New Zealand

Bryce Town



The Modern Practice and Cloud Accounting


By Kim Youle

The business world is changing and this includes the accounting industry. Cloud-based accounting is revolutionising the way that accountants work. The major accounting firms are already alert to this, making partnerships with the main software providers and entering into the small and medium sized entity market at extremely competitive price points.

Small and medium sized accountancy firms are slowly waking up to the efficiencies that can be obtained by using Cloud packages and the future of accounting software is undoubtedly in the Cloud, but the present reality for many professionals is that the software is still in the server room. Most accountants realise that the profession needs to adapt to the changing business environment but it would seem that generally small and medium sized practices are not yet embracing the journey to the Cloud.

What is the Cloud?

The Cloud is a platform that enables data and software to be accessed simultaneously by users, anywhere and anytime from any web-enabled device providing there is an internet connection.

Clients’ records can be accessed in real time and problems can be addressed immediately, not weeks or months after an event occurred. Each user can log on to provide a quicker and more responsive service. Processes are automated with data feeds directly from the banks and credit card providers into the online accounting application. The software can integrate with a whole ecosystem of third party add-on applications, better backup, quicker bug fixes and immediate access to upgrades. IT compliance costs are streamlined as all IT tasks such as version upgrades and data backups are managed by the application vendor.

Human intervention and judgement is still required but freeing up the pure processing time allows the accountant to collaborate more effectively with their clients’ decision-makers by providing management information and financial reporting in one-click access, offering greater control over time and ultimately significant cost savings.

Is the Cloud Secure?

Firms will worry about holding their clients’ data in the Cloud especially due to the 2014 high profile breaches of data security on the most well-known Cloud platform, which raised public awareness of Cloud technologies. Fear of hacking inevitably gives rise to trust issues around the technology. The main enticement with Cloud is that from a security perspective the Cloud providers are extremely attractive for hackers as the rewards for gaining access to their data are far greater than breaking into a single computer. Therefore Cloud providers must ensure that safeguards are extremely strong and modern data centres have more robust security and backup processes than locally hosted systems. People may not even realise that they are already utilising Cloud software through internet banking and most would not now carry out their banking any other way.

No Cloud provider can provide 100% security against hackers but many business owners are reluctantly agreeing that their financial data is probably better secured by a Cloud provider whose business model is reliant on sound security. Accountants should ensure that Service Level Agreements are agreed with the software providers in order to specify parameters for each element of service, and remedies for failure to meet those requirements. It is also advisable to affirm ownership of data stored on the Cloud provider’s system and that the physical location of their servers is known as it may affect Data Protection requirements.

Added value and increased profits

Modern accountants are highly focused and there are undoubtedly services that firms can offer to add value. For instance, the Cloud is enabling firms to provide a virtual Financial Director or Chief Financial Officer function. The Cloud enables immediate access to real time accounting information from which high quality business advice can be offered. In having the most recent financial information to hand, client service can be both personal and positive and clients are prepared to pay for this level of service.

Clients do not perceive that they derive value from paying fees for manual data inputting tasks. However, with Cloud, as the inputting processes are more automated, entry time for maintaining accounting records is dramatically reduced which means greater profit margins are achievable.

Work-life balance

For many independent practices the future looks rather bleak. Many have succession issues that they have failed to address, whilst others are unable or unwilling to introduce the structural and cultural changes within firms to create a modern accounting practice.

There is also a challenge within the profession for the small and medium independent accounting firms to attract and retain high quality young talent. There are certain things that ‘Generation Y’ desire, including the freedom to work flexible hours and to work from home. This generation has grown up seeing their Baby Boomer parents working long hours, thus shaping their views on the workforce and the need for the right work-life balance. Cloud technology provides employees with the tools to use their time more productively as all they require is a device and internet connection to carry out their jobs, enabling less commuting and allowing more family time or to pursue charitable or sporting interests. As this generation will work longer into their old age they will exert more pressure on employers to accommodate this greater flexibility.

Looking further ahead ‘Generation Z’ or the ‘iGeneration’ will take technology driven lifestyles for granted and, having an instinctive understanding of the technology, will expect a highly connected open-minded flexibility when it comes to their workplace demands.

The digital future is coming and practitioners need to be ready.


GGI member firm

Citroen Wells Chartered Accountants

Auditing & Accounting, Tax, Advisory, Corporate Finance, Fiduciary & Estate Planning

London, UK

Kim Youle




Psychology of the Fed’s decision

By Prof Dr Teodoro D. Cocca


Market reaction to the decision by the Federal Reserve to leave its benchmark interest rate unchanged shows that investors are focusing on a new mental model: economic outlook.

The main event on the financial market in recent days was the decision by the Federal Reserve on 17 September to leave its benchmark interest rate unchanged. Market reaction to this decision allows us to draw analytical conclusions as to the current mental models prevailing on the financial market. In behavioural economics, cognitive representations of problem situations are referred to as mental models. They are depictions of reality, i.e. they are developed on the basis of external impressions and allow people to structure their environment by creating logical interdependencies and using them to find their way.

If the common hypothesis previously seemed to consist of celebrating low interest rates and falling into dejection at any indication that interest rates would be raised shortly, the collective reaction pattern to decisions on interest rates by the Fed has now changed for the first time. In retrospect, market reaction must be interpreted to the effect that the Fed raising interest rates would have been viewed as a positive signal because it would have confirmed the central bank’s belief in the sustained recovery in the U.S. economy.

The “patient” (the financial market), which was previously dependent on liquidity, therefore seems to have been treated successfully. However, it is now the Fed’s misfortune that the patient discovers just before the supposedly final therapy session that the therapy is to be extended. This conveys the feeling that the therapist does not believe the patient has been cured and throws him into a new depression. From this, it is clear that the Fed’s decision on 17 September was perceived by investors in accordance with entirely new cognitive patterns for the first time for a long period.

Structural break in the thought process

The Fed’s decision was no longer viewed in the light of a more or less accommodating monetary policy (old mental model) but now considered as the Fed’s economic outlook (new mental model). In principle, both mental models are entirely rational and comprehensible; in this instance, it is merely a matter of establishing that greater weight is now, apparently, attached to the new mental model in the aggregate perception of market participants.

Consequently, the mental development of the market now actually corresponds precisely to that which has been the Fed’s greatest challenge for years, namely effectively breaking the market’s chronic dependency on liquidity injections and giving it the confidence to stand on its own (“economic”) feet. The Fed has achieved precisely this – consciously or unconsciously – since 17 September, as each increase in interest rates will now be viewed as confirmation that the central bank expects a strong U.S. economy.

However, structural breaks in thought processes of the kind we are now experiencing naturally create uncertainty in the initial phase because of the resultant cognitive dissonances until the new thought pattern is firmly established.

Had the Fed based its decision on market psychology, it would have to increase the benchmark rate at the September meeting from a purely psychological perspective. The impact on the real economy of an increase in interest rates of 0.25 percentage points, for instance, would have been negligible. By contrast, the psychological signal it would have given would have been of relevance for shaping market opinion and could easily have triggered a positive information cascade. The question can be raised as to how far the Fed should take account of the reaction of financial markets at all, as ultimately it must manage factors in the real economy and not portray every tiny emotional movement by the market as the problem. However, recent years in particular have shown that the interactions between the financial market, central bank policy and the real economy are close. Viewed from this perspective, it is essential that every central bank includes the psychology of the markets in its calculations to influence the transmission mechanisms of its instruments more effectively.

Breaking the argumentative corset

With the reference in the Fed’s communiqué to taking global imbalances into account, another problem for its future decision-making is added, as by including global factors in its perspective, the question as to when there will ever be a suitable time for raising rates arises. The more broadly the perspective is drawn in geographic terms, the more likely it is that a black spot tarnishes the overall picture. The Fed must find a way out of this self-imposed argumentative corset as soon as possible.

The reverse of the new mental model is dangerous.

A further easing of monetary conditions would increasingly be seen as an admission that the previous monetary policy measures had not worked and that concerns about economic growth are far more serious than had previously been assumed. This loss of confidence in the effectiveness of decisions on interest rates would constitute the actual disaster for the Fed in terms of market psychology.

Market sentiment would be particularly unstable in this case since neither the old nor the new mental model would be sufficient to explain the connections. If the expectations resulting from perceptions are refuted too frequently by reality, mental models will be lost, which leads to increased uncertainty. This risk definitely exists if the fact that central banks are operating on very unfamiliar terrain and the uncertain efficacy of ultra-loose monetary policy is taken into account.

Managing herd behaviour

A key behaviour pattern here is the almost irresistible urge to find an explanation for every – however accidental – market reaction. Since this is the case for so many, associative lines of argument are repeated thousands of times – not least thanks to modern media – which increases the willingness to accept them as plausible.

Accordingly, one of the dominant mental models of the last two years was the “lack of any alternative” to shares, which was propagated on all sides. As is so often the case, the line of argument in question may contain rational elements but, in its entirety, it shows how one-sided thought patterns can become. In our need (to explain), we focus on one aspect and feel vindicated if others emphasise the same aspect although they are ultimately just as clueless as we are ourselves.

As a result, herd behaviour is reinforced on markets through the coordinative effect of a mental model that is accepted on all sides. Central banks play an ever more important role in managing this herd behaviour, since their recent “ultra-transparent” communication policy forces each analyst to analyse, scrutinise and interpret every published word almost obsessively.

In this regard, central banks are viewed as the supreme authorities who are able to assess the future more accurately than market participants because they have better access to data – a mental model which also requires scrutiny.

Teodoro D. Cocca, Professor for Wealth and Asset Management at the Johannes Kepler University in Linz and Adjunct Professor at the Swiss Finance Institute.

“Growth in Asia is slackening: how do we tackle this issue?”

KC Chia, Tan Sri Dato’ Dr Lin See Yan

“If you know the enemy and know yourself well, you need not fear the results of a hundred battles. If you know yourself well but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Sun Tzu, The Art of War

As a past event sponsored by Mutiara Johan Group, the forum with the above-titled was jointly organised by GGI member firm KC Chia & Noor, Chartered Accountants, the National Chamber of Small and Medium Enterprises, Malaysia and Tsinghua University Beijing APAC CEO Alumni association. The forum was held in Kuala Lumpur, the Malaysian capital, with more than 400 attendees.

The keynote speaker was Tan Sri Dato’ Dr Lin See Yan who was the former Chairman and CEO of the Pacific Banking Group and former Deputy Governor of the Central Bank of Malaysia. In addition to being a UK Chartered Scientist and Chartered Statistician, he holds 3 postgraduate degrees including a PhD in Economics from Harvard University, USA, where he was a Mason Fellow and Ford Scholar.

While discussing current problems facing the Asian economy, Dr Lin also exchanged ideas with attendees on the economic development in the region. For example, the progress Asia has made since last financial crisis in 1998, reflecting on 17 years of rapid growth led by China and, to an extent, India, as well as the role they have both played in encouraging economic expansion in most other parts of the world.

However, he stressed that economic activity in Asia has started to slow down in the face of tapering to QE3, the continuing recession in Europe and lacklustre performance of most BRICS economies. Asia now needs a new growth strategy in order to boost and maintain its growth momentum, including finding ways and means to minimise the economic setbacks which have led to calls for immediate structural reforms. Dr Lin sees this as a herculean task which is presenting a significant challenge to the majority of Asian countries,, with Malaysia no exception.

Dr Lin elaborated on the contemporary problems facing Asia’s economy and was asked by the crowd to reflect on the recessions to have hit the West, and how they have seemingly affected what look like over-optimistic predictions for growth in Asia.

As a renowned banker and former deputy bank governor, Dr Lin regaled the audience with personal anecdotes on resolving conflicting interests between the public and private sector. Widely-read, he also entertained attendees with cartoons from The Economist added to his own wry sense of humour. True to his background as a trained scientist and statistician, he displayed multiple data sets before the audience: comparing economic indicators relating to different economic regions, decades, and nationalities.


Below is a summary of his speech:

  1. Risks and uncertainties

The world economy continues to face significant uncertainty, with risks still tilted to the downside against the backdrop of the worsening eurozone crisis, the United States “falling off” the fiscal cliff, the slowdown of some large developing economies and disadvantageous currency fluctuations.

Dr Lin envisaged that new risks and uncertainties may eventually unfold as a result of the ever-expanding monetary policies adopted by certain developed economies which could have a significant adverse impact on financial stability, leading to a prolonged period of subdued growth in certain economies with high unemployment and inadequate investment. The overall impact of this would be noticeably lower potential output in the future.


Other pertinent factors are geopolitical risks including: increasingly frequent changes of government, rampant political unrest, military tensions, the global arms race, and potential military conflicts in the South China Sea and East Sea (Sea of Japan). Artificial and natural disasters also have the potential to decelerate economic momentum resulting in reduced growth: these may include aeroplane crashes, earthquakes, floods, haze and typhoons, which all pose a risk to economic momentum and growth of the region if they were to hit the continent.

  1. Challenges and emerging trends

Dr Lin elaborated that, despite Asia being the driver of economic growth, it still faces huge economic inequality hindering economic growth, undermining democratic institutions and triggering conflict in the region. The growing tide of inequality within countries and disparity between economies threatens the long-term growth prospects of the continent. While some inequality can help to promote investment as a select group of entrepreneurs amass capital, too much inequality leads to reduced economic mobility for some. This can lead to misallocation of resources and consequently to social and political unrest. Although Asia’s robust economic growth has caused the middle-income population to swell and therefore increased domestic demand, this population segment also demands better quality of life, civil liberties and democratic rights. Opening up greater economic opportunities to lower income population strata in order to achieve inclusive and balanced growth is yet another challenge.

The imbalance in the region’s supply/demand situation as a result of over production capacity and duplication in production processes which has seen similar products manufactured in various Asian countries has caused operational inefficiency, stiff competition and economic setbacks.

  1. Vigilance and precautionary measures

Dr Lin mentioned that despite Asia and ASEAN countries remaining in positive growth, this can only be sustained if they implement vigorous structural reforms. They have to adopt an outward looking market focus, shifting their sights beyond small domestic markets to the global arena, as the regional market has gradually become too congested and intensely competitive.

In addition, various precautionary measures, from legal and economic reforms to better administrative efficiency, accountability and transparency, need to be put in place. This is in order to curb political corruption, volatility on the property and securities markets and fluctuating commodities prices which have badly affected the livelihood of the rural population and national export revenues. Risks linked to long tail “unlikely” shocks and calamities continue to abound in the aftermath of economic stagnation, imminent currency war and QE withdrawal syndrome.

  1. Strategies and manoeuvres

In order to continue to drive growth, it is imperative to become competitive, innovative and efficient in the regional economy. For this reason, both the public and private sectors must make substantial investments in education and training, research and development activities, innovation projects and effective risk governance in order to sustain a dynamic business environment, capture new markets and sharpen risk appetite.

To remain competitive, Asian nations need to adopt an open approach to recruiting and retaining talent from all over the world, regardless of race, nationality, religion and background. Only those economies rich in natural resources and with a strong pool of capable and creative talent will thrive, recover faster and perform better than their competitors.

Despite lacklustre performance of the European, Japanese and U.S. economies, these markets still have a great demand for consumer goods, merger and acquisition (M&A) initiatives, downstream technologies and open software, as well as educated and qualified human resources. A special focus is now required on BRICS countries, which still present promising opportunities for new markets, M&A activities and green initiatives.

  1. Conclusion

To conclude, Dr Lin summarised that China and India are key factors in the success of otherwise of the Asian economy as a whole. As emerging superpowers, both have been exerting increasing influence in the region and are expected to expand on the world stage, although this will take them at least two decades and this number is subject to variation in global demand for their products and services, especially from the volatile European and U.S. economies.

However, the USA has recently started to show signs of recovery, albeit slow and unsteady, from the 2008 recession. Meanwhile, Asia needs to introduce new structural mechanisms in order to stimulate and sustain growth as an economic region and political entity.

Malaysia especially has a number of challenges to tackle. Although they may be both domestic and international in nature, Dr Lin opined that economic reform in the country requires a modern, cohesive education system, political harmony and social stability.


GGI member firm

KC Chia & Noor, Chartered Accountants

Auditing & Accounting, Tax, Advisory, Corporate Finance

Kuala Lumpur, Kluang Johor Darul Takzim, Melaka, Malaysia

KC Chia



FPS among Germany’s top law firms

Wooden gavel barrister, justice concept, legal system

GGI member firm FPS has once again been recognised as one of the top German law firms in various practice areas, and FPS lawyers have again been named as being among the best lawyers in Germany. Here are some of the accolades they have received:

“Focus Spezial 2015”

FPS was once again placed among the top business law firms in Germany. According to the news magazine Focus, FPS is one of Germany’s top law firms in the practice areas of real estate, trademarks and design patents as well as information technology and telecommunication.

“WirtschaftsWoche 2015”

An independent jury of six insurance specialists commissioned by “WirtschaftsWoche” named FPS one of the 14 best law firms for insurance law in Germany. The selection criteria included demonstrable successes, successes over a course of years, team strength and specialisation. Furthermore, the independent jury of experts identified Dr Carsten Harms as one of the best insurance lawyers in Germany.

“Handelsblatt”/“Best Lawyers International 2015”

The U.S. publication “Best Lawyers” researched Germany’s top peer-recommended lawyers exclusively for the German business newspaper “Handelsblatt”. As a result, 11 FPS lawyers were recognised among “Germany’s Best Lawyers 2015” in various practice areas: Dr Carsten C. Albrecht (intellectual property), Ingrid Burghardt-Richter (corporate law and mergers and acquisitions), Dr Andreas Freitag (intellectual property), Dr Robin L. Fritz (real estate), Dr Carsten Harms (transportation and insurance), Christian Hertz-Eichenrode (intellectual property), Dr Christoph Holzbach (intellectual property), Bettina Komarnicki (information technology and intellectual property), Dr Georg-Peter Kränzlin (corporate governance & compliance), Dr Thomas Schröer (real estate), Dr Oliver Wolff-Rojczyk (intellectual property).

Dr Carsten Harms was named the Hamburg area’s “Lawyer of the Year 2015” in the practice area of transportation law.

“Kanzleimonitor 2014/15”

In the “BUJ-Rechtsabteilungs-Report” survey of in-house lawyers, FPS lawyers received multiple recommendations for banking law, financing, intellectual property law, real estate and construction law, IT law, capital market law and public construction law.

GGI member firm


Law Firm

Dusseldorf, Berlin, Frankfurt/Main, Germany

Dr Reinhard Nacke



GGI member firm Ciuni & Panichi recognized as a great workplace by NorthCoast 99 for eighth consecutive year


Published in InsideBusiness – September/October 2015 Issue

After a fire damaged the home of Silvia McClellan in April, she faced the hassles of dealing with the insurance company and the multiple contractors working on rebuilding it.

But one company that didn’t give her a hassle was her employer, Ciuni & Panichi. The Beachwood accounting firm let her to work from home during the renovation, allowing her to save her time off for rest and relaxation.

“It’s very nice they offer this flexibility,” she says. “I can actually spend my time off with my ·kids instead of with contractors.”

This isn’t an exception granted to a senior staffer – McClellan is an accountant who’s only been with the firm since 2013. Instead, it’s part of the company’s philosophy to work with employees as they try to juggle life in and out of the office.

“If there are circumstances due to a death in the family or an injury or their kid is sick, we really try to work around the individual’s needs so the firm gets what it needs and the employee feels looked after and cared about,” says Jacki Bell, the firm’s human resources coordinator. “That’s how we want them to feel.”

Brian Marita started at Ciuni & Panichi as an intern in 1994 while he was still a student at John Carroll University. He was drawn there in part by the firm’s reputation and the respect it had for its employees.

Today he’s the managing partner, and he’s working to maintain and improve that culture that first attracted him to Ciuni & Panichi.

“Our employees make or break us,” says Marita. “They’re the linchpin to our success, and if we don’t dedicate the time and resources to them, we won’t go anywhere.”

Last fall, members of the firm’s tax department had a scavenger hunt in University Circle, but it was more than just a team-building exercise for employees.

McClellan says it was a chance to learn more about Cleveland history and help employees to get to know one another. The company invited new hires and interns – who usually don’t start until the first of the year which she says made their first days of work easier.

Employees are also encouraged to come up with their own ideas to improve the workplace, Marita says, such as the initiative McClellan and several coworkers created to help women get more leadership, networking and educational opportunities.

As part of that women’s initiative, the company brought in a yoga instructor – one of the firm’s clients – to offer tips to deal with stress. Marita says other wellness programs are being planned and will be introduced within the year.

“I feel like I have an impact on the company,” says Bell. “I am recruiting. I am hiring staff. I can develop my skills, and that’s very important to me. It feels like I have some ownership.”

The women’s initiative, currently in its infancy, is also delivering food to local women’s shelters, offering after-hours networking events and bringing in speakers to talk about balancing work and home life.

Maintaining that balance is one of Marita’s biggest challenges: “It’s difficult to do in the accounting world with the concept of a billable hour,” he says.

The firm also hosts a dinner dance in May, a golf outing in the summer, a meeting followed by a day of fishing and socializing at a local trout club and a bowling party in January.

“It gets people out of the work environment and get to know each other,” Marita said of these events, most of which are open to employees and their families. “It’s always fun to see who your spouse works with and build relationships there.”

Brian Marita


Ciuni & Panichi, Inc.

Auditing & Accounting, Tax, Advisory

Cleveland, OH, USA

Brian Marita