Tracing the movements of high-net-worth individuals across the world can tell you a lot about capital market trends and business hotspots.
Australia, the USA and Canada were the leading destinations for more than 100,000 high-net-worth individuals (HNWIs) that moved from their home countries in 2018, according to an AfrAsia Bank report. The biggest outflow of wealthy people (15,000) coming from China followed by Russia (7,000) and India (5,000).
These top destinations for HNWIs, which also include Singapore, Israel and Spain, reflect a wider longer-term trend for both companies and individuals to look past traditional offshore locations for their wealth and move on-shore, to more regulated countries.
"When I look at the top three locations, I see a lot of faith and trust in the markets. Canada, the USA and Australia are perceived as safe places to be – for families and their wealth" says Lisa Wilcox, Senior Director of Client Services at TMF Canada. Wilcox says that these jurisdictions have more predictable taxation environments which are attractive for wealthy individuals looking to leave more 'punitive and fluctuating' tax systems such as in France. "They're looking for consistency, safety and security in how they live and invest. And that is how the winning jurisdictions operate."
The importance of consistency, safety and security for the relocating HNWI – who often migrate money along with them – cannot be underestimated. "From a private client services perspective, we need to think about how we structure the family wealth in their new location and that also means assisting with the various transactions that go hand-in-hand," explains Wilcox.
These transactions include the buying and selling of businesses, entering into capital markets, investing in real estate and other commercial deals. "In our role as an escrow agent, we see HNWIs buying property and commercial enterprises in their new countries, sometimes as part of visa applications, other times simply as part of a diversified investment strategy" says Paul Wilden, TMF Global Head of Capital Markets Services. Also in demand by HNWIs, he says, is the global firm's administrative support for operating entities; accounting and tax, HR, payroll and corporate secretarial services.
"There are many more self-made millionaires in the world than those sitting on inherited wealth. We often work with entrepreneurs who want to establish or replicate a business in their new location, borrow through the capital markets, set up a fund company or a combination of those. Because we are in more than 80 countries, we can provide the local expertise to support whatever move our clients want to make."
Those moves are increasingly including investment in digital assets. "One of our clients was looking to diversify his investment portfolio to the tune of around half a billion pounds by investing in Bitcoin. It's at the riskier end of the market, but we have very robust know-your-client (KYC) and anti-money laundering (AML) qualification filters that allow us to verify and support legitimate investors and sellers."
The USA's second place ranking in the list of desirable of destinations for relocating HNWIs (10,000 in 2018) indicates that the 'Trump effect' is not a deterrent. Lisa: "I think regardless of the political flavour of the day, the USA is still seen as a place where you can thrive in an entrepreneurial sense. You can set up yourself and your family, and be successful either by starting or investing in business there. HNW families will still send their children to school there and often they stay looking to establish themselves in a real economic sense."
The AfrAsia Bank report shows that the UK – historically a big recipient of migrating HNWIs – is in a two-year slump, having lost approximately 7,000 in 2017 and 2018 combined. Paul: "Historically a lot of Chinese and Russian money has come to the United Kingdom and that has absolutely slowed down. Brexit uncertainty continues to be the biggest challenge, and a no-deal scenario will certainly have a further negative effect on the market. However, we know many investors are sitting on the sidelines, intending to come back in. And when they do, that will speed up UK market recovery."
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