Despite the scandals that have shaken the industry, the proportion of high-net-worth (HNW) individuals who invest offshore has been on the rise. However, this is not the time to be complacent - wealth managers need to do their due diligence and provide sound advice spanning multiple jurisdictions to capitalize on the rising proportion of offshore wealth.
The report "HNW Offshore Investment: Drivers and Motivations 2018", reveals that despite recent data leaks and high-profile scandals such as the Panama Papers and Paradise Papers, the proportion of wealth HNW individuals who invest offshore has risen from 11.2% in 2014 to 16.9% in 2018. It found that HNW investors are increasingly seeking new homes for their wealth to achieve benefits from global diversification and gain tax efficiencies.
According to Heike van den Hoevel, Senior Wealth Analyst “It is true that the offshore world has been shaken, and naturally this leads to the assumption that the global HNW offshore market has taken a hit. To avoid being tainted by association one would expect HNW investors - especially those with significant public exposure - to repatriate at least some of their fortunes. Yet this has not been the case, as HNW investors continue to see value in offshoring their wealth.”
In fact, 2018 Global Wealth Managers Survey shows that wealth managers do not anticipate repatriation of HNW wealth following offshore scandals to have a positive effect on onshore business growth.
While drivers differ from country to country, global diversification benefits and tax efficiencies top the list. For example, European investors offshore the largest proportion of their wealth to achieve tax efficiencies (24%) while North Americans invest the largest proportion offshore to diversify (41%).
Heike continues: “Understanding the reasons why HNW investors book their wealth abroad is paramount to capitalize on the rising proportion of offshore wealth. Tax efficiencies as a driver for offshore investments are almost as important to HNW investors as geographic diversification. This means providers have to focus on uncorrelated or less correlated risks when promoting offshore investments to potential clients.”
Demand for tax advice has risen significantly over the past few years, and HNW investors are looking for ways minimize their tax liabilities via offshore booking centers. This puts wealth managers in a difficult position. Clients are becoming increasingly demanding when it comes to structuring their fortunes in a tax-efficient but legal way. But realizing tax efficiencies has become harder as governments globally have picked up their game. This means wealth managers are walking a fine line and need to ensure all structures are carefully vetted.
Heike concludes: “The days of secrecy and illicit structures have passed, and providers need to ensure they are well equipped to do their due diligence and provide sound advice spanning multiple jurisdictions. Avoiding the reputational and financial damage associated with any further scandals is in both wealth managers’ and investors’ interest.”
The report "HNW Offshore Investment: Drivers and Motivations 2018", analyze’s the drivers behind offshore investments in the HNW space. It examines and contrasts HNW offshore investment preferences across 24 jurisdictions, providing readers with an in-depth understanding of what is motivating HNW investors to look for new homes for their wealth.
- At a global level, 17% of HNW wealth is invested outside one’s country of residence.
- European investors offshore the largest proportion of their wealth to achieve tax efficiencies (24%), while North Americans invest the largest proportion offshore to diversify (41%).
- 48% of global HNW wealth is held via equities, 18% via bonds, and 16% via property.
- Economic and political instabilities are driving 16% of global HNW wealth offshore.
- HNW expatriate money flows are responsible for only 5% of HNW offshore wealth, but are of particular importance in expat hubs such as Singapore.
Reasons To Buy
- Understand the global trends that are driving offshore investments in the HNW space.
- Learn why certain HNW offshore drivers are more relevant in some countries than in others and how this affects your business.
- Learn how political and economic instability affects client preferences, and how global markets shape investment behavior in the HNW space.
- Give your marketing strategies the edge required and capture new clients using insights from our data on HNW drivers for investing offshore.