The Mosaic of Modern Wealth: Wealth Advisers Must Keep Pace with Globally Mobile Clients
By Axel Hörger, CEO Europe at Lombard International Assurance
The world’s wealthiest people are on the move. According to this year’s Knight Frank Wealth Report, 26% of ultra-high-net-worth individuals (UHNWIs) are planning on emigrating in the next year. An astounding 36% already hold a second passport. For many, the ability to move their lives, families and assets freely around the world is the new norm.
This trend has been growing for well over a decade, fuelled by increased competition between countries seeking to attract the world’s wealthiest and drive investment. From France to Thailand, countries are seeing the benefit of adopting competitive tax regimes, investment-based visa schemes, and fast-tracked citizenship programmes. Since 2000, 20 EU member states have implemented these types of policies, resulting in approximately $28 billion in foreign direct investment.
For countries like Malta and Cyprus, this has led to a much-needed economic boost as thousands of wealthy individuals have invested in their local economies in return for residency or citizenship. In Portugal, attractive tax rates have in part led to a remarkable economic rebound, with GDP growth set to be one of the highest in Europe, while Lisbon and Porto consistently top the list of most attractive places to live in the world. As countries look to replicate this type of success story, global mobility is only set to increase.
But as global mobility increases so too does the complexity of managing wealth. Globally mobile clients will look to their advisers to be able to seamlessly manage their cross-border wealth, regardless of where they look to base themselves. And as many of the residency by investment programmes have a time limit, moving to a third or fourth country over a ten-year period is becoming increasingly normal. Wealth solutions for truly globally mobile clients need to be able to facilitate this unprecedented level of cross-border movement.
Advisers will also have to be aware that the globally mobile HNW and UHNW client base they are serving is expanding. In 2018, $8.7 trillion of personal financial wealth was held cross-borders – roughly 4.2% of the global total. The fabric of modern-day wealth is evolving as the sources and destinations of this wealth are set to change significantly over the coming years. For example, Boston Consulting Group predicts that by 2023, the value of Asia’s cross-border wealth will have grown by 150%.
Wealth advisers will need to keep pace with this dramatic shift and cater for the changing needs of this growing client base. Driven by continuing economic and political uncertainty in the region, HNWIs and UHNWIs from emerging markets will increasingly seek asset safety, protecting against currency depreciation, and the desire to gain stable returns through international diversification. What these clients need are wealth structuring solutions that can manage cross border wealth spread across multiple developed markets. They will also need advisers who are able to navigate effectively around any regulatory or cultural differences between markets.
The mosaic that makes up the lives of modern wealthy people is constantly shifting and being redesigned as wealth is distributed across a more diverse range of ages, genders and nationalities than ever before. What drives wealthy people around the world has never been so complex. For wealth advisers, this means greater difficulties and greater opportunities. The wealth management industry needs to understand the changing landscape that faces HNWIs and UHNWIs and offer solutions that can help them to navigate the uncertainty and complexity.
When I speak to clients, what they are looking for is comfort that their adviser has expertise across multiple markets and jurisdictions. What they want is a feeling of control over their wealth and life’s legacy wherever they are, wherever they want to be, and regardless of what lies ahead.
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