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HNW Offshore Investment: Drivers and Motivations 2018

December 2018 | 46 pages | ID: HA287CCCEC9EN
GlobalData

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HNW Offshore Investment: Drivers and Motivations 2018

SUMMARY

This report draws on our 2017 and 2018 Global Wealth Managers Surveys to analyze 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.

The proportion of HNW individuals who invest offshore has been on the rise despite the scandals that have shaken the industry. While the reasons are diverse and differ from country to country, global diversification benefits and tax efficiencies top the list. This suggests that assisting HNW investors in minimizing their tax liabilities is key. However, it is important to realize that the boundaries between tax evasion and tax avoidance are becoming increasingly blurry. The days of secrecy and illicit structures have passed, and providers need to ensure they are well equipped to conduct their due diligence and provide sound advice spanning multiple jurisdictions. Avoiding the reputational and financial damage associated with any further scandals is both in wealth managers’ and investors’ interests.

SCOPE
  • 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.
1. EXECUTIVE SUMMARY

1.1. Providing tax advice spanning multiple jurisdictions is key
1.2. Key findings
1.3. Critical success factors

2. GLOBAL TRENDS DRIVING HNW OFFSHORE INVESTMENTS

2.1. Offshore investments have been on the rise despite global scandals
  2.1.1. Diversification benefits remain the number one offshore driver in the HNW space
  2.1.2. Tax efficiencies is now the second most important factor driving offshore investments
  2.1.3. Other drivers include the expectation of better returns and access to better products
2.2. Significant regional differences exist in the motivations for offshore investment
  2.2.1. Offshore propositions must be tailored at a country or regional level

3. DETAILED DRIVER ANALYSIS

3.1. Local market factors drive the variety in HNW individuals' motivations for offshore investment
3.2. Driver one: HNWs invest offshore to achieve diversification benefits
  3.2.1. Players looking to attract offshore HNW wealth should highlight the benefits of geographic diversification, while smaller companies should promote funds
  3.2.2. Geographic diversification alone is not enough
3.3. Driver two: The desire for tax efficiency represents an opportunity
  3.3.1. Taxation is a crucial consideration for a number of reasons, including high rates, complex tax systems, and changing regulations
  3.3.2. Being able to provide sound tax advice is becoming more important than ever
  3.3.3. Compliance is becoming an increasingly big headache, but technology can assist
  3.3.4. The US and fake residency information are the biggest issues facing CRS
3.4. Driver three: Instability is increasingly driving offshore investments
  3.4.1. Economic factors are marginally more important than political ones as an offshore driver
  3.4.2. Political and economic instability are major concerns in Turkey and South Africa
  3.4.3. Hong Kong investors worry about the effects of an economic slowdown
3.5. Driver four: HNW investors are betting on better returns offshore
  3.5.1. HNW investors are increasingly tapping equity markets offshore to boost returns
  3.5.2. The comeback of China’s QDII program could have an adverse effect on offshore holdings
3.6. Access to a broader and better range of investments is also an important consideration in the offshoring decision
  3.3.2. Domestic market sector concentration bias drives offshore investment in the developed world
  3.6.1. Access to a broader range of investment options is an important driver in markets with limited investment options
3.7. Other drivers: The importance of currency volatility, client anonymity, and expatriate money flows varies across markets
  3.7.1. Client anonymity is only of relevance in a select few countries
  3.7.2. Currency volatility as a driver for offshore investments is becoming more important
  3.7.3. Wealth managers will do well to keep an eye on emerging markets
  3.7.4. Helping HNW entrepreneurs formulate a foreign exchange management strategy is becoming increasingly important
  3.7.5. HNW expat money flows are responsible for only 5% of HNW offshore wealth, but there are notable exceptions

4. APPENDIX

4.1. Abbreviations and acronyms
4.2. Supplementary data
4.3. Definitions
  4.3.1. Affluent
  4.3.2. CRS
  4.3.3. Exchange of information
  4.3.4. HNW
  4.3.5. Liquid assets
  4.3.6. Mass affluent
  4.3.7. Residency
4.4. Methodology
  4.4.1. GlobalData’s 2018 Global Wealth Managers Survey
  4.4.2. GlobalData’s 2017 Global Wealth Managers Survey
4.5. Bibliography
4.6. Further reading

LIST OF TABLES

Table 1: Offshore investments as a proportion of total managed HNW wealth, 2017-18
Table 2: HNW offshore investment drivers, 2018 (part 1)
Table 3: HNW offshore investment drivers, 2018 (part 2)
Table 4: HNW offshore investments by asset class, 2018

LIST OF FIGURES

Figure 1: Scandals have not taken a toll on the global HNW offshore market
Figure 2: Diversification benefits are driving offshore investments in the HNW space
Figure 3: Geographic diversification is a key consideration in North America
Figure 4: Diversification benefits drive offshore investment in markets at various stages of development
Figure 5: HNW investors prefer to book their wealth close to home
Figure 6: Tax efficiencies as an offshore driver are of particular importance in the UK
Figure 7: HNW demand for tax planning is strong in the vast majority of countries surveyed
Figure 8: Kendris’ app keeps professionals updated on compliance deadlines
Figure 9: Opinions on whether CRS will benefit non-participating jurisdictions are divided
Figure 10: Political and economic instability are key offshore drivers in a number of countries
Figure 11: Political stability is a real concern in South Africa and Turkey
Figure 12: The majority of both South African and Turkish HNW wealth is booked in safe havens
Figure 13: HNW investors in Sweden are betting on better returns offshore
Figure 14: The average HNW offshore portfolio is increasingly biased towards equity investments
Figure 15: The DAX and S&P 500 have outperformed the OMXS30 since January 2013
Figure 16: Access to a broader range of investment options is of particular importance in Hong Kong
Figure 17: Client anonymity as an offshore driver is important in only a handful of countries
Figure 18: The Turkish lira has enjoyed a wild ride over the past few years
Figure 19: Investec provides non-resident mortgages to South African HNW investors

COMPANIES MENTIONED

UBS
Investec
HSBC
Kendris


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