Despite 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 health.
Economic and political instabilities are driving 16% of global HNW wealth offshore.
The proportion of HNW individuals who invest offshore has been on the rise, from 11.2% in 2014 to 16.9% in 2018, despite the high-profile scandals that have shaken the industry such as the Panama Papers and Paradise Papers. 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.
Heike van den Hoevel, Senior Analyst at GlobalData, says: “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.”
“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.”
GlobalData’s report “HNW Offshore Investment: Drivers and Motivations 2018” draws on the 2017 and 2018 Global Wealth Managers Surveys to analyze the drivers behind the offshore investments in the HNW space. It examines HNW offshore investment preferences across 24 jurisdictions, providing an in-depth understanding of the factors that are motivating and HNW investors to look for new homes for their wealth.