03 January 2019
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The wealthy are showing a keen interest to invest offshore, as the HNWIs seek to achieve benefits from global diversification and gain tax efficiencies.
The proportion of HNWIs who invest offshore has risen from 11.2% in 2014 to 16.9% by December 2018, , according to GlobalData's HNW Offshore Investment survey.
They survey showed that 24% of European investors offshore the largest proportion of their wealth to achieve tax efficiencies, while 41% of North Americans invest the largest proportion offshore to diversify. At a global level, 17% of HNWI wealth is invested outside one's country of residence.
"Avoiding the reputational and financial damage associated with any further scandals is both in wealth managers’ and investors’ interests"
Senior wealth analyst, Heike van den Hoevel, said understanding why HNW investors offshore their wealth was paramount to capitalising on the rising proportion of offshore wealth.
"This means providers have to focus on uncorrelated or less correlated risks when promoting offshore investments to potential clients," he said in the report.
Van den Hoevel said while demand for tax advice was on the rise, the days of illicit structures have passed, and providers must do the due diligence to avoid reputational and financial damage associated with scandals.
"Avoiding the reputational and financial damage associated with any further scandals is both in wealth managers' and investors' interests," the study added.
The study reveals that HNWI expatriate money flows are responsible for only 5% of HNWI offshore wealth, but are of particular importance in expat hubs such as Singapore. 48% of global HNWI wealth is held via equities, 18% via bonds, and 16% via property.
In India, the bid to get good returns has led the wealthy to look increasingly at investing offshore. "Investments by UHNWIs and HNWIs in offshore are catching up," said Atul Singh, chief executive at WGC Wealth.
"They are looking for offshore funds and need hand-holding. "That's where we step in. It is easy as the investments go through the official banking channel. Even redemption or liquidation is simple," he told local news outlet The Hindu Times.
Quoting RBI figures, he said in the last three years, investments by UHNIs and HNIs through liberalised remittance scheme had grown from $1.5bn to $12bn.
WGC Wealth, an arm of Wadhawan Global Capital, forayed into wealth management to provide financial advisory services in investments, lending, succession planning, and protection services for investors (insurance) to UHNWIs and HNWIs .
