The high net worth (HNW) landscape and the movement of wealth are changing, driven by the lure of residency-by-investment programs for tax efficiency and lifestyle opportunities, according to GlobalData Financial Services

 

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The high net worth (HNW) landscape and the movement of wealth are changing, driven by the lure of residency-by-investment programs for tax efficiency and lifestyle opportunities.

About 74 countries around the world offer residency-by-investment programs which grant residency to individuals who invest a specified amount into property or government bonds, for example. These programs can be important economic drivers, often creating local business or contributing to cultural research.

In an effort to capture the wealth of HNW investors and provide added support to their economies, it is expected that more countries will launch residency-by-investment programs and competition will heighten. This in turn will present HNW individuals with a residency marketplace of sorts, whereby investors have a multitude of programs from which to choose.

At the same time, programs that prove ineffective and unattractive will be updated or suspended. For example, the UK leaving the EU will bode well for countries in the trading bloc. And similar to the bond program in Hungary which closed in April 2017, those which are ineffective in bringing about an economic benefit will fizzle out.

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The world’s wealth is growing at a notable rate, with more and more individuals becoming HNW every day. GlobalData Financial Services‘ Global Wealth Markets Analytics shows that the world’s HNW population exceeded 8.5 million in 2016 and is forecasting stronger growth rates. It is anticipated that countries will explore the creation of tiered programs, whereby greater investments yield expedited residency.

For example, a $1m investment may enable an individual to obtain residency in five years while a $2m investment may constitute residency in three years. These tiered programs will pique the interest of HNW individuals who have the desire to obtain residency quickly and have the assets to qualify.

Regardless of the required investment or whether they are tiered, wealthy investors from emerging markets will continue to drive the residency-by-investment trend.

As emerging markets tend to experience political and economic instability, individuals from countries such as China and South Africa will explore opportunities for obtaining residency in markets abroad.

Looking ahead, residency will become an integral component of HNW portfolios and a useful factor for measuring market confidence. In short, the movement of people will become a stronger indicator of the movement of wealth.