The Risk of Not Diversifying Your Mobility Assets is Unacceptably High

 

This year, we have seen the concept of residence- and citizenship-by-investment (RBI and CBI) gain more public acceptance than in any other year before. A growing number of ultra-high and high-net-worth (U/HNW) investors focused on futureproofing themselves and their families are increasingly seeking out alternative residence and citizenship options. In my own work, I have witnessed this precipitous rise first-hand.

Historically, investment migration as a concept has been limited to wealthy people, particularly in emerging markets. It primarily appealed to individuals who wanted to transcend the constraints imposed on them by their country of origin in order to access business, financial, or career opportunities on a global scale.

Mobility: Now also a first-world problem

Now we are seeing the concept of including an alternative residence or citizenship as part of resilience planning gaining momentum in the developed world, even more so than in the emerging markets; an increasing share of clients from the US, Canada, the UK, France, and other major developed nations are embracing the idea of holding an alternative residence or citizenship in a neutral or benign country as a hedge to their existing residency or citizenship. For instance, there’s been heightened interest from American and European clients for second citizenship programs in the Caribbean. 

The stark polarization of politics in many developed countries, consistent speculation on fiscal policies, and a changing stance in bilateral trade relations in each political term are leaving the majority of entrepreneurs confused as to what the future holds for their businesses. This represents heightened exposure to macro risks and has piqued their interest in the option of diversifying their domiciles so they don’t have to solely rely on the geopolitical conditions of their home country to decide their future.

The smaller Caribbean nations have become a perfect hedge. They have zero interference on their current status and do not tax on the basis of citizenship. These nations also tend to stay away from any international propaganda, maintaining only an observer’s stance.

It is now, likely for the first time in history, fair to say that alternative residence has become a legitimate wealth management tool. A tool more essential than any other since it is the primary determinant of any macro stimuli to one’s business or wealth preservation initiatives. Just as Bitcoin is now widely regarded as a hedge against inflation, an alternative residence is regarded as a hedge against all manner of adverse macro events. Combining cryptocurrencies with an alternate residence is the ultimate wealth management portfolio that many forward-thinking entrepreneurs are now embracing. 

Investment migration finally a widely recognized asset class

Entrepreneurs are seeing the benefits of investment migration not only as a means to improve their mobility or for lifestyle and education purposes, but also as an avenue to take their businesses global, protect their families’ future, and have an insurance policy in place to hedge their sovereign risk. 

In the world of investments, it is considered best practice to invest in different regions and asset classes, from equities to real estate, to spread the risk and find the greatest value. But what about where you reside? The same principle applies. The more jurisdictions you can access, the more diversified your assets and opportunities, and the lower your exposure to country-specific risks such as poor health security, higher tax burdens, or unexpected policy changes. This is especially relevant for clients in developing and emerging markets in Asia.

Given the pandemic and the threat of similar disruptions in the future, the possibility of relocating to a new country that promises access to world-class healthcare options and enhanced safety and security is a massive drawcard for an increasing number of clients, not just in Asia, but across the globe. 

Turbulence favors the IM market

In the investment migration world, any type of uncertainty, be it of a political, economic, or security nature, usually propels interest in the concept. IMI has pointed out, on many occasions, that ours is an “antifragile” industry.

We’ve seen this with the unrest in Hong Kong, Brexit, Covid-19, and, more recently, Capitol Hill in the US. Interestingly, in the last 12 months, the US has become our single biggest market as clients realised that putting all their eggs in one basket from a citizenship or residence perspective wasn’t ideal. This has also extended now to US expats in international hubs like Singapore, Dubai, and London.

Another emerging trend we see is that countries are beginning to compete for HNWIs as they not only bring their wealth but also talent, years of entrepreneurial experience, and often also their businesses along with them. Countries that are politically neutral, financially and politically stable, with robust infrastructure to provide opportunities for wealth preservation are likely to attract these HNW families. The historic success of Switzerland and relatively recent success of Singapore are testaments to that.

This year, I’ve witnessed a sharp rise in interest from families across Asia wanting to make Singapore or the UAE their established base. Countries that are at the forefront of providing excellent infrastructure for wealth preservation are likely to be popular destinations amongst the wealthy.

Protecting wealth remains an important driver for investment migration but, now, we are transitioning into an era where alternative residencies and citizenship are seen as the ultimate resilience plan for the next decade. Families are not just keen on acquiring one alternate residence but are building a portfolio of residencies and citizenships to provide greater access and mobility to their family members in unpredictable times.

From acquiring bolthole farms in New Zealand to investing in citizenships in the Caribbean, we are entering a phase where not holding an alternative residence apart from your home jurisdiction is an unacceptable risk that high-net-worth families of today cannot afford to take.

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Nirbhay Handa Author
Managing Director South Asia , Henley & Partners

Nirbhay Handa is the Managing Director for the South Asia Team of Henley and Partners. Nirbhay is based in Singapore and advises High and Ultra High Net Worth Families on Citizenship and Residence Planning.

Nirbhay has been at the forefront of the investment migration industry across Asia and the Subcontinent advising some of the most respectable and established Private banks, Family offices, and Law Firms.

His articles, speeches, and overall thought leadership in the investment migration space are often quoted in some of Asia’s leading wealth management forums and publications including Forbes, The Peak Singapore, CNBC, Times of India, The Economic Times, IMI, and Hubbis.

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