10 On The Weekend – David Lesperance: “Governments Are Increasingly Harassing the Wealthy”

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Ten On The Weekend is a weekly feature on IMI, the concept of which is simple: Each weekend, we ask the same ten questions to a different industry figure, letting readers get to know the interviewee on a more personal and informal level than they might in an ordinary business setting.

This weekend’s guest is David S. Lesperance, Managing Director of Lesperance & Associates

How do you spend your weekends?
Saturday is Twin Time! Six years ago my wife spent nine months carrying our twins; in return, I pledged to give her a break on Saturdays. This started out with me taking them out in the stroller for a few hours but has now grown into a much-loved tradition. Sometimes we split them up so that they have one-on-one time with each parent. We also like to Skype their adult brother and sister to catch up on what is happening. Sundays vary, but if we are lucky and can get a baby-sitter my wife and I get to spend a few hours together on our own.

What are your top three business goals this year?
To continue to let our target market know that there is a critical difference between receiving advice from a qualified independent advisor and a self-serving salesperson. We’re seeking to strengthen our existing relationships, alongside building new ones. We often work with other advisors such as family offices, private bankers, financial advisors, accountants, lawyers, and estate agents. Their work frequently complements our own. We show such advisors that working together to better serve our mutual clients is a Win-Win-Win proposition.

Finally, we hope to dispel the misconception that there is something nefarious when wealthy families diversify their citizenships and residencies to protect their family wealth and well-being. We call it Backup Planning, and think it is as prudent as investing in fire insurance!

What’s your biggest business concern right now?
As evidenced by the unethical and unsavory attack against Jean-Philippe Chetcuti, the international media can be vicious. As he pointed out in his own Ten on the Weekend, these attacks are “often based on a lack of understanding of residence and citizenship by investment programmes”.

The reality is, overcoming this widespread public prejudice is a daunting task. However, by our doing proper due diligence and ensuring proper information and advice are readily available, we can reassure that our target market that the countries we recommend that offer residence by investment and citizenship by investment are acting ethically, lawfully, and prudently.

My other major concern is that various governments are increasingly harassing or downright attacking wealthy individuals and families. This may be the result of their not supporting the power structure in countries like China, Saudi Arabia, Mexico, or Brazil. It may also be that the wealthy are the targets of populist ‘Tax the Rich’ proposals in countries like the US and the UK.

Few would argue that we are currently living the Chinese curse of “May You Live in Interesting Times”. What our clients need to realize is that they may also be subject to a second curse; “May you be recognized by people in high places”. The reality is that those in high places play for keeps. Like preparing for the possibility of a wildfire, you need to get house insurance; you also need a fire escape plan before the flames threaten you and your family.

Which book is on your nightstand right now?
I just started reading “BlowOut” by Rachel Maddow. It is an insightful geopolitical global analysis of current affairs through the lens of the petroleum industry. One of my favorite books is “The Prize” by Daniel Yergen which used the same microscope, so I am looking forward to her take. On the lighter side, I am reading “Treasure Island” with/to my son and “Anne of Green Gables” with/to my daughter.

How and when did you first get into the investment migration industry?
At law school in the late 1980s, I actually worked as a customs and immigration officer at Canada’s busiest car crossing and airport. I found the whole experience fascinating. After being called to the bar in 1990, I saw the light (or went to the dark side) and started to practice in the area. I describe myself as either a tax-savvy immigration practitioner or an immigration-savvy tax practitioner.

Right from the outset, I had three main client groups:

First were Hong Kong HNW families who were preparing for the 1997 handover. My law school buddy worked for Baker McKenzie in HK at the time; he sent me a steady stream of referrals. This later expanded to include mainland Chinese clients and wealthy families throughout Asia.

A second area of practice was with HNW Americans. I helped my first American client navigate renouncing his US citizenship for tax purposes. My childhood was in the border city of Windsor, Ontario and my own father worked in the US and slept in Canada. I was very familiar with the unique US practice of citizenship-based taxation!

Thirdly, I spent half of my time in the Middle East meeting with private banking clients of both Standard Charter Bank and British Bank of the Middle East (now HSBC). My role was to advise them on the Canadian Immigrant Investor Program. This was before, during, and after the Gulf War.

My “If this is Tuesday…this must be Doha” existence gave me a great deal of insight into the needs of not only Gulf nationals, but also other HNW groups like non-resident South Asians.

During this Phileas Fogg existence, I quickly learned the wisdom of expanding the tools in my toolkit. They soon included lineage citizenship, citizenship by investment, and residence by investment – and proper international tax planning.

What was your proudest moment as a service provider?
The decision of my ancestor to leave France and move to what is now Canada had a profound impact not only on his life but also on the lives of three centuries of his descendants, including myself and my children. Many clients do not realize the profound importance of acquiring alternative citizenships and residences. However, it gives me a great deal of satisfaction knowing that the work that I do on behalf of their family will have positive impacts well beyond either of our lives.

Which investment migration market development has surprised you the most in the last year?
The increase in both types and levels of risks to HNW individuals and their families around the world. On the client-side, this is reflected in the panic amongst HNW families in HK and China. This actually started before the introduction of the Extradition Bill; I can point to Chinese officials snatching billionaire Xiao Jianhua from his Four Seasons HK penthouse in January 2017 as the moment when their concern grew exponentially.

On the policy side, the popularity of progressive “Tax the Rich” proposals in the US and UK have put the ‘fox in the henhouse’ for HNW families. Those in the UK have dodged a bullet until the next UK election or budget; however, America’s wealthy realize that the US election is a ‘Jump Ball’. HNW Americans would be sensible to prepare for any possible outcome. Finally, legislative proposals in Mexico have suddenly made the acquisition of a Backup Plan of prime importance to the wealthy in that country.

On the product side, the extreme popularity of the Greek Residence by Investment program has attracted my attention and scrutiny. Upon closer examination of the required €250K investment, it turns out in many cases that €70K is immediately returned to the applicant as “Up Front Rental Revenues”. Generally speaking, €50K is then immediately paid to the salesperson as commission. This leaves €130K for the developer to cover marketing expenses and build a property that is supposedly worth €250K and will generate returns. Logically speaking this is highly unlikely to happen.

What is more likely to happen is that the developer will go bankrupt and the unit will not be built. This would leave the purchaser out-of-pocket by €180K while they stand in line for two years plus for a 5-year renewable residence permit. They can then wait for 7 more years to naturalize. It will take a further 4 years for their citizenship application to be finalized and passport issued.

It is more than likely that they will need to be a tax resident in Greece throughout this 11-year period. Greece has recently introduced a new tax regime that can limit the investor’s Greek tax liability to €100K per year, which adds another €1.1 million onto the €180K cost of their eleven-year journey to a Greek passport. This is all assuming, of course, that the Greek government renews the residence permit after five years. This is in no way guaranteed if there is the required €250K property does not exist.

This facts-based analysis makes me wonder why the Greek RBI program was so popular? My guess is that it was the combination of motivated developers incentivizing both a large Chinese salesforce with a 20% commission and the investors with the ’teaser’ of an immediate €70K kickback. The developer and salespeople win while the investors “think” they win. Unfortunately, they later discover that they’re left holding the bag. When one views RBI and CBI programs through the lens of the incentives for the different parties, the results are illuminating, though perhaps not surprising.

If you could go 10 years back in time, what business decision would you change?
I would invest my money in Amazon, Apple, and Google – and retire! But seriously, early in life I was taught that looking back is only useful in making choices in moving forward. As a result, I don’t spend an extraordinary amount of time on regrets or “what ifs”. I’d rather look to history as a learning tool. It may not repeat itself but it sure can rhyme.

What investment migration industry personality do you most admire?
Although I have never met, talked or worked with him, I would have to say Jean-Philippe Chetcuti. I hugely respect how he tackled the tyranny and power of the press. The video that was later uncovered showed him acting like a true professional. He laid out the issues involved in the case being presented to him and clearly communicated the limits to the program and the work which he would undertake. In short, he acted like a fiduciary and a professional and not an “I’ll do anything to close the deal” salesperson.

If all goes according to plan, what will you be doing five years from now?
In five years I hope to lead a small team of fellow professionals. Together we will provide a top-drawer service to a group of clients who appreciate the value we provide. I have no interest in abandoning my current approach just to build an empire. I also hope to achieve a better work-life balance so that I can enjoy more time with my family. As for retirement, I’m not sure how much it appeals! Keeping up on global affairs and how they impact my family and my clients directly relates to my interest in history, geopolitics, and futurism. Semi-retire is about as far as I think I will ever go.

More from the Ten On The Weekend interview series:

• Ten On The Weekend – Jean-Philippe Chetcuti: “Unity in the Industry is Key to Survival”
• Ten On The Weekend – Gareth Brookes: “Diversify Away From CBI-Services Only”
• Ten On The Weekend – Eric Major: “Our Industry Deserves Some of the Bad Press it Gets”
• Ten On The Weekend – Nuri Katz: “I Live My Life in a Constant State of Jet Lag”