_Barriers & opportunities - which factors are influencing ultra-high-net-worth individual movement?

The world will become more globalised, not less
Parag Khanna, Global strategist and bestselling author

Votes for both Brexit and Trump last year were held up as examples of globalisation being in retreat. I very much disagree with this diagnosis. I believe that these votes were votes against London and Washington’s mismanagement of globalisation rather than against globalisation itself, from which everyone benefits on the whole, even – eventually – those who lose their jobs in antiquated industries.

Despite my view that we will see more globalisation, investors will inevitably have to navigate an increasingly complex geopolitical environment in the future.

There will be more pressure from governments for investment into areas like energy, industry and real estate, both for the jobs this will create and the secondary economic activity it will stimulate. I can foresee new tax measures being introduced to incentivise capital to remain or be reinvested.

Such measures are already popular in emerging markets.

The bigger issue, though, remains: how will governments go about trying to lure fresh investment capital? While the great global centres like London continue to offer investors admirable returns over the long term, the cost of investment and assets is itself a barrier to entry.

If I were asked to point to a future growth area, I would strongly tip investing in emerging and frontier markets, based on the demographic trends of urbanisation, and the new pragmatism of governments in investing in infrastructure in non-core districts of major cities as well as in second- and third-tier cities.

Blockchain will change…everything
David Friedman, CEO, LifeChain

Blockchain is set to cut a swathe through the investment world – especially that part of it where issues relating to data, privacy and security intersect. At its core, Blockchain is a distributed ledger whose architecture offers a secure and seemingly unhackable infrastructure that will give ultra-high-net-worth individual (UHNWIs) the ability to accelerate the deployment and monitoring of their global capital across portfolios.

Currently, every transaction requires validation of identity by a third party, adding friction to the process. By creating a permanent and unalterable record of each transaction, Blockchain eliminates the need for validation, reducing that friction and leading to greater control and trust. Ultimately, easier transactions should prompt a rise in volumes, spurring additional global flows of wealth.

As the Common Reporting Standard (CRS) continues to gain traction across global tax regimes, there is an opportunity for investors to get ahead of the curve and influence the way governments share information in the future, encouraging the exchange of accurate, transparent and timely data via a platform built on Blockchain.

In our view, the main risk for Blockchain is not that someone will “hack” into this aggregation of data and assets, but that at some point a government might find such a concentration of information an irresistible target for control.

However, this is a geopolitical risk rather than a technology issue. The potential offered by Blockchain for accelerating global capital flows far outweighs the potential risks.

New citizenship options will open up
Dr Christian Kälin, Henley & Partners

The number of residence and citizenship-by-investment programmes is proliferating, and we are expecting a further slew to be announced in 2017. Recent European reforms mean that, for example, the Cyprus Citizenship-by-Investment Programme now offers more affordable access to the EU, with the minimum investment reduced to €2m.

Investment options have been restructured, and now include the choice to invest in real estate or development land. Also in Europe, applications for the Malta Residence and Visa Programme opened last year.

This gives individuals the right to reside, settle and stay indefinitely in Malta, with free movement of travel within the Schengen zone. Elsewhere, in the Caribbean, Grenada’s Citizenship-by-Investment Programme has recently been reformed, and now offers visa free travel to all major countries, and double taxation treaties with CARICOM and the UK, as well as an E-2 Investor Visa Treaty, giving successful applicants the right to enter, live, work and stay in the US.

Aside from such programmes, the ability to move around the world is becoming easier thanks to a growing number of visa waiver agreements.

Like the UAE before it, Kuwait is in discussion with the EU regarding exemption for its citizens from the Schengen visa; Georgian nationals have been granted visa-free travel privileges to the Schengen zone; and China and Serbia now have a visa-free agreement with each other. Expect to see more such announcements through the course of this year.

Data sharing will influence investment decisions
Richard Morley, Partner, BDO

The introduction of the CRS means that the volume of private data being shared between governments is set to grow exponentially. At its simplest, the CRS will help signatory governments ensure that their citizens have paid the appropriate level of taxation on their global investments. In reality, though, this is likely to mean coming face-to-face with a host of logistical problems.

Governments must make sure that they have the capacity both to host and use the data received and to sift out misinformation, and that they are equipped to deal with the risk of data leaks.

No one should underestimate the scale of the challenge posed by the first two problems on this list: even well-resourced tax departments in Europe are running hard to get prepared.

But the latter point is also hugely significant, especially as the “Panama papers” leak has shown that there are no guarantees when it comes to data protection. There are real

issues surrounding the security of UHNWIs in those jurisdictions where government control of data will be weak and where there is the potential for extortion. The result may well be that UHNWIs currently based in the emerging world will choose to move their investments, themselves and their families elsewhere in order to minimise personal risk. So, where will they go? The US is set to be the biggest destination of choice.

As long as it sits outside the CRS it will become an outlier in attracting wealth and investments. Expect to hear squeals emanating from tax havens, particularly of the island and alpine variety.

Brexit will shift the dynamics of wealth migration
Andrew Amoils, New World Wealth

For many observers the UK’s decision in 2016 to leave the EU was a disaster both in broad economic terms and, more specifically, in terms of its ability to attract and retain wealthy residents. However, in our view, the forthcoming Brexit process will not result in an outflow of wealthy individuals from the UK; rather, it will mean that existing HNWIs will be more likely to remain and indeed to be joined by a growing list of new arrivals.

This view is backed up by the fact that over the past few years many of the wealthy UK residents we have interviewed have voiced concerns over the UK’s open border policy with Europe, as well as wider issues relating to the euro and economic dislocation within the EU.

As home to Europe’s dominant business and financial services cluster, the UK is in a uniquely advantageous position. It is the only English-speaking major-sized economy in the region: a fact that helps to attract HNWIs and their businesses from across Asia, Australasia, Africa and North America.

We anticipate that the UK’s traditional alliances with the US, Canada, Australia and New Zealand will all grow stronger post-Brexit. Specifically, we expect Britain to reintroduce two-year working visas for citizens from Canada, Australia and New Zealand in the next few years.

Immigration will be the key political issue
Nadine Goldfoot, Partner, Fragomen LLP

Migration – of investors, and of people in general – will present considerable challenges in 2017, both within the EU and internationally. Immigration is a central issue for the new US presidency, and a prominent feature in elections across Europe.

More broadly, against a backdrop of growing global instability and security concerns, questions of economic migration and “forced migration” are becoming conflated in political discourse.

Some countries with high historical immigration levels, such as Switzerland and the UK, are feeling the heat and have introduced restrictive policies, albeit ones that do not necessarily act as a bar to HNWIs looking to invest.

In the UK too, the roadmap to Brexit currently remains unclear, and with it the shape of the nation’s post-Brexit relationship with the EU. The next 12 months should bring some clarity.

The end of 2016 saw a noticeable change in the demographic of those looking to take advantage of investor (and entrepreneur) visa programmes globally, with a significant increase in appetite among European and US HNWIs that looks set to continue into 2017.