Henley & Partners on Investment Migration, Residency & Citizenship – Opportunities and Trends for the Year Ahead
Alternative residences or citizenships have become very popular amongst wealthy clients in the past decade and even more so since the pandemic hit and during times of geopolitical uncertainties. Domicile diversification has become almost a new asset class. Nirbhay Handa is Group Head of Business Development at investment migration specialists Henley & Partners. He gave a lively and informative presentation to delegates at the Hubbis Asian Wealth Solutions event in Singapore on June 8. He explained why the demand for these alternative residences or citizenships continues to grow. He outlined why clients consider domicile diversification as a new element of astute estate and wealth planning for HNWI and UHNW clients. And he told delegates how this could be achieved, as well as how it can often be aligned to real estate investment overseas on many of the investment migration programmes. We have summarised the key points in this brief report.
Henley & Partners (Henley) has championed the investment migration industry for more than two decades. The firm has grown especially rapidly in the past five years, particularly since the start of the pandemic. Henley has expanded its global footprint fairly aggressively, with 35 offices globally today, and plans to open another 12 or possibly even more offices this year, including new offices in the Middle East, Africa and South America. The firm set out on this journey back in the 1990s, and they have advised more than 20,000 clients to date.
Henley’s two core activities
The firm has two core businesses, one advising private clients on their options and then helping them execute, and the second advising government on the inward investment migration programmes.
In the world of private client advice, Henley works closely with the wealth management industry and associated professions. The firm’s advisors are in constant liaison with private bankers, private client lawyers, financial advisors, IAMs, tax advisors, corporates, fiduciary companies, and others who refer clients.
Working with the wealth industry
They then work on a fee share arrangement and constantly reiterate how wealth market incumbents can rest assured that Henley is a totally benign partner, never going anywhere near any clients for investment advisory and instead focusing entirely and exclusively on investment migration. Moreover, they can often also reciprocate referrals to business partners now that they have such a major global client base and extensive geographical coverage.
As to how Henley works with its intermediary partners, there are two primary models. One option is a fee-sharing model for successful client referrals. The other – and this is becoming more prevalent – is the reciprocal referral basis, which works particularly well in the major financial centres worldwide.
The Passport ranking – Asia leads!
Armed with an excellent slide presentation, Handa first pointed to the well-known Henley Passport Index, which the firm releases every year, and that is updated quarterly.
He explained that Japan and Singapore lead the global list, with visa-free access to 192 countries around the world. At the very end of the list come countries such as Afghanistan and Syria. Thailand, he reported, is currently ranked number 66, roughly in the middle of the pack with China and Saudi Arabia.
He said there are more than 100 different options for citizenship or residency by investment around the world, but that Henley has narrowed that down to roughly 30 to 40 programmes, in Europe, the Caribbean, and the usual mainstream destinations such as the US, the UK, and Australia. He also pointed to programmes in Asia, including Singapore, Thailand and Malaysia.
A world of choice rather than a plethora of forms
He highlighted how as wealth increases in Asia, so too does mobility. “South Korea now has a stronger citizenship from a mobility point of view than United Kingdom and United States,” he reported. “My own country of birth, India, is not so strong, so I often joke that by the time I turn 90 years old, I think I would have spent almost two years of my lifespan getting different visas for different countries with the amount of travel that I do!”
“Within the wealth management community, we're going through a democratisation of wealth,” he observed, “and people increasingly want to choose their own governance of the future, or decide the jurisdiction they want to reside in. And that is the core philosophical foundation of the business that we're in.”
The world is your oyster
In Europe, countries such as Cyprus, Greece, Italy, Malta, and Portugal, all very popular programmes right now for residency by investment for Henley clients in Asia. In the Caribbean, Henley currently focuses on five key programmes, including Grenada and St. Lucia, for example.
He explained that some of the benefits of the Caribbean programs include their price and the speed of applications. “A single applicant would be able to achieve citizenship in some of these countries for anywhere from USD100,000,” he reported. “And it is important to note is all of these Caribbean countries offer Schengen visa access, which is visa-free access to all the European countries that are part of that treaty.”
In Europe, he explained, pricing for EU access could range from relatively low levels for countries such as Greece to very high entry levels and requirements, such as Austria, which is often seen as the crown jewel of countries for its remarkable infrastructure and quality of life. However, an investment of at least EUR3 million as a donation to the Austrian government is required. Malta, Cyprus and Portugal are other popular programmes that are available at somewhat lower costs.
Handa also addressed the client motivations, explaining that domicile diversification centres around the concept of not putting all your eggs in one basket. Recent disruptors of COVID-19 and climate change have become key drivers of interest in investment migration, he reported. And this year, global volatility has reached new heights with the ongoing war in Ukraine.
He said the general lack of certainty has led many high-net-worth individuals to reassess their situation and circumstances, leading them to see the increasing appeal of residence and citizenship by investment programmes as a hedge against country-specific risk, which includes poor health security, increases in taxation, and changes in government policies.
“These programmes enable individuals and families to safeguard their futures due to the optionality they provide,” he elaborated.
He also noted that there had been a rise of location-independent entrepreneurs globally, as well as a rise in location-independent employees.
“European residence by investment programmes become extremely popular for these people because the physical presence requirement is quite minimal,” he said. “But you end up with an alternative residence, put your wealth in a high-performing asset and give your child a Schengen residency along with it. It's the same case for American entrepreneurs, many of whom are moving to Portugal. And that's primarily at the back of location independence with their entrepreneurship and the initiatives that they're pursuing.”
Education is also a major driver, with strong historical demand for the US and the UK, and rising demand for Europe, especially with the prominence of further business educational establishments such as INSEAD.
The domicile portfolio
Handa said that domicile diversification through holding multiple residences and citizenships allows individuals to overcome restrictions and limitations of their countries of origin while facilitating access to world-class healthcare, education, and business and career options in stable and secure environments.
Domicile diversification, he explained, is about taking out a hedge on your overall sovereign risk. “It's become a bit of an insurance policy because we live in a very volatile macro outlook,” he said. “Most of the people that we work with don't necessarily move to these jurisdictions, but they get an alternative residence or a citizenship as a hedge against any macro adversity that their jurisdiction can go through. The more diversified your residencies are, the better prepared you are for the future.”
Planning for the future
He added that diversifying your wealth and lifestyle portfolios by investing in a selection of residence options enhances your family's global mobility as an excellent insurance policy against ongoing political and economic upheaval.
“It also functions as an intergenerational legacy planning tool to prepare and future proof your family for generations to come, by providing them with access to multiple countries around the world,” he explained.
“We have clients who acquired two, three, four different residences, because they're looking at the next 40 years. None of us can predict the future, but we can prepare for it.”
Your family, their futures
Moreover, residence and citizenship by investment programmes offer multiple solutions for large multi-generational families that do not necessarily need to all be in the same location.
He also highlighted some key drivers for alternative residences, such as quality of life, including access to improved safety and personal security and world-class health care systems, as well as access to leading schools and universities. Some might be driven by tax, thereby moving from higher to lower tax jurisdictions. Some might find some other countries offer greater security and privacy.
And of course, there are also the advantages of different passports if the clients choose the citizenship options. Handa told delegates that such options also appeal for lifestyle, retirement, healthcare preferences and facilities, estate and legacy planning and so forth. Climate change can be another reason, for example, if the client is based in a region threatened by the impact of global warming. Additionally, he explained that citizenship is one of the tiebreaker rules in double tax treaties between countries.
Build first, then hold
He said the European citizenship by investment programmes are extremely sought after for families in the emerging markets as they seek to keep the wealth they build.
“The emerging economies are often exceptional places for wealth creation, but not necessarily for wealth preservation,” he noted. “These families, particularly from Indonesia, or the Philippines, are often looking outwards to Singapore, to Zurich, or London for their robust banking and investment infrastructure that can provide them longevity for their wealth preservation initiatives.”
Around the world in 80 ways
There is literally a world of choice amongst the programmes available, but Henley always tries to narrow things down to the best alternatives suitable for the clients.
Handa continued his scan of the globe, zooming in on certain markets. He reported that golden visas are becoming increasingly popular amongst, for example, British citizens, who are targeting locations such as Portugal, Greece, Spain, and Italy, as great retirement destinations. Henley helps many clients with these applications, and many are achievable through real estate investment, with residence then often a pathway to citizenship.
He said they also see increasingly more wealthy Americans looking for second passports as a hedge against changes in fiscal policy in the future. For example, he reported that many wealthy Americans are seeking out Caribbean passports so that should they so wish at any stage, they have the option of renouncing US citizenship at some point in the future.
Wealthy Indians are very active, liking access to countries with excellent education for their children, top-class healthcare facilities, and easier travel, especially if there were to be another major pandemic. Indian clients are becoming increasingly global in their reach, and their family members are often dispersed across the globe. Canada, for example, is also a very popular choice amongst high-net-worth individuals of any origin when it comes to health security.
The snowball effect
“We see strong growth ahead in demand from countries such as China and India, and although they have restrictions on dual citizenship, residence by investment programmes have proven to be particularly popular with them in countries such as Europe, the US, Canada, Australia, and the UK,” Handa reported.
He then offered delegates insights into a report that Henley worked on in partnerships with Deep Knowledge Analytics to create the Best Investment Migration Real Estate Index.
Migration diversification and real estate investment
“This is a comprehensive look at the top 16 countries in the world that have some sort of real estate component to their citizenship or residency programme,” he explained. “These countries are all actively seeking high-net-worth individuals and families who are looking to pair their real estate investment with residency or citizenship which many clients would like to do but don't necessarily know that that is an option out there.”
He explained the parameters include elements such as GDP, quality of life, saleability of the asset, and the overall real estate market in these countries. He highlighted key markets such as Dubai/the UAE, Spain, Montenegro, Turkey, Portugal, and Thailand, all of which have a real estate component to their residency option. He noted that all five of the Caribbean citizenship programmes are on the list as well.
A perfect match
“Why are investors looking for real estate in foreign jurisdictions as part of this residence or citizenship diversification?” he pondered. “Well, it is quite simply for access to a stable asset class overall, access to stable currency through rental income, and to increase their quality of life. They are looking to possibly have a vacation home for themselves or their extended family or possibly a retirement home for the future. In all these cases, there is a great potential for pairing investment in real estate and lifestyle with the potential for the residency or citizenship components, and all the many advantages we have highlighted that come with those.”
Working the with wealth community
He closed what was another excellent Henley presentation by reminding delegates that Henley works very closely with wealth managers, independent asset managers, and family offices.
“We're always keen to have a non-obligatory discussion discussing trends around citizenship and residence planning,” he reported. “Similarly, a lot of our clients are also looking for insurance solutions, real estate solutions, and other private banking solutions, and we can often send clients to the banks and other wealth managers as well. Accordingly, we embrace a two-way, symbiotic relationship with the wealth management community. Our doors are always open.”
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