This article was originally published on The Wealth Net
. Read the article here
We live in a globally connected world, studying, living, working and investing across different countries and continents. We are on a constant journey, and so is our wealth, which can often circumnavigate major financial hubs through the most appropriate international wealth corridors.
Whilst the concept of wealth corridors may seem new, they have actually been utilised for centuries. The concept has now been vastly modernised – utilised by wealthy individuals and their families who are becoming increasingly more global and diversified in their lifestyles and investment choices.
High Net Worth individuals (HNWI) have de facto international lives, often with hyper-flexible family units that disperse globally. Recent research shows that the global number of migrating HNWIs has risen 14% in recent years, a trend that is only set to continue, not least spurred on by the pandemic and geopolitical volatility. It is also not uncommon for HNWIs to diversify their financial interests across multiple geographical regions of the world, or for their children to study in several different countries to their familial home. Many may then choose to become resident in a third country as a result of marriage or work. In addition, it is not unusual for people to marry more than once, which could again mean settling elsewhere with a second family, adding potential complexities to manage. Such scenarios require a suitably multi-jurisdictional and flexible approach to financial and wealth planning.
An essential enabler of global wealth connectivity
Structural trends affect HNWIs long-term investment decisions as well as shaping their global asset allocation strategy. Over decades, such requirements have helped establish preferred financial corridors that enable the management of their wealth efficiently and compliantly, while providing security and accessibility to their assets.
These ‘wealth corridors’ facilitate lifestyles and investments across individual’s preferred geographies, jurisdictions and investment preferences. They directly correlate to the robust legal and regulatory frameworks that follow global trends and facilitate HNWIs’ global movements. These individuals require robust, long-term planning solutions that help grow and protect their wealth for future generations with succession and inheritance as their top priorities[i]. As they look to succeed in meeting these needs, they shape their families’ lifestyle and wealth allocation strategies across the globe, using their preferred country of residence and related corridors.
The EU is a good example of this as many of its members facilitate residence or citizenship by investment. For instance, Portugal is building its reputation as the easiest overall option for EU citizenship, Belgium offers EU citizenship tied to business relocation, and others provide citizenship routes for residents of former colonies.
The demand is not restricted to the more ‘western’ economies. As global growth is pushed by dynamic economies across Asia and the Americas, the number of millionaires and billionaires in these regions will continue to boom.
In an increasingly changeable world and often unpredictable global economy combined with political uncertainty, evolving family dynamics and wealth underline the true value and importance of planning ahead.
A myriad of benefits
Such intricate, super-connected, geo-flexible lifestyles also necessitate the need for greater financial accessibility i.e. being able to know, with confidence, that one’s family can access their wealth regardless of its and their location. Wealth corridors are often the means by which such requirements are delivered. From the point of preservation, wealth corridors are also an essential vehicle for enabling HNWIs to invest their wealth in jurisdictions other than those in which they are resident.
Beyond the financial benefits, the importance of the cultural and language advantages of being able to transfer wealth through jurisdictions which are more socially familiar to an individual is key. Being able to engage in an individual’s mother tongue and understand the nuance of cultural references and priorities is hugely advantageous.
Lastly, the use of such a framework can deliver much appreciated privacy, whilst at the same time ensuring that all necessary data is shared with appropriate regulators and authorities. For HNWIs in some developing countries, this can provide essential peace of mind.
Wealth corridors in the world of tomorrow
The pandemic has given many the opportunity to pause for thought. In a post-COVID world, wealth structuring and succession planning is only going to become more complex, with significant variations amongst generations in their priorities, aspirations, expectations, and attitudes towards what they want to achieve.
In many cases the desire to secure a route to protect and pass on their legacy has been accelerated. Not only are previously hyper-mobile individuals recognising that they may not have as much freedom to travel as they had prior to 2020, regulatory change, globally, is going to be influenced by the fall out of the pandemic and will likely move quickly.
As HNWIs’ look to succeed in overcoming these post-COVID challenges and shape their families’ lifestyle and wealth allocation across the globe, using their preferred country of residence and related wealth corridors sits at the heart of the solution.
[i] Attitudes Survey – 10 years perspective, by Wealth-X and Knight Frank, 2016