The number of HNWIs investing offshore is on the rise. Global Data’s most recent HNW Offshore Investment Survey shows the number has risen from 11.2% in 2014 to 16.9% in December 2018. This increase may be surprising for some since it comes in spite of recent data leaks, including well-publicized ones like the Paradise Papers. But more HNWIs than ever are looking for new places to store their wealth offshore for a range of beneficial reasons, including global diversification and achieving greatest tax efficiency.
A closer look at the survey’s findings
So, what else did the survey reveal? 24% of European investors offshore the largest proportion of their wealth in order to achieve tax efficiencies. And a larger 41% of North Americans invest the largest proportion of their wealth offshore to diversify. On a global scale, the survey also found 17% of total HNWI wealth is invested outside of the investor’s country of residence. Additionally, 48% of global HNWI wealth is held via equities, 18% via bonds, and 16% via property.
The changing financial landscape
According to Heike van den Hoevel, a senior wealth analyst, it’s essential to understand the specific reasons why HNWI investors choose to offshore their wealth in order to capitalize on this rising proportion of offshore wealth. “This means providers have to focus on uncorrelated or less correlated risks when promoting offshore investments to potential clients,” van den Hoevel explains. Ultimately, while the need for solid tax advice is ever-growing for the super-rich, the days of secrecy and risky and illicit structures are also long gone. As a result, wealth managers are now faced with tougher challenges since governments around the world are getting stricter and have cracked down on legal loopholes.
Safe and legal investment or trading advice
Tax-efficient and legal methods of both investing and trading are now imperative. Another recent example of a clamp down are the new rules for CFD trading. But many CFD traders are welcoming these protective changes as a way of maximizing their profits and avoiding heavy losses on complex financial instruments. Since lower leverage is also now used, the reputational and financial loss that comes with scandals can therefore be well avoided.
Global Data’s survey shows us demand for tax advice has steadily increased over the past few years. Financial planners must therefore do their due diligence, carefully vet offshore structures, and give comprehensive advice covering multiple jurisdictions. This way investors can receive the most effective investment advice which minimizes their tax liabilities.