The international portability of wealth will be crucial in navigating the complex world of tomorrow
By Stuart Parkinson (pictured), Group CEO, Lombard International – As we head towards the end of an infamously volatile year, we continue to live in rapidly changing and uncertain times, be it geopolitics, the global economy, or evolving international regulations. While there is no silver bullet to navigate uncertainty, the value in foresight with regards to wealth and succession planning, is ever more important and significant. High Net Worth (HNW) families have much to consider, balancing their shorter term lifestyle needs, against the needs of their family construct and, over the longer term, the legacy they wish to leave behind.
While the impact of the pandemic has temporarily limited the freedom of travel, HNW families, who typically have a geographically diverse footprint, internationally distributed familial and business responsibilities and live cross-border lives, will remain ‘world citizens’. Many wish to diversify their financial interests across multiple geographical regions in order to support their wider family who may be studying or working abroad, or to spend extended periods of time in different countries of which they may or may not be resident. The complexities of these lifestyles also mean that individuals and families require the ability to access their wealth with confidence, without their physical location or their wealth’s location impeding this accessibility.
Covid-19 has and will have a lasting impact on tomorrow’s global economy, and, as a result, we may see further changes in legal and tax regulation. This in turn may impact and require HNWIs, entrepreneurs and wealth creators to review their plans and ensure they have prudent and up to date wealth and succession planning strategies in place.
In the uber-connected world in which we live, a growing range of countries and jurisdictions offer HNWIs a seamless, reliable, compliant, and secure investment ecosystem, with robust solutions being built in response to a portability demand that shows little sign of abating. With businesses and entrepreneurship flourishing across Asia and the Americas, the number of HNWIs in regions across the world continues to rise. A recent report from Swiss bank UBS outlined that billionaires increased their wealth by 27.5% from April to July 2020, mostly benefiting from the recovery of global stock markets. But developing and emerging countries’ political and economic volatility means that successful businesspeople have an ever more complicated range of factors to bear in mind when considering their short, medium, and longer-term financial planning requirements.
Let’s consider two scenarios:
The portability imperative: Asian entrepreneur emigrating with family to the US: A successful, semi-retired Taiwanese entrepreneur is married with three adult children, with the majority of their family wealth comprised of their family business’ publicly listed shares. The three adult children plan to emigrate to the US in the near future. The essential need for the client is to be able to pass on their assets and legacy to family members who will be internationally spread across a number of different countries.
The entrepreneur is keen to transfer ownership of her own shareholdings to her family in the most efficient way possible. Working closely with their advisors, a Private Placement Life Insurance (PPLI) contract delivers the much-required cross-jurisdiction portability, further ensuring the family can invest in a broad range of diverse assets, including real estate funds and private equity opportunities. The solution also includes beneficiary clauses that identify the children and respective grandchildren and allows the clients’ wealth to be transferred across generations, while maintaining trusted banking relationships.
The flexibility imperative: The international professional athlete: While most professional careers span 35 years, an athlete's is likely to be around just 10 years, ordinarily working and living in at least 2 countries during that time. This results in the emergence of multi-asset wealth scattered across multiple borders and jurisdictions. While moving from one country to another, professional athletes must ensure they are not disadvantaged due to insufficient planning. Expert wealth planning can actively support their desired long-term outcomes.
HNWIs and their families need wealth solutions that tackle these challenges comprehensively, while also being simple, adaptable, and capable of protecting against both the uncertain and the unknown. As wealthy individuals become more internationally mobile, they need relevant diversification and management of assets strategies that are fully compliant across multiple jurisdictions and benefit from security and accessibility.
Unit-linked life insurance based solutions, for example, can deliver such benefits. As an internationally recognised cross-border wealth structuring tool, that is growing in popularity with the wealth advisers, unit-linked life insurance is able to address the growing needs that investors have in protecting, preserving and passing on their wealth across asset classes and geographies.
Moreover, it is often more reassuring for wealth to be transferred through jurisdictions which are more socially conversant to an individual. In addition to being able to operate in a familiar language, understanding the nuances of cultural references and priorities ensures a greater level of confidence, delivering much needed peace of mind.
Wealth advisers have an important role to play – they are the confidants, the solution finders, and the match makers, ensuring the wealth of today continues to help fund innovation, entrepreneurship, philanthropy, employment and the communities of tomorrow.