Diversify to Grow
Titan of industry is not a term that is easily attributed. Austin Fragomen could lay claim to this title, but it is certainly nothing he would ascribe to himself. However, with more than 4,200 employees, offices in almost 30 countries and a ranking as one of the top 60 legal firms in the US, it is a title that sits easily with someone of his calibre. The IM Yearbook spoke to him about the major trends currently influencing the investment migration industry and how the sector will evolve over the next years.
Fragomen is widely seen as the leading law firm focused on providing immigration services worldwide. How was 2018 for your firm and what initiatives are high on your agenda for 2019?
2018 was a good year for Fragomen. We grew by around 10% and are now one of the biggest firms offering immigration services. We are number 80 on the list of the world’s largest law firms, and in the US, we are ranked number 60. From individual private clients and small local businesses to the world’s largest companies, we offer support and advice on all immigration needs. In terms of investment migration and our private client practice, we are experiencing big movements mainly due to the changing dynamics in the mainland Chinese market. Thus far, mainland Chinese nationals very much dominated the investment migration industry, which is particularly true when it comes to immigrating to the US. Given the current difficulties and restrictions, key stakeholders in this industry are eager to reduce the reliance on the mainland Chinese market. Hence, one of our top priorities is diversification. We are further building and developing our referral networks and forging new relationships with corporate service providers, accountants, lawyers and real estate experts in a number of new jurisdictions. At the same time, we are educating potential mainland Chinese clients who may be interested in locations other than the US, since we offer immigration services into over 150 countries.
Geographically, where exactly are you planning to expand?
India is interesting; it is a massive market. We are very well connected in India because on the corporate side of our business we already represent a number of major companies, particularly in the Indian IT space. We have around 500 people working for us in India, and are the dominant service provider in that space. So we work off our considerable contacts and organise seminars in different cities and so forth. In general, we are particularly interested in Southeast Asia. We have been doing a lot of marketing not only in Vietnam, Indonesia and Thailand but also in Malaysia, which has a very interesting programme based on real estate. We have an alliance with a very strong regional law firm based in Kuala Lumpur with offices in many southeast Asian countries. In addition, we consider South Africa an interesting market, and we continue to do a lot of business in South America, particularly in Brazil and Mexico.
Some say Africa is the rising star of the future. Do you agree?
In Africa you have many developing nations and some interesting frontier markets, such as South Africa and Nigeria, which are further along and interesting. But is the whole of Africa the way to the future? I don’t think so.
In terms of your marketing efforts, are digital channels playing an increasingly important role in acquiring clients?
I still think that the traditional referral networks will remain the main channel to generate new business as opposed to digital media. Word of mouth still resonates with high-net-worth individuals and their advisory network.
There is a general anti-immigration trend that is currently permeating immigration policy around the globe. The bottom line is that countries are becoming more restrictive, and programmes will most likely become more expensive. Take the USA’ EB-5 visa as an example. There are executive branch proposals that the investment threshold should be raised from $500,000 to $1.35 million. This means investment migration will not remain as attractive to the mass affluent market as it is today. The industry will lose those successful middle-class mainland Chinese clients who have really driven the market so far. In my opinion, the client profile will change, and the focus now and in the future needs to be on attracting high-net-worth and ultra-high-net-worth individuals, as those will be the clients who will continue to afford these programmes. This changing client profile also affects our marketing measures. We are dealing with more sophisticated, wealthier people, and attracting them through social media is not going to work.
There are a number of programmes that are using price as a lever to attract a broader spectrum of applicants. Do you think these programmes will be an attractive choice for candidates of more modest means?
The US and the UK are still among the top destinations for many of our clients. However, we have seen numbers drop for the UK programme since the investment threshold was raised a few years ago. So, yes, we are definitely seeing the emergence of a second tier; programmes such as those of Malta and Cyprus are receiving a lot of interest. These countries might not be a client’s first choice, but they make a lot of sense if the goal is to get access to the European Union.
Then there are a number of countries with much lower entry requirements, but I would argue that they are also less desirable destinations for most. I am not convinced that getting citizenship of a Pacific island nation is going to be the best solution, especially not if visa-free travel is the main objective. One of the other big developments that we are seeing is that international organisations such as the EU and the OECD have come out against economic citizenship programmes. The question remains if and what actions will follow. Would the EU for instance curtail visa-free access for individuals from certain countries? This would definitely be a game changer.
What would you highlight as the other most noticeable trends at the moment?
The hot news is the emergence of entrepreneur programmes, which are becoming increasingly popular. However, the problem in my opinion is that no one has really defined what an entrepreneur is. What happens to an entrepreneur should the business not take off? Then you just have another immigrant who doesn’t have any money. There are obviously ways to deal with it, including granting only provisional residency rights until such time the entrepreneur proves his/ her business is successful. I think some of these entrepreneur programmes need to be tweaked a little. However, there is certainly a market for those programmes.
On the other hand, I think the political support for anything that includes ‘buying status’, and particularly passports, is decreasing. There is too much negativity around that, and I think it will be difficult to get new citizenship programmes off the ground. I believe new pro- grammes will be leaning more towards residency rather than citizenship. In addition, more programmes will be designed to create employment and economic activity, while programmes just requiring a cash donation to government will be harder to justify in the future. The political environment is more frightening than many people may realise. That is true for migration in general. The number of migrants in the world keeps growing due to issues such as poverty, famine, economic crisis, wars and so forth. The rhetoric surrounding these issues has definitely created a negative climate, and this has a real effect on the entire industry.
What is your outlook for the investment migration industry over the next five years?
Despite the difficulties we talked about, I am still bullish on the market for this type of investment. It is positive that there are presently more people interested in these programmes than there were a few years ago. I also believe the high demand for these programmes will be a counterforce to the more restrictive trend that we are witnessing, and it will ultimately drive government policy.
Interview with Austin Fragomen Jr, Chairman and Partner at Fragomen, USA
Source: IM Yearbook 2019/2020