Much Ado in the world of High Net Worth Individual Movement: Trends and challenges in 2016

As we head into autumn, 2016 already promises to leave behind a history of significant events. From Brexit to Schengen to global security challenges there is much ado in the world of High Net Worth Individual (HNWI) movement.

As the sun sets on Rio’s 2016 Olympics, we look at how Brazil fares against the rest of the world in HNWI growth and migration.

Compared to the growth of HNWI population in other parts of the world in 2015, Brazil performed poorly, losing 7.8 per cent of its HNWI population and 5.9 per cent of ultra-HNWI wealth (elsewhere ultra-HNWI wealth has gown more than the other wealth segments, both in 2015 and over the past four years)[1].

Regionally, however, Brazil has the highest number of HNWIs in Latin America and third highest among BRIC nations, and the growth of Brazil’s UHNWI population over the next decade is expected to outperform the global average, at 50 per cent[2]. WealthInsight forecasts that the number of Latin American HNWIs is expected to exceed 530,000 by 2019[3]. Brazil had the highest number of HNWIs with 198,000 in 2014, followed by Mexico with 148,000 individuals in the same year. Remarkably Latin American HNWIs held a higher proportion of their wealth outside of their home countries than the global average between 2010 and 2014, according to WealthInsight. Millionaires from Chile, Peru, Colombia and Argentina all held more than 33 per cent of their wealth outside their home country in 2014, while the global average was 20-30 per cent. Chilean HNWIs held the highest proportion of their investments outside their country at 38.4 per cent or USD100.5 billion in 2014, and it is one of the fastest growing in the region, recording a forecast compound annual growth rate of 4.8 per cent between 2015 and 2019.

Earlier in the year, it was reported that the downturn in Brazil’s local economy and rising crime rates are pushing many millionaires out of the country[4]. Key destinations for foreign investments include North America and Europe.

Turning towards developments in Europe, the full impact of Brexit remains uncertain. EU citizens residing in the UK are looking to cement their status through permanent residence and naturalisation applications for those eligible[5]. The UK remains attractive to HNWI, and UK’s Tier 1 Investor route may become increasingly popular for those who were planning to establish themselves in the UK through citizenship programs elsewhere in the EU.

Meanwhile, elsewhere in the region challenges have arisen for Tukey’s economy, with the fall of the Lira following the attempted coup on 15 July 2016. Turkey’s economy had been expanding year-on-year at the fastest pace since the third quarter of 2011 (while fixed investment was the main driver of growth, private consumption expanded at a slower pace and public spending shrank).

According to New World Wealth data, of the 100,200 HNWIs in Turkey with assets of USD 1 million or more, 5,200 HNWI have net assets of over USD 10 million. The HNWI number in Turkey has grown by 145 percent since 2000 and by 90 percent since 2005. Turkey’s HNWI numbers have been boosted by inflows from the rest of the Middle East and North Africa. There are 28 billionaires in the country with a population of 78 million; .Turkey is followed by the United Arab Emirates, which counts 72,100 HNWIs among its population. Israel has 71,700 HNWIs and Saudi Arabia has 59,000.

Prior to the events in July, the Turkish HNWI population was forecast to grow by 19.4 per cent, to reach 119,226 in 2020, while HNWI wealth has been projected to grow by 31.2 per cent to reach USD 768.2 billion[6].

The import of any political insecurity, an important driver of HNWI movement, on Turkey’s sizeable HNWI population will be one to watch in terms of outflows, with no capital controls currently in force, but also to see the impact on inflows and alternative destinations for those HNWI from the Middle East and North Africa previously moving into Turkey.

Author: Nadine Goldfoot, Partner, Fragomen Worldwide
www.fragomen.com

[1] https://www.worldwealthreport.com/Global-HNWI-Population-and-Wealth-Expanded

[2] https://www.knightfrank.com/wealthreport/2015/wealth-distribution/uhnwi-growth

[3] https://www.wealthadviser.co/2015/12/22/235007/wealthinsight-predicts-positive-future-outlook-latin-american-wealth-management-ma

[4] https://big.assets.huffingtonpost.com/millionaire-erevna.pdf

[5] See Migration Observatory’s Report on this for some interesting statistics: https://www.migrationobservatory.ox.ac.uk/commentary/here-today-gone-tomorrow-status-eu-citizens-already-living-uk

[6] https://www.businesswire.com/news/home/20160725005934/en/Turkey-Wealth-Report-2016—96768-HNWIs