Puai Wichman, CEO and Founder of Ora Partners – an international trustee and wealth solutions firm.
The global migration of millionaires is back. The number of high net worth individuals choosing to relocate to a new country has rebounded from the lows seen during the Covid-19 pandemic, potentially reaching record numbers in 2023, with more than 120,000 high net worth individuals expected to move to a new country this year. The reasons for the relocations are varied, often including a combination of economic, geopolitical, lifestyle and climate factors. Whatever leads to the decision, a foreign move is a complicated matter for any client, and the asset management of a millionaire adds to the logistical and strategic complexity.
Wealth managers and advisors can play a pivotal role in ensuring the transition meets the client’s financial goals. Here are three ways advisors can ensure that client assets are protected during a move abroad.
1. Update financial plans while reducing decision fatigue.
It can be expected that a high net worth client will already grasp many of the financial nuances of their pending relocation. However, clients likely also understand that, with the overwhelming details of an international move, they will need to lean on trusted professional expertise. This presents an opportunity for advisors to strengthen the client relationship, but professionals should be cautioned to remain focused on the task at hand.
Keeping in mind that decisions should be kept straightforward, the preparation for client conversations around the move may be more extensive than a typical meeting, so plan on extra prep time. This is probably not the meeting to talk about what’s going on in a certain market segment, reevaluate the client’s environmental, social and corporate governance (ESG) preferences or dive into performance metrics. Instead, wealth managers should be well-informed and prepared for conversations around the following topics:
• Any financial strategies or business opportunities that the client is seeking to leverage via the relocation.
• The client’s long-term intentions regarding the move and residency status (whether permanent or temporary).
• The client’s intentions to keep any assets in their home or current country of residence, along with any applicable liquidation plans for assets.
• The client’s understanding about the differences in tax regimes.
2. Ensure that their assets are protected during and after the transition.
While specific asset allocation discussions can wait until a client has settled into their new home, the legal safeguarding of assets should be incorporated into the transition plan right away. Advisors can help clients understand how laws in their new country may impact the way their asset ownership is treated. In most cases, moving abroad will likely require a client to reconsider the legal ownership of their brokerage accounts and assets. Wealth managers can help clients set up airtight offshore trusts in dependable jurisdictions. Offshore trusts can offer legal and privacy protections as the client transitions to a new country with different and potentially detrimental laws on asset ownership, such as forced heirship laws or aggressive personal liability laws.
3. Help mitigate any blind spots or behavioral finance biases.
When high net worth individuals relocate abroad, they may be influenced by several cognitive biases that can impact their financial decision-making. Common behavioral finance biases that may come into play during a move abroad include:
Your client may express a bias for the initial information they received that spurred their desire to move abroad. For instance, they may anchor their expectations on initial cost estimates, business prospects or taxation policies. These factors may be outdated or inaccurate, potentially leading them to underestimate or overlook the true cost and expenses of moving. Advisors can help align client expectations with the reality of current costs and economic climate.
In the context of relocation, a high net worth individual might be inclined to seek out information that supports their decision to move, potentially overlooking potential downsides or risks. If your client has entrusted you as a fiduciary and advocate, you have the duty and the opportunity to help them see both the pros and the cons of a move and its financial consequences.
This is the tendency to overestimate the likelihood of positive events and underestimate the likelihood of negative events. Optimism bias often leads high net worth clients to be overly optimistic about the financial benefits or lifestyle improvements associated with the move, which can be particularly risky when moving to a less familiar environment.
Watching out for clients’ blind spots and mitigating unsound assumptions or biases is not about forcing an uncomfortable or confrontational conversation. Simply being aware of potential biases, stressors and hopes of a move abroad can help advisors ground their plans and recommendations in reality. The trust built from sound advice can help ensure a continued relationship with a client as they settle into their new home and country.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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