As economies become more globalized, advisors find that high net worth clients have increasingly diversified needs spread out around the world. Some may have a business outside their home country, families in another and will move another time or two before they retire, which adds complexity to investing and estate planning, according to a recent study commissioned by RBC Wealth Management.
“As globalized economies converge, high net worth individuals have increasingly international footprints, often with personal and professional interests in multiple geographies,” George Lewis, group head of RBC Wealth Management and Insurance, said. “As one’s wealth increases, so too do the complexities involved in protecting and ultimately transferring wealth to future generations, particularly when multiple jurisdictions are involved.”
Many internationally-mobile wealthy individuals, which RBC defines as someone who lives, works or spends more than half their time outside their home country and has more than $1 million in investable assets, got to where they are through entrepreneurship, according to the Economist Intelligence Unit survey. Respondents most frequently reported that their income came from work as a professional, an entrepreneur or an executive of a publicly traded company.
“It’s this sort of global way of looking at their future and how they live their lives, how they manage their lives, how they think of their personal and professional goals. It’s a global lifestyle,” Mary Zimmer, executive vice president and head of the U.S. division of international wealth at RBC, said in a phone interview. “Global mobility is a way of life.”
Their view toward investing is also global, according to the survey. Twenty percent invested most of their assets in countries outside of their origin or residence compared to 9% of peers who kept their investments closer to home. Almost half, 48% invest in their country of residence and about a third, 32% invest in their country of origin.
“An increasingly higher and higher portion of internationally mobile portfolios are seeing that [investment in global equities],” Zimmer said.
Real estate was the most popular asset class investment, especially among the international high net worth clients in the Asia-Pacific region of whom 68% said that property comprised a “high” or “very high” portion of their investment portfolio. These investors are also poised to make more global investments in currency as nearly half, 48%, said that they had investments in three or more currencies.
Estate planning was more complicated, however, according to Zimmer.
“Many of them don’t think of themselves in the estate planning mode because they’re so much still about building a business or developing careers,” Zimmer said. “Part of our job is going to be to help them think about planning even in the earlier stage of their lives.”
Over a third, 37%, of respondents lacked a will and only 36% reported having a trust and 9% had a foundation.
“Many of them don’t necessarily have wills in place, but have very highly complex situations given that they’re business owners or have connections to many countries,” Zimmer said. “Many, at least as it pertains to U.S. people, but generally speaking, feel that just trying to maneuver through a complex tax system is almost overwhelming.”
Finally coming full circle, their country of birth had the biggest impact on their estate planning, according to the survey.
“Those from developed markets are most likely to divide their estate between family and charitable causes,” the study explained. “Whole those from developing-country backgrounds are more likely to leave their entire estates to family members.”
According to Zimmer, the survey jives with much of what she has seen on the ground in her own work and the firm will continue to investigate the needs and interests of these internationally-mobile wealthy individuals as it increases its focus on bringing in global high net worth clients.
“There’s clearly things we can learn about how best to service clients who have complex wealth accumulation and then wealth planning and estate planning needs,” she said.