Less than a quarter of HNWs invest offshore for tax reasons

Added 24th June 2016

Only 23.2% of global high net worth (HNW) wealth is invested offshore for tax reasons, according to financial services research and insight firm, Verdict Financial.

Less than a quarter of HNWs invest offshore for tax reasons

While tax is the second strongest driving force to invest offshore, it sits marginally behind gaining access to a greater or better range of investment options, cited by 24.1% of global HNWs.

The firm found that wealth managers need to gain a deeper understanding of the drivers that are prompting HNW investors to look for new places to store their assets and wealth.

However, while reducing one’s tax bill is certainly a consideration for many HNW individuals looking at offshore investment - especially among those in countries with high tax rates or a complex tax system - it is not necessarily the primary consideration.

Senior analyst Heike van den Hoevel notes that, fuelled by recent scandals and increased media attention, the word "offshore" is overwhelmingly associated with tax avoidance or even evasion.

No single reason

She explains: “Wealth managers need to understand that there is no single reason driving HNW offshore investment, and that providers have to factor in pronounced regional differences when designing their offshore propositions.

“For example, German HNW investors, who traditionally only invest a small proportion abroad, have been increasing their offshore holdings, mainly due to the lack of returns that can be earned at home, while HNW individuals in South Africa have been eager to channel wealth offshore to escape currency volatility in their own country, which suggests that offering hedging tools is essential.

“Verdict Financial believes that local wealth managers would do well to offer a wider range of investment funds providing exposure to international markets to avoid losing funds to offshore providers. On the flipside, providers looking to attract offshore wealth should highlight more beneficial investment conditions in their country,” she said. 

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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