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Merged Wealth House Eyes Opportunities In HNW Expat Market

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We talk to a recently merged business, with footprints in Asia and the US, about the kind of issues arising from wealthy expats looking for more options in an uncertain world.

Serving the needs of expats continues to be a challenging but lucrative sector for international wealth and private client firms. With geopolitical troubles often making front-page news, there’s also plenty of incentive for HNW individuals to think hard about where they want to live. 

The business of helping expats to negotiate the reefs and shoals of different jurisdictions’ rules is a well-trodden one for The Capital Company, a business with a strong Asian footprint that recently merged with US firms LeoGroup and BFT Financial to form Leo Wealth. The enlarged group unites players from New York, Hong Kong and Dallas Fort Worth.

Chinese people – including those in Hong Kong – are looking for “a back-up plan,” Jessica Cutrera, founding partner of The Capital Company and now president of Leo Wealth, told this news service. 

“The US is still one of the top destinations. There is still a lot of interest in US real estate and in US trust structures,” she said. 

That there is an outflow from certain countries cannot be denied. In 2019, 4,200 Hong Kong HNWIs migrated from the country leading to a loss of 3 per cent of its HNW population (source: India Times, AfrAsia Bank, 17 June 2021). In 2019 more than 16,000 Chinese and 7,000 Indian HNW people left their respective countries, accounting for a two per cent loss of their HNW population. However, relative outflow from Russia and Turkey was higher at six and eight per cent, respectively. (Data for 2020 appears harder to pin down and of course physical movement has been severely constrained by the pandemic since the start of 2020). 

And HNW migrants realise that they need to have their tax and other financial affairs in order, considering the heightened desire by governments to levy taxes and repair COVID-ravaged public coffers. Some people eyeing the US as a new home, for example, might not fully appreciate how the Internal Revenue Service taxes US citizens/Green Card holders on a worldwide basis. Once you’re in the embrace of Uncle Sam, it’s a struggle to break free if you change your mind. With other countries, there can be complications or obligations that need to be thought about. 

There is, Cutrera said, more awareness around the world about “tax responsibility.” “With information sharing and big data, people are a lot more concerned about tax compliance matters. The framework of all of this is often overwhelming to people,” she said. “There are more people thinking about planning.”

In Asia, there are firms that work with US expats, for example some of the larger banks, wealth managers, and some specialist firms. “There are firms in Switzerland that do this work in the private wealth space. In Asia, most [firms looking after US expats] tend to be private equity and hedge fund firms. It is still a challenge in Asia,” she said. 

Some Asian HNW clients see opportunities to educate their children in the US and experience Western culture. “They want optionality,” Cutrera said.

It is not just Hong Kongers, for example, who are thinking about reassessing where they live.

“We have also contacted families in Thailand and Malaysia and they are interested in having more options outside their home countries…it is about having more choices,” she said.

One consideration is that HNW individuals and their families have complex financial affairs that need to be straightened out. This speaks to a kind of “project management” role that many wealth managers, if they are doing their jobs properly, need to perform to help clients.

“We have run into a number of people where they need some clean-up work after they received some bad advice…they got into some complex situations,” Cutrera said. 

Asian growth
The rise of Asia as a financial powerhouse means that HNW individuals from the region who want these jurisdictional choices form a lucrative market. After the three firms merged into Leo Wealth, they had $4.3 billion of assets to manage. And this kind of business has the footprint necessary to serve those with Asian and US connections: Leo Wealth is licensed by the Securities and Exchange Commission and by the Securities and Futures Commission in Hong Kong.

Another trend that Leo Wealth’s executives see is the growing importance of onshore wealth management in Asian jurisdictions where in the past money was handled offshore.

“We are seeing more of an onshore wealth management market in Thailand and Indonesia. We are seeing more people creating family offices in Singapore and some also in Hong Kong,” Harmen Overdijk, chief investment officer at Leo Wealth, told this publication in the same interview.

The firm also has the capabilities for helping people who want to build family offices or who already run them. Leo Wealth likes this kind of client, Overdijk said. 

“We would rather deal with licensed counterparties…they take a more professional approach in using services such as ours. A lot of these families are to be found in private equity and real estate deals…they use family offices for liquid portfolios and look to us for advice,” he said. 

Cutrera weighed in on this theme. 

“For family offices, we are their go-to when they have questions,” she said. Leo Wealth is looking to partner with FOs such as those from China.

A part of the phenomenon of wealthy people seeking options is that of “golden visas”, aka citizenship/residency-by-investment programmes operated in a number of countries, including the US, with its EB-5 Green Card system. There are dozens of these programmes around the world, in jurisdictions such as Portugal, Spain, Malta, the UK, a number of Caribbean Islands and Singapore. These golden visas have been criticised at times for being an alleged conduit for dirty money. Canada, which had such a programme, mothballed it about six years ago amidst complaints it was causing severely inflated real estate prices in cities such as Vancouver.