More On Tax Planningfrom The Advisor's Professional Library
- Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
A global, nomadic approach to personal and professional life is a key factor to the success of millionaires around the world.
Eighty-eight percent of millionaires who left their birth country in search success rated quality of life as important and 79% family cited needs, while 67% said business interests were a key factor, according to a new research report.
Wealth Through the Prism of Culture and Mobility, released Monday by RBC Wealth Management and The Economist Intelligence Unit, investigated the investment, wealth transfer and charitable-giving behaviors of individuals who lived, worked or spent more than half their time outside their country of origin and had investable assets of at least $1 million.
The report examined how their global paths influenced the key wealth decisions of internationally mobile wealthy individuals.
“As globalized economies converge, high-net-worth individuals have increasingly international footprints, with personal and professional interests in multiple geographies,” George Lewis, group head of RBC Wealth Management & Insurance, said in a statement.
“Our experience working with high net worth clients around the world shows that their success is often strongly influenced by a global perspective about building, protecting and ultimately transferring wealth to future generations.”
The survey found that 60% of internationally mobile wealthy individuals generated the majority of their income from their country of residence, and 48% invested the majority of their income back into that country; 32% invested primarily in their country of origin.
IMWIs took a similarly global approach to what they invested in, with 36% favoring global equities, compared with 25% of millionaires who had stayed in their home country.
Real estate topped the list of preferred asset classes for the internationally mobile wealthy, with 53% having it as a high or very high proportion of their portfolio. Those living in the Asia/Pacific region in particular invested heavily in real estate compared with their counterparts in North America and Western Europe: 31% versus 7% and 10%, respectively.
Mobile millionaires were also more likely to invest significantly in precious metals compared with their home-based wealthy peers (21% versus 13%).
The most common approach to wealth transfer, for 33% of respondents, was to leave enough to their family so they would be comfortable but still have to work for a living. But again, regional differences were telling.
Forty-one percent of those from Asia/Pacific were the most likely to leave all their assets to their families, compared with 27% of IMWIs from other regions. For their part, North Americans were the most likely to leave assets to charity, with 29% planning significant donations compared with just 11% of IMWIs from other markets.
Despite these varied plans, 37% of respondents did not have a will and 34% admitted to not fully understanding the tax regimes their assets were subject to, factors that might affect what their families and charitable causes would inherit.
Birth country influences charitable giving as part of an estate plan, but country of residence affects current donations among mobile millionaires, probably because of levels of government social spending and charitable tax benefits.
Seventy-six percent of North American respondents preferred to give where they lived, while 48% of those in Asia/Pacific were more focused on their birth countries, 38% to causes where they resided and 13% to causes in other countries.
Children’s charities received 27% of total donations from respondents followed by 13% for health, 12% for education and 11% for poverty reduction causes.
The study provided the following “fast facts” about internationally mobile wealthy individuals:
- They are generally self-made, having earned their wealth as professionals (29%), entrepreneurs (17%) or executives of public organizations (12%). Thirty percent grew up with wealthy parents.
- Millionaires aged 40 and under generated wealth through more diverse means, with only 17% earning wealth as professionals, compared with 26% of those in the 41-to-50 group and 41% of those older than 50.
- Respondents born in Asia/Pacific generated wealth at a younger age, with 46% aged 40 and under, compared with just 19% of those from other regions.
- Twenty-nine percent of residents of Singapore and 28% in the U.K. were most likely to have three or more personal residences, compared with 18% of those in Canada and 9% of those in the U.S.