Private Wealth Migration Trends among Indian HNWIs: Navigating Opportunities and Challenges

“Act in haste, repent at leisure” is unfortunately an adage that resonates with many high-net-worth individuals (HNWIs), ultra-high-net-worth individuals (UHNWIs), and family-owned businesses that hastily migrated from India during the global pandemic. Many exiting families did not have the luxury of time to consult professional advisers, or create sustainable cross border estate and succession plans, whilst others were keen to temporarily relocate to friendlier jurisdictions for reasons that were not just financially driven.

With a specific focus on India, the concentrated attention on economic advancement in diverse sectors, including infrastructure development and the emergence of technological startups, has played a pivotal role in fostering the impetus of the economy and facilitating the generation of wealth within the nation. Consequently, this has led to a noticeable upsurge in the population of affluent individuals in India; and with projections of the HNWI population expected to rise by 80% in 2031, ensuring adequate wealth management is more pertinent than ever.

Whilst global mobility amongst Indians (as the recent data produced by Henley & Partners illustrates), did indeed witness a massive surge during the pandemic, it interestingly shows no signs of abating in the near future, despite a slight decrease in net outflows, as the forecast net outflow for 2023 has been ranked the second highest globally.

A variety of factors may well be attributable to these statistics which although have decreased slightly since 2022, remain consistent. Prohibitive tax legislation coupled with convoluted, complex rules relating to outbound remittances that are open to misinterpretation and abuse, are but a few issues that have triggered the trend of investment migration from India.

The exodus of big money from India: Where are these HNWIs going? 

The recent unsettling British ‘Non-Dom debate’ triggered by unprecedented political volatility, coupled with rising debt, a dysfunctional healthcare system, high crime rates, and a general sense of lingering malaise, has clearly tarnished the lustre of London for many wealthy Indians.

Dubai and Singapore remain preferred destinations for wealthy Indian families. The former, also known as the “5^th City of India”, is particularly attractive for its government-administered global investor “Golden Visa” program, favorable tax environment, robust business ecosystem, and safe, peaceful environment. The 2023 forecast for the net inflow of HNWIs is 4,500, which is 50% higher than the former peak in 2016. Singapore has also been renowned as Asia’s top wealth hub, with a forecast net inflow of 3,200 in 2023; the highest on record. Portugal has also been the recent recipient of significant wealth from the Indian diaspora, but perhaps that too has reached its maximum potential, considering the announcement regarding the termination of the illustrious Portugal Golden Residence Permit Program, which had attracted significant investment in Portuguese real estate and other ventures by HNW Indians. Nevertheless, it is worth noting that golden visas for entrepreneurial pursuits will continue to be accessible for those with a keen interest in such opportunities.

“Plans are nothing; planning is everything.”¹

Regardless of your ultimate destination, adequate exit planning, pre-arrival tax planning and cross-border advice are crucial pre-requisites to ensuring successful and sustainable wealth migration. Choosing the right professional advisers in each jurisdiction at the outset is critical. A lack of advice, “paralysis by analysis” (being over advised), or just plain bad advice, are so often among the reasons that many families set themselves up to fail.

Seek advice from those who are true experts in their own right. Avoid those who take a “one size fits all” approach, or those who try to do it all themselves for a “fixed fee”. A successful cross-border estate and succession plan requires the collaboration of expert tax and legal advisers in each jurisdiction. Each family will require bespoke professional advice; there really is no back of the envelope solution that magically works for all. The sooner one engages professional advisors, the better. Leverage your trusted advisor’s professional network to your advantage, so that the end result is a cost-effective, robust, bespoke, global estate and succession plan that has taken into account as many of your objectives as possible.

Continual adaptation: Flexibility in wealth structures

Above all however, the plan must be devised with an adequate degree of flexibility, rendering it capable of modification and adaptation, if an unforeseen event takes place.

Succession plans that are frequently revisited, reviewed, and revised ensure flexibility, facilitate the smooth transition of wealth, and minimize disruption for a family. Wealth preservation structures must be able to accommodate changing family dynamics, growth, and diversification. Family governance practices, such as implementing family constitutions and charters, have grown in sophistication and importance.

The importance of clear communication and inclusive consultation

Legacy planning goes beyond merely having a will; it requires a comprehensive succession plan. Clear communication, competent advice, and inclusive consultation with all family members are key to successful succession. Engaging the next generation at an early stage, embracing family governance practices, and curating a family charter through an inclusive consultative process are critical to continual family harmony and the successful preservation of ancestral wealth.

Opportunities in the UAE for wealthy Indians in estate and succession planning — Family offices and foundations

Depersonalization of wealth through consolidation and preservation is a significant opportunity for HNW Indians. With liberalized outbound investment regulations introduced in India in 2022, business families can benefit from overseas expansion and international trade opportunities.

The UAE continues to be an attractive international financial center. The wealth management solutions that it offers private clients, be they HNWIs, UHNWIs, or prominent business families, are truly remarkable. With access to two common law international financial centers (that also host a range of highly active sovereign wealth funds), a variety of freezones including those that regulate the ownership of virtual assets, a liberalized economy facilitating independent ownership in most sectors and choices as to where family offices can be established, the UAE undisputedly provides a holistic solution for many.

The recent entrant to the Middle East family office network is that of the Ray Dalio Family Office, which strategically chose the UAE to establish its regional hub so as to leverage and benefit from the buoyant ecosystem and regional trade and investment opportunities.

Foundations are an incredibly versatile wealth preservation solution that permits a family to retain ownership, control, and management of the underlying portfolio of assets, unlike trusts. A hybrid of a company and a trust, foundations were thoughtfully introduced into the UAE as the optimal solution to preserve wealth historically amassed by regional families, who prefer to remain involved in the management of their businesses, yet who also understand the importance of smooth transition of such wealth. Since their inception in 2018, there are now more than 715 foundations throughout the UAE.

Experts will concur that if structured properly, an estate and succession plan will include both the foundation, which ensures unfettered sustainable accumulation and ownership of wealth for the entire family, and a family office, which acts as the executive arm, carefully deploying and investing such wealth.

The wealth management Industry continues to develop within India and beyond. Access to competent advisers, seasoned professionals, and their respective networks is far easier for clients than ever before. Investment migration is an excellent route to growth and diversification for family businesses, provided the planning has been carefully carried out and executed in the right way.

References

¹ Dwight D. Eisenhower, “A speech to the National Defense Executive Reserve Conference in Washington, D.C., November 14, 1957”.