High Net Worth Individuals (HNWIs) have always had the ability and resource to shift the needle on investment strategies, leveraging their unique financial position and insight to predict the next big market trends, capitalise on them and thus secure (and increase) their wealth. Over the last century, the landscape of HNWI investments and strategies has naturally shifted, being shaped and influenced by economic factors, technological advancements, and evolving societal trends and norms.
Traditionally, HNWIs favoured conservative, what would be considered ‘classic’ investment routes (such as stocks, bonds, and real estate). However, in recent years there has been a significant shift from these conventional avenues; HNWIs are increasingly looking to diversify their portfolios by exploring alternative opportunities. This shift is not only due to the evolving nature of the investment landscape (big disruptors such as crypto have significantly altered the investment environment in recent years), but also HNWIs are now interested in investing in avenues that bring lifestyle benefits and global mobility, rather than just financial returns.
The past decade has seen a significant evolution in the type of investments that HNWIs are making, with many factors being considered the driving force behind these changes.
Historical perspectives on HNWI investments
When observing historical trends, HNWIs primarily invested in tangible assets such as land, property, and industrial ventures; this was natural as more ‘conceptual’ investment routes had yet to be introduced to the public lexicon. However, the invent and rise to prominence of Wall Street in the early 20th century saw the beginning of a new era of investment opportunities, as HNWIs began to embrace the stock market as a legitimate means of investing and earning money.
The post-war era again experienced a shift in investment avenues, with things such as mutual funds, hedge funds, and venture capital gaining popularity. While these new investment routes gave HNWIs access to a broader range of investment opportunities, there was still loyalty toward traditional asset classes (such as stocks and real estate). However, as the years progressed, HNWIs continued to explore the new avenues for growth and diversification.
The shift in recent years
In recent decades, there has been a significant shift in the investment strategies of HNWIs, driven by changing geopolitics, access to new and disruptive technologies and evolving trends. While traditional asset classes remain (and will likely never stop being a cornerstone of HNWI portfolios), there has been a growing interest and investment in alternative avenues that offer unique benefits and opportunities for growth.
One notable trend is the increasing popularity of investment migration programs, such as the U.S. EB-5 Immigrant Investor Program, Portugal Golden Visa, and Canada Start Up Visa, which offer HNWIs the chance to obtain residency or citizenship in exchange for investment in the host country’s economy.
Additionally, the rise of digital assets and cryptocurrencies has opened up new possibilities for HNWIs to diversify their portfolios and generate significant returns. Despite their potential for volatility, digital currencies such as Bitcoin, Ethereum, and many others have garnered widespread attention in recent years, with HNWIs increasingly seeing them as legitimate ways to secure and appreciate their capital. The decentralized nature of cryptocurrency offers HNWIs a level of financial autonomy and privacy that traditional investments simply cannot match, making them an attractive option for individuals who are looking to increase their wealth in the digital age.
The U.S. EB-5 Program
So why are we seeing an increase in HNWIs investing in secondary passports and citizenships in recent years via programs like The U.S. EB-5 investment immigration program? Established in 1990, the EB-5 program offers investors the opportunity to gain permanent residency in the United States, in exchange for investing in job-creating businesses. To qualify for the program, investors must invest a minimum of $800,000 in an enterprise that creates or preserves at least 10 full-time jobs for U.S. workers.
To invest in an EB-5 project, the individual must first secure a Regional Center through which they can invest. Investment through a Regional Center involves committing capital to a USCIS-approved entity, that pools funds from several investors to finance large-scale projects. Regional Centers typically focus on industries such as real estate development, infrastructure projects, and hospitality – although this has also been diversified in recent years to other types of businesses.
One of the key advantages of the EB-5 program is that it offers not only the investor, but their whole family (their spouse and any children under the age of 21) the opportunity to secure a green card and become a resident of the U.S. This green card gives them the legal right to live, work, and study anywhere in the USA, as well as access to a whole host of benefits that come with being a citizen of the U.S. These benefits include access to healthcare, education, and retirement programs.
Another key advantage for HNWIs is that the EB-5 investors are not required to actively manage the day-to-day running of their project investment, meaning that once in the U.S. they can pursue other avenues/business interests as they see fit, whilst somebody else manages the EB-5 project. This means that they also have the option of living abroad (continuing to work or manage their foreign businesses), whilst maintaining U.S. residency for their families.
These advantages are particularly pertinent when considering why we are seeing a shift toward citizenship investments by HNWIs. Typically, wealthy individuals value not only capital, but convenience too. The freedom that comes with a second passport is difficult to achieve via any other means, and having the ability to travel freely between continents to conduct business is one that cannot be overstated. Aside from that, the familial benefits are also extremely advantageous, with many HNWIs choosing to put their children through the world class U.S. educational system in order to set them up for future success
Further advantages of a second passport
Holding a second passport or citizenship opens up a pathway to many advantages that would otherwise be extremely difficult to obtain, and these advantages are particularly beneficial to HNWIs looking to increase their capital whilst also enjoying global freedom of movement. Having dual citizenship provides HNWIs with a high degree of global mobility, allowing them to travel freely between countries without being slowed down by the application for visas or residency permits. Freedom of movement is a particularly valuable asset for business professionals and entrepreneurs, giving them the ability to take advantage of international markets and the exploration of new business opportunities abroad.
Additionally, holding a second passport provides a valuable safety net in times of political instability, economic uncertainty, or social unrest in an individual’s home country. In these situations, an EB-5 investor could move their family to the U.S., ensuring their safety and security. These conveniences are often held in the same regard as financial gain in the eyes of HNWIs.
EB-5 investors will also gain access to the U.S. job market and educational system, opening up a wealth of opportunities for professional growth and personal development for their entire families. Increasingly, HNWIs are exploring the EB-5 program on behalf of their children, to give them the opportunity to study in the world class colleges in the U.S. at extremely reduced citizen costs (when compared to international student fees). Residency also means that the children will not need to apply for the vastly oversubscribed H1-B visa in order to work in the U.S., as the EB-5 visa gives them the right to live and work in the U.S. immediately post-graduation.
Finally, HNWIs enjoy diversity; from diversifying a financial portfolio and investments to diversifying their lifestyle (as has become increasingly popular), HNWIs enjoy the freedom & benefits that comes with diversification. Second residencies and citizenships simply provide HNWIs with options of where to live, where to work, and where to enjoy benefits at any given time. As a result, some investors are now choosing to obtain not only second passports, but third and sometimes fourth passports as well, seeing this as a long term investment into their future and the future of their families in a world of unknowns.
Predictions for the future
Looking ahead, the future of HNWI investments will continue to change, being shaped by factors such as continued technological innovation, changes in financial regulation, and geopolitical developments. Advances in artificial intelligence (AI), machine learning, and blockchain technology look to be changing the financial services industry from the ground up, creating new opportunities for HNWIs to streamline their investment strategies and generate more income.
Begin your international investment journey with Step Global
Step Global is a Dubai based leading immigration advisory firm in the MENA region, with over 13 years of experience in the investment immigration and EB-5 industries. They are the single point of contact between all parties involved to ensure the most optimal chance of approval for your application for migration. Because of this, they hold one of the highest track records of approvals in the region. Due to the vast experience and expertise of Step Global’s award winning legal team, they have helped countless families strategically plan for a future via second citizenships and residencies.
At the centre of Step Global’s policies sits the understanding that by handling their clients’ applications, they have a responsibility to not only their future, but the future of their family too. The experienced immigration team will always provide exceptional standards of service and trustworthy advice, whether you are seeking educational opportunities for your children, a better quality of life, global access, more security and stability, access to better healthcare or simply enjoying endless freedom. By providing a 360 degree advisory service to its HNWI clients, Step Global looks forward to assisting you and your family achieve your migration dreams.
