High net worth clients diversifying global portfolios post Brexit

In the wake of the British public’s decision to leave the European Union (EU) in June, there was widespread concern London would no longer be able to maintain its position as the leading global financial centre and a hub for the ultra-wealthy. So far, however, these fears have proven premature –security, education and cultural diversity all play important factors in the quality of life the city can provide high net worth individuals and these remain unchanged.

The opportunities the post-referendum economic climate has provided for the ultra-wealthy to widen the scope of diversification within their global portfolios post-Brexit are significant. Brexit appears to be acting as a catalyst for high net worth international investors examining their exposure to the Pound Sterling and capitalising on currency fluctuations to purchase prime Central London property at a price drop of up to 15%. We have seen growing enquiries from overseas clients in the last six months, and a substantial increase in buyers from the United States and Far East investing heavily into the UK with dollar cash and assets, who require investment structures from banks who are able to take a global outlook on assets under management (AUM) when providing lending.

International Investment Opportunities for UK Residents 

For UK residents looking to reduce their exposure to sterling assets and re-balance their investment portfolio to encompass a global focus, the option to release equity from a UK property to invest internationally is gaining greater interest in the current market. This is especially attractive to ultra-high net worth clients with business interests in Europe who are looking to spread the risk across their portfolio while uncertainty remains over the terms on which Britain will leave the EU.

I commented in the Financial Times last week on both Monaco and Switzerland “expecting a bounce” of wealthy individuals and families purchasing a property in the current market. Both locations have traditionally attracted “tax tourists” given the range of tax breaks on offer for wealthy foreigners and the lifestyle available for high net worth individuals and their families.

We recently helped a client who has a global property portfolio and was looking to raise HNW mortgage on his UK property from £2.5m to £6m in order to release equity to purchase additional property in Monaco for investment purposes at €3.35m and to cover the refurbishment work. We were able to use our close relationship with a top private bank to secure this at a two year fixed rate of 2.25% on an interest-only basis.

Changing Tax Regulations

Those looking to increase their global portfolios post-Brexit do, however, need to keep abreast of changing tax regulations for expats and non-domiciles. Since 2013, there have been more stringent rules in place for UK residents living and working abroad and wishing to be exempt from paying UK taxes, and you are only able to work in the UK for 30 days a year and remain for 90 days. Further major changes are expected in April 2017 when the government will introduce new tax changes for resident non-doms, who class their main residence as abroad and subsequently their foreign income is not subject to UK tax. From April, those who have been UK resident for 15 of the previous 20 tax years will now be required to pay tax on their worldwide income, as well as capital gains on an arising basis irrespective of whether the income or gains are remitted to the UK. Non-doms will also be subject to inheritance tax on their worldwide assets.

For any clients looking to diversify their portfolio and are seeking global investment opportunities, it is crucial to seek expert advice from an advisor who understands the financial complexities of local markets and the impact of factors such as currency fluctuations and tax regulations on your investment. For more information on how our International team can help you do get in touch.