Home » Expat Focus Financial Update May 2018

Expat Focus Financial Update May 2018

HNW expats need more from financial advisors

Wealth managers who succeed are those who offer tailored products to their high net worth (HNW) expat clients in an increasingly competitive sector, says analytics firm GlobalData.

They say a one-size-fits-all approach will not meet the demands from these clients, particularly for the lucrative Chinese market and also with non-resident Indians.

The firm says that the global high net worth expat market has risen from 2014’s figure of 1 million to reach 1.2 million people last year.In a report, Seizing the Global HNW Expat Opportunity, they found that 65% of wealth managers are targeting the high end of market.

However, a wealth management analyst with Global Data, Heike van den Hövel, said: “The size of the global HNWI expat market offers a significant opportunity for wealth managers to target mobile, affluent customers with tailored products.”

She added that in key expat hubs such as Singapore, Hong Kong and the UAE, competition is fierce and non-resident Indians offer a lucrative target market since they account for nearly 11% of the world’s HNW expat population.
Meanwhile, insurance firm Berkeley Alexander says the HNW insurance market is heating up. They are now rolling out enhanced coverage for their wealthy clients to help meet their needs to protect their assets and lifestyle.

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Most expensive destinations for expats

New York City has once again topped the list for being the most expensive world destination for doing business, according to ECA International.

Their findings highlight that a typical trip to the city will cost $869 (£644) every day based on average costings for hotels, meals and drinks as well as taxis and other essentials.

A spokesman for ECA International said:

“Demand for hotels reflects in the premium room rate of $557 (£412) per night on average for a four or five star hotel.”

He added that the high prices for transport and hotels plus the mandatory 15% to 20% tipping policy for meals means the US city is one of the world’s most expensive for business travellers.

In second place is Geneva with an average cost of $789 a day, with London not making the world’s top 10 with an average cost of $637. However, London is Europe’s sixth most expensive city for business travel.

ECA points out that the cost of business travel to London has been relatively static in recent years and the euro’s strong performance has pushed up costs in other cities such as Paris and Monaco to overtake the UK’s capital.

The organisation points out that the cost of business travel in the UK has fallen overall, with every UK city dropping in the table. The spokesman explained:

“Aberdeen helps to illustrate the sudden drop for business travel costs to the UK after falling from 13th place to 39th in the European rankings in the last two years.”

One of the reasons for this is the recent downturn in the gas and oil industries, which led to business travel costs falling and having an impact on Aberdeen’s local economy.

After New York City and Geneva, the top 10 most expensive cities for business travel in the world are Zurich, Luanda in Angola, Bridgetown in Barbados, Paris, Nassau, Washington DC, Basel and Monaco.

In the Asia-Pacific region, Hong Kong once again tops the list, narrowly edging out Tokyo. Daily expenses in the city are around $506, while in Tokyo expats and business travellers need $501. Seoul and Singapore tied for third spot.

Most expensive hotel stays in Europe

Meanwhile, a survey from PricewaterhouseCoopers reveals that the most expensive place in Europe to stay in a hotel is Geneva. The average cost per night is $300, with Paris in second place on €232. The most expensive overnight tariff in the world is for the Hotel President Wilson in Geneva, where its penthouse costs $83,300 (£61,688) per night.

British tax havens may have to reveal account identities

After resisting attempts at revealing who is sheltering money in Britain’s overseas territories, new laws unveiled by the UK government may force them to do so.

Among the territories are tax havens such as the Cayman Islands and British Virgin Islands. Prime Minister Theresa May has unveiled tougher measures aimed at clamping down on secrecy. Campaigners who have called for the law say that the secrecy has enabled people to launder money and hide their wealth.

However, the Isle of Man has announced that it will ‘vigorously challenge’ any bid by the UK government to impose a public register of its beneficial owners.
The island’s chief minister, Howard Quayle, says that the planned amendment to the current legislation was withdrawn before MPs voted on updating the bill because it seemed to be in direct conflict with a constitutional agreement between the UK government and its Crown Dependencies.

However, the move coincides with a call from the EU for the Isle of Man to avoid being placed on its ‘tax blacklist’ to do more in addressing ‘the lack of legal substance requirements’. The island is currently on the EU’s ‘grey list’ and must make changes before December or run the risk of being moved onto the blacklist.

Best countries for wealth creation revealed

A report is predicting that India’s level of wealth creation will see the country leapfrogging Germany and Britain to become the world’s fourth wealthiest country by 2028.

The report from AfrAsia Bank highlights that private wealth in India will reach $24.7 trillion (£18.3 trn).

The Global Wealth Migration Review also highlights that China is second to India for best performing markets. The report measures the country by their total private wealth and not by their GDP.

The wealthiest country is the US with a total value of $62.58 trillion, followed by China with $24.8 trillion, Japan is on $19.52 trillion and the UK in fourth with $9.91 trillion.

Expat packages disappear in UAE

There is a distinct trend of employers targeting younger expat professionals in the UAE, with traditional expat packages ‘fading away’, says one news outlet that questioned several recruitment firms.

The result of cutbacks is that families are being squeezed financially as companies look to control costs by hiring younger professionals. Recruiters say that the reduction in living allowances has been in the pipeline for a long time. However, despite the reduced benefit and salary packages and with the UAE’s cost of living rising, the country still remains an attractive destination for expat jobseekers.

A spokesman for recruitment firm Robert Half Middle East said: “The glory days of high worth packages are long gone.” He added that fringe benefits, such as employers paying for schooling, have been removed.

Also, recruitment firms have found that business class flights have been restricted with even senior level expat workers having to fly in economy. The latest Robert Walters Middle East jobs index highlights that adverts for expat professionals increased by 25% in the last quarter of 2017 and also in the first three months of 2018, with the UAE seeing strong demand for expat jobs in financial services, banking and accounting.

The managing director of Hayes Gulf region also highlights that his firm receives more than 9,000 applications every month from people looking for jobs.

He told the newspaper that there is a strong desire to relocate to the UAE and take up employment and that employers are being cost conscious when it comes to salaries, with rising business costs impacting on pay and benefits.

Cost of living for expats in the EU

The cost of living for expats in the European Union has been revealed from official data.

The most expensive countries are Denmark, Sweden and Luxembourg, with Ireland in fourth place. Previously, Ireland was the third most expensive country to live in.

Most expensive countries for groceries

A survey from business caterer Caterwings has revealed which countries are the most expensive for buying pork, with expats in Switzerland paying the most.

In second place is Hong Kong, followed by Singapore, Japan and New Zealand.
The most expensive country for buying beef is Switzerland, followed by Hong Kong, Norway, South Korea and Japan while for chicken Switzerland also dominates followed by Norway, Sweden, Finland and New Zealand.

Tax warning for South African expats

South African expats are being warned that they need to understand the new expatriates tax law which will affect them. Critics say the move may seriously affect their overseas income and they need to act now to mitigate any potential losses.

The Income Tax Act amendments have now been fully enacted, but some South African expats apparently do not appreciate that these amendments have been formally accepted.

The new law will come into effect from 1 March 2020 so there is time to get their tax affairs in order.

Essentially, the new amendment demands that South African tax residents living overseas must pay up to 45% of their foreign employment income where it reaches or exceeds the threshold of 1 million Rand (£58,801 / $79,482).

While this may appear to be a generous threshold, employment income is deemed as including fringe benefits and allowances. This means that South African expats enjoying a package that includes housing and other allowances, including flights, may reach that threshold quickly. Already one firm of tax experts says that expats are wrapping up their offshore work and returning to the country.

Representatives bin move to tax expat remittances

A move by MPs in Bahrain to impose fees on expat remittances has been rejected by the legislative and legal affairs committee in the Council of Representatives. They say the proposal contradicts the kingdom’s constitution.

Also, the move was condemned by various organisations including the Central bank of Bahrain and the Bahrain Chamber of Commerce and Industry.
MPs had wanted to impose a fee on all foreign remittances with amounts varying between those above BD 300 (£590/$798) and those below.

Most expensive places for families in the US

Expats heading to the US may be interested in the Economic Policy Institute's survey, which highlights the most expensive places in the US for families to live in.

The aim is to calculate what income a family needs to enjoy a ‘modest yet adequate’ standard of living for two adults and two children.

The survey reveals that a family of four would need $148,440 (£109,706) every year to live in San Francisco. In San Jose families would need $10,758 a month and in New York City they would need $10,344.

Meanwhile, according to real estate firm Savills, the most expensive place for expats to live and work in the world is New York. They add that Hong Kong is the next most expensive, followed by London.

Expats in UAE assess futures

Guardian Wealth Management says that the rising cost of living in the United Arab Emirates is the single biggest factor for expats assessing their future in the country. They say clients are voicing concerns over rising travel and food costs and school fees.

Also, the introduction of VAT at 5% is helping to push up inflation. The firm’s head of global partners, Gemma Frankland, said:

“We have seen an increase in clients voicing concerns over their rising costs. This is troubling for expats who come to the UAE to take advantage of high wages and save long-term.”

In other news…

The Central Bank of Kuwait says that expat remittances there fell by 9.2% in 2017. In 2016 remittances amounted to KD 4.56 billion and have now fallen to KD 4.14 billion (£10bn/$13.7). The country is still looking to impose a tax on remittances.

An online search tool has been launched by the US Securities and Exchange Commission to help investors make informed investment decisions and also avoid financial fraud. Investors can use the SEC Action Lookup (SALI) tool to check whether the person selling them on investment has a judgement or order against them.

The Australian government has announced that it is planning to protect the erosion of superannuation funds there by capping investment and administration fees. The government says that excessive fees are eroding superannuation balances, particularly for those with low amounts.

The city with the most billionaires is London, with 93 who either were born there, live there or have their businesses based in the UK’s capital, says the Sunday Times Rich List. New York is in second place.

Growing numbers of Australian pensioners are retiring overseas, according to the Australian Bureau of Statistics. In 2016, more than 11,600 Australians aged over 55 relocated overseas permanently, compared with nearly 8,000 in 2005. The most popular destinations for Australian retirees are New Zealand, Italy, Greece and Spain.

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