There has been a sharp increase in the number of ultra high-net-worth individuals and families looking to relocate to a jurisdiction that offers better business opportunities, a favorable tax and regulatory environment, improvement in quality of life, a safer physical environment, better opportunities for their children, such as better options in education and work, the right solution in terms of lifestyle and, importantly, privacy.
The Knight Frank Wealth Report 2018 showed the scale of the change—it reported that globally, the number of individuals with a net worth of more than $5 million was expected to grow from 2.5 million in 2017, to 3.6 million by 2022. That is a significant increase. But digging deeper into the numbers it showed that those with a net worth of over $50 million were forecast to rise from around 44,000 to 60,000 in North America, from 35,000 to 47,000 in Europe, and from 36,000 to 56,000 in Asia. There was some other variation in other regions, but those were the three key areas.
From a practitioner point of view, we have seen huge diversity in the client base and what they want. If you were to go back a decade, there were probably two key groups of clients: an older generation who were approaching retirement age, wanted a change of lifestyle and to step away from active management of family assets; and a younger group who had accumulated significant wealth through investment or tech businesses, and who wanted to move to a jurisdiction with their families where they could continue to have some limited involvement in that work, but also change their lifestyle to encompass more leisure opportunities. Those groups still exist, but they have been joined by a very diverse group with disparate objectives. We are dealing with a wider variety of people from all over the world with very different backgrounds—you could say that the only thing that they have in common is wealth, and a desire to live in a politically stable environment with high quality services and a more relaxed atmosphere and community.
Cayman is known for its combination of Caribbean weather and lifestyle, coupled with the fact that many of the people that we are dealing with will be very familiar with Cayman's mature financial services sector, and in particular the offering as it relates to investment funds, company registration, and Cayman trusts and foundations. So that's the starting point, but from there there's also the availability of suitable residential property, excellent health and education services, and robust transport links to the U.S. and Europe.
And while the Cayman Islands are historically known to be a top destination for UHNW relocations, promotion of the jurisdiction has recently elevated, albeit it in a discreet and sophisticated way, primarily via a network of trusted professional service providers and advisors. The Cayman Islands leads the way in keeping pace with global regulatory changes while still retaining all the things that make it an attractive place for UHNWIs, their families and businesses.
The substance regulations are effectively a level playing field across most of the offshore world, because every jurisdiction has had to enact economic substance rules. But the reality is the UHNWIs we deal with have no problem meeting the requirements placed on them by the substance rules, because many remain economically active and are using family office structures to manage their wealth. Cayman is well-placed to provide a venue for that kind of activity, and has the professional services infrastructure in terms of legal and trust professionals to support it. We have found that the implementation of globally established substance rules have had a positive effect. Cayman offers opportunities to meet the requirements more easily than some less sophisticated international financial services centers.
Although there is diversity in terms of intended outcomes and objectives, the two fundamental points that we are always dealing with are a) finding a good investment that is likely to appreciate in value and b) a solution that offers a secure, sophisticated and private lifestyle.
Privacy has always been a key concern for UHNWIs when considering relocation, but it has perhaps grown more in importance as a result of political and social changes. In an increasingly interconnected world, a location like Cayman where people's privacy is respected is particularly attractive.
Beyond that, there are other lifestyle and social factors, including travel and proximity to family (Cayman has over 20 flights per day to North America in addition to the UK and Central America), sports and leisure opportunities, political stability, good climate and the right property. That final point should not be overlooked, we often deal with individuals who, on the advice of family counsel, or tax advisers, are considering relocating to Cayman. If they find the perfect home here, that can end the jurisdiction/location debate quickly. Fortunately, Cayman has a lot of high quality real estate. When people relocate they are looking for a home that works not just in terms of their wealth, but also in terms of their and their family's other needs.
Cline Glidden is Senior Associate in Ogier's Cayman Local Legal Services team. A former government minister and current attorney, Cline advises clients and their advisors on all aspects of relocating to the Cayman Islands.
