A recent survey by HSBC Bank International of the expatriate community reveals that, despite the current turmoil in the financial system, there exist plenty of opportunities for IFAs in the expat market
HSBC Bank International recently commissioned the world’s largest survey of expats, Expat Explorer. Expats have not been immune to the global economic crisis, but despite this, expats from the UK are wealthier and save more than their local counterparts, presenting opportunities for IFAs and providers alike.
Now in its second year, Expat Explorer surveyed over 3,100 expats from more than 50 countries. Expat Economics is the first of three reports on the results and examines expats’ economic quality of life. This year’s survey revealed interesting insights into a dynamic segment of the world’s population, and also stands as a key indicator into how expats had been affected by global economic events.
Impact of the economic downturn
As global economies continue to experience significant uncertainty, fascinating behavioural trends emerge among the expat population, particularly in the changes to their spending and investing habits. The majority of British expats, for example, reported that they had no intention of returning to the UK now that it is in recession – in fact, less than 10% said they would consider moving back.
The UK’s economic position is also impacting foreign expats living in this country. In fact, almost half of expats working in the UK report they are considering returning to their countries of origin as a result of the current financial crisis. This figure was more than expats living in any other country in the world and provides a stark contrast when compared to the average of only 15% of expats overall who are considering the same move.
Perhaps unsurprisingly, emerging markets came out favourably in the research. Expats living in emerging market regions claim their financial status has improved significantly since moving, compared with when they lived in regions with more developed markets. Russia, Qatar and Saudi Arabia in particular scored highly in the areas of increased investing and disposable income. Interestingly, two-thirds of expats in Qatar (63%) said their attitude to spending had not changed as a result of the economic crisis.
Earnings
On average, expats around the world earn £105,000 – an increase of 18% on the previous year’s findings. Native UK expats scored very highly when it came to remuneration, with almost a fifth of all British expats surveyed earning more than £151,957 a year, and over 60% earning more than £60,782 per year, ranking British expats as the sixth highest paid nationality in the world.
When it comes to native British expats, over half said they have more disposable income than when they were living in the UK, except those living in France (47%). Almost all British expats in Qatar (94%), Russia (97%) and Saudi Arabia (98%) have more disposable income than they did living in Britain. More expats in these countries also have more than £2,431 (70%, 59%, 52% respectively) of disposable income each month compared to the survey average of 36%.
Saving and investing
It is well documented that expats on the whole make a significant contribution to the local economies they are living in. This is both as a skilled workforce and as a group with high disposable income and the associated spending power. For example, Dubai and Hong Kong have both depended on their expatriate workforce to maintain the level of economic growth and development. Not only this, but Expat Economics found that expats are continuing to save and invest in the current economic climate.
Overall, expatriates take advantage of the financial benefits of living away from home to increase the amount of money allocated to savings and investments. Expats based in the Middle East are strong savers, with the UAE ranking fifth (after Saudi Arabia, Russia, Qatar and India) as a country where expats are increasing their savings. On average, 72% of British expats are saving more than when they were living in the UK.
British expats remain sophisticated investors: almost half continue to invest in shares (46%), more than half (53%) are committed to putting their money in property, while managed funds (42%) and bonds (15%) continue to be popular.
However, the research found that foreign expats living and working in the UK were the worst savers and investors globally, with more than a quarter (27% – the highest recorded in the survey) admitting they had reduced their savings and investments since moving to the UK.
The IFA advantage
With this in mind, the expat market provides great opportunities for IFAs, who should be able to offer the solution to UK expat needs by providing advice and guidance on a range of secure investment options that may not be available in other countries. For example, UK savings are backed by the Government up to £50,000, but this assurance does not cover their savings held in overseas institutions, so a significant amount of expat cash could return to the UK.
But many people may not realise they are eligible to take advantage of offshore banking, or be aware of the range of options available to them. Many local banks are also able to access offshore funds and products offering capital protection (in various currencies) utilising monies held in local bank accounts and can offer advice and support for their financial needs.
An experienced and qualified IFA will help expats to understand the benefits of holding offshore investments and show how these structures allow an individual to make the most of potential tax benefits or access to cross-border investment markets. There are also considerable security advantages from this approach. Expats from the UK may feel there are political or economic stability issues worth considering in their new countries and will therefore look to hold some funds elsewhere. Offshore banking provides convenience to internationally mobile expatriates, giving them one central place to build up funds while their careers may take them round the world. Customers can also choose the most relevant offshore centre to deposit savings so that, in the event of death, beneficiaries can deal with probate in a language, culture and process that is most familiar.
The expat community is a hugely valuable niche market and despite the recent turmoil in the financial system, the Expat Economics study demonstrates there are still a lot of opportunities for IFAs.
Alan Smith, head of international wealth management, HSBC Bank International
