Print this page
In recent years there have been some major changes in migration patterns. This will continue to change over time as countries around the world continue to develop and grow. In recent years there have been some major changes in migration patterns. This will continue to change over time as countries around the world continue to develop and grow.

Alternative Citizenship: The New Asset Class for the World’s Wealthy

Written by  Amanda Smit, Managing Partner of Henley & Partners South, East and Central Africa Aug 04, 2019

There are various piecemeal ways to unlock opportunities in business, real estate, and education; or obtain robust downside protection against various market risks and potential geopolitical instability.

However, probably the only way to achieve all of these things in one fell swoop, is through residence- and citizenship-by-investment. Visa rules can and do change, as do governments, but permanent residence and citizenship are for life and, in the case of citizenship, can be easily passed down to future generations.

The once-niche industry of citizenship planning has evolved. In the 1980s, the very notion of acquiring alternative citizenship was considered irregular, if not eccentric. Today, not only is investment migration common practice around the world but has become an increasingly core component of wealth management strategies in Africa.

For today’s high-net-worth individuals (HNWIs), the strategic logic of investment migration is self-evident. Investment migration programs, which offer a facility whereby individuals can acquire alternative residence or citizenship in exchange for a significant economic contribution to another country, are fundamentally designed to manage the combination of risk and opportunity.

It is important to recognize that alternative residence or citizenship is not simply a pleasant accessory for the wealthy but an integral part of holistic wealth planning. Since becoming a mainstream practice, citizenship planning has effectively helped to create an entirely new asset class for HNWIs, which offers significant value — extending well beyond improved visa-free access, a wider variety of lifestyle choices, and enhanced global mobility.

It is an undeniable fact that political instability is a global phenomenon, but the impact of its far-reaching consequences is felt more on the African continent. Fundamentally, investment migration programs are designed to manage the combination of risk and opportunity. Holding additional residence and/or citizenship creates security, reliably diversifying risk through greater protection from volatile markets and political instability.

Investment migration also permits access to a significantly expanded suite of travel options, attractive opportunities for real estate investment, and major other business investments. In short, the benefits that accrue from having additional residencies and/or citizenships generate unique value for the investor that go beyond simply providing political risk insurance.

This crucial combination of risk mitigation and opportunity creation protects individuals from being at the mercy of a single government and subject to conditions they cannot control. For instance, holding alternative European citizenship guarantees the right to travel, trade, and settle anywhere in Europe, without restriction, as well as granting access to all the benefits enjoyed by other citizens of the state in question (education, health care, and so forth).

Having this kind of mobility makes expanding businesses and overseeing international operations significantly more efficient. In essence, alternative citizenship dilutes the power that a single state can exercise over you, which leaves you at liberty to make autonomous decisions regarding the deployment of your capital.

By now, it is not hard to argue that a well-rounded, integrated, holistic global investment strategy for HNWIs would be lacking if it did not include citizenship or residence planning. The benefits of investment migration are so compelling, that it is no surprise to see many law firms, wealth planners, and family offices already including this component in their financial planning discussions with wealthy clients.

Whether an individual seeks alternative citizenship or residence during their working years, post-retirement, or during a phase of succession planning, it is becoming ever clearer that, as a new asset class, residence- and citizenship-by-investment are no longer part of a bespoke service offering. Investment migration is officially becoming mainstream.