For much of the modern financial era, the geography of wealth was relatively predictable.
London.
New York.
Geneva.
Paris.
These were the cities and financial centres where wealthy individuals established businesses, managed investments, bought property and built their personal lives.
That geography is changing.
The wealthy are becoming increasingly international, and the jurisdictions competing for them are becoming increasingly diverse.
The result is a new geography of wealth.
Wealth Is No Longer Where the Money Is
One of the most important changes in international wealth management is the separation between where wealth is created, where it is invested and where its owner lives.
A successful entrepreneur may operate a business in London, invest through Luxembourg, bank in Switzerland and live in Monaco.
A technology entrepreneur may run a company in the United States, maintain investments in Europe and establish residence in Dubai.
A European family may own property in France, have a family office in Switzerland and use an investment fund based in another European jurisdiction.
The traditional assumption was that these activities would largely be concentrated in one country.
That assumption is becoming outdated.
The Numbers Are Beginning to Show It
In 2022, Henley & Partners projected significant movements of high-net-worth individuals between jurisdictions.
The UAE was expected to attract approximately 4,000 millionaires during the year.
Switzerland was projected to attract approximately 2,200.
Portugal and Greece were also expected to see substantial inflows, at approximately 1,300 and 1,200 respectively.
The UK, by contrast, was among the countries expected to experience a net outflow.
These figures should not be interpreted as proof that wealthy people are abandoning the traditional financial centres.
They are evidence of something more interesting.
The competition for wealthy individuals is becoming global.
Why Are They Moving?
Tax is an important part of the answer.
But it is not the entire answer.
A wealthy individual choosing a new country of residence is usually making a much broader calculation.
What is the tax regime?
How stable is the political environment?
Is the legal system reliable?
Can the family live comfortably?
Are there good international schools?
Is there access to financial services?
Can the individual continue to operate their business?
How easy is it to travel?
What happens to wealth on death?
And perhaps increasingly:
How easy is it to leave again if circumstances change?
This last question is becoming more important.
Wealthy people are not necessarily looking for a permanent home.
They are looking for optionality.
The Rise of the New Wealth Centres
The UAE is perhaps the clearest example.
Dubai and Abu Dhabi have developed into major international business and wealth centres without attempting to replicate London or Geneva.
Their proposition is different.
They combine a strategically important geographical position with modern infrastructure, international connectivity, a significant business community and a highly competitive personal tax environment.
The 2022 Henley report identified the UAE as the leading destination for millionaire inflows that year.
Switzerland represents a different model.
Its appeal is based on stability, wealth management expertise, infrastructure and a long-established reputation among international investors.
Portugal and Greece offer another proposition.
They combine European Union membership, lifestyle and investment or residence opportunities that can appeal to internationally mobile individuals.
Monaco represents yet another model.
It is not a major industrial economy.
It does not need to be.
Its proposition is based on scarcity, security, location, infrastructure and its extraordinary concentration of private wealth.
The point is that these jurisdictions do not need to become the next London.
They only need to become the preferred destination for a particular segment of internationally mobile wealth.
The Three Different Decisions
Perhaps the most important distinction is between three decisions.
Where do I live?
Where do I invest?
Where do I structure my wealth?
Historically, the answer to all three questions was often the same.
Increasingly, it is not.
A person may decide to live in Monaco because of its personal tax environment and proximity to France and Italy.
That does not mean their investment portfolio moves to Monaco.
Their assets may remain invested across Europe, the United States and emerging markets.
Likewise, an entrepreneur may live in Dubai while continuing to own a European operating business.
The residence decision and the investment decision are becoming separate.
Tax Competition Is Only Part of the Story
This is important because discussions about wealth migration often focus too heavily on tax.
Tax matters.
But the most successful wealth centres understand that wealthy people are buying an entire environment.
They want security.
They want infrastructure.
They want efficient airports.
They want international schools.
They want good healthcare.
They want professional advisers.
They want sophisticated banking.
They want access to investment opportunities.
And they want confidence that the rules will not change dramatically every few years.
The best jurisdictions therefore compete on more than tax.
They compete on quality of life and quality of institutions.
Europe Is Becoming More Competitive
Europe remains one of the world’s most important regions for private wealth.
But it is no longer a single wealth market.
Different countries are competing for different categories of investor.
Switzerland remains a traditional wealth-management centre.
Monaco attracts an exceptionally concentrated population of international wealth.
Portugal and Greece have used residence and investment programmes to attract internationally mobile individuals.
Italy has developed special tax arrangements for wealthy new residents.
Malta and Cyprus offer their own combination of residence, taxation, investment and lifestyle advantages.
The result is fragmentation.
There is no longer one obvious European destination for every wealthy individual.
The Wealthy Are Diversifying Their Residence
There is another consequence.
Wealth diversification is becoming increasingly connected with geographical diversification.
An investor may diversify their portfolio between equities, bonds, real estate and private equity.
But they may also diversify their geographical exposure.
They may maintain assets in several countries.
They may have companies in several jurisdictions.
They may hold different residences or citizenships.
They may establish succession structures that operate internationally.
This is not necessarily about avoiding tax.
It is about reducing dependence on any one jurisdiction.
Optionality Has Value
For wealthy investors, optionality itself has become an asset.
If a person has spent thirty years building a business in one country, moving may be extremely difficult.
If, however, the individual has already established international banking relationships, investment structures, professional advisers and residence options elsewhere, the cost of moving becomes considerably lower.
That changes behaviour.
A country does not necessarily need to lose a wealthy individual today for that individual to become less economically committed to the country.
The decision may be gradual.
First, the second home.
Then the investment account.
Then the family office.
Then the children’s education.
Then tax residence.
Eventually, the centre of gravity of the family may have moved without any single dramatic decision.
The New Geography Is About Centres of Gravity
This is why traditional measures of wealth migration can sometimes be misleading.
The question is not simply:
Where does the wealthy person live?
The more important question is:
Where is the centre of gravity of that person’s economic life?
A wealthy individual can have a residence in one jurisdiction, a business in another, investments in several others and advisers spread across the world.
The country that captures the greatest share of that economic activity is not necessarily the country in which the individual spends the most nights.
This distinction will become increasingly important.
What Does This Mean for Traditional Financial Centres?
London, New York and Geneva are not disappearing.
They remain extraordinarily powerful financial centres.
But their monopoly over international wealth is weakening.
The new competitors do not necessarily need to replace them.
They can simply take one part of the relationship.
Dubai can take the entrepreneur.
Monaco can take the European family.
Switzerland can take the wealth-management mandate.
Singapore can take the Asian family office.
Portugal or Greece can take the residence decision.
London may still retain the investment bank, private equity manager or lawyer.
The same wealthy individual can therefore be economically connected to all of them.
The Competition Is No Longer for Capital Alone
This is perhaps the most important change.
For decades, governments competed primarily to attract capital.
Today, they increasingly compete to attract the people who control capital.
That is a different proposition.
Capital can be invested almost anywhere.
The owner of that capital is much harder to attract and much easier to lose once alternatives become credible.
This explains why residence programmes, special tax regimes, family-office initiatives and investment migration programmes have become increasingly important.
Governments are competing for the economic ecosystem surrounding wealth.
The New Map
The geography of wealth is therefore becoming more complicated.
The old model was concentrated.
The new model is distributed.
London may remain the investment centre.
Monaco may become the residence.
Switzerland may manage the wealth.
Dubai may host the entrepreneur.
Luxembourg may provide the investment vehicle.
France may hold the property.
The United States may provide the technology investment.
None of these arrangements is inherently unusual anymore.
They are simply different components of the same international wealth structure.
Where Does This Leave Governments?
Governments should pay attention to this change.
A wealthy individual does not have to move everything to leave.
They can move incrementally.
And once the economic centre of gravity begins moving, reversing that process can be difficult.
The policy challenge is therefore not simply to ask how much tax a wealthy individual can pay.
It is to ask what the country wants to be competitive for.
Capital?
Businesses?
Family offices?
Entrepreneurs?
Investors?
Residents?
Or all of them?
The countries that understand this distinction will have an advantage.
The New Geography of Wealth
The world’s wealthy are not abandoning the traditional financial centres.
They are building around them.
That is the important distinction.
Wealth is becoming more international, more mobile and more geographically diversified.
The wealthy individual of the future may not have a single financial home.
They may have a network.
And the jurisdictions that understand how to become an important part of that network will increasingly compete for the most valuable economic asset of all:
the people who control the capital.