Where do the world’s wealthiest citizens prefer to live and invest?
Not surprisingly, at the top of the list are London, New York, Paris, Los Angeles and Tokyo, according to Knight Frank’s latest index of the globe’s 100 urban hotspots. Toronto makes a respectable showing at No. 9 (it’s the only Canadian city in the top 20).
Among the reasons that wealthy families from around the world are applying for second passports or new citizenship in Canada are quality of life, investment opportunities, safety, tax considerations, ease of travel, better education and great health care, according to the international property firm’s Wealth Report Attitudes Survey.
Canada ticks all of those boxes, plus we have a stable political system, solid financial-services infrastructure as well as cultural diversity in our favour, says Toronto-based Ralph Awrey, director of Stonehage Fleming’s Family Office.
Families planning far into the future also want to know about Canada’s track record for navigating troubled times, Awrey adds. They want to know how Canada performs amid challenging global circumstances and whether that stability will still be there 20 or 50 years from now.
“Canada has always been a popular destination for global citizens,” says Yannick Archambault, partner and leader of KPMG’s National Family Office practice in Canada.
Over the next 10 years, Canada is forecast to see a 30-per-cent increase in its population of high-net-worth individuals, defined as people with an average net worth of USD $164,360 per capita. That’s the fourth-highest growth projected among the world’s 10 wealthiest countries, after India (80 per cent), Australia (60 per cent) and China (50 per cent).
Canada’s growth in high-net-worth immigration will likely be augmented by an increase in demand for alternative residencies, Archambault says.
“Many affluent individuals who saw their movements highly constrained during the pandemic are realizing the importance of diversifying their wealth and investments and enhancing their lifestyle options,” he says. Increasingly, they are looking for greater flexibility and want to better manage risks in the event of a future pandemic, geopolitical crisis or other situation that might affect them and their country of primary residence.
According to the Henley report, wealthy individuals entering Canada in 2022 are mainly coming from Britain, the U.S., France, Vietnam, India, China, Iran, Brazil and Hong Kong (special administrative region of China).
Immigration for economic growth
Canada welcomed more than 405,000 new permanent residents in 2021, more than any other year in Canadian history. Business immigrants can apply for permanent resident status under Canada’s Business Immigration Program, and both the federal and provincial/territorial governments offer services to help entrepreneurs start businesses and settle in Canada.
Chris Gandhu, KPMG partner and leader of the firm’s Calgary Family Office, says these kinds of government policies help set Canada apart on the international stage.
He cites three key factors that work in Canada’s favour: federally driven immigration policies, a strong and growing economy, and reuniting family members with those already living here – for example, a child who decided to stay in Canada after attending university here.
Canada’s nurturing attitude toward entrepreneurs is a big bonus, Gandhu says.
“If you have that entrepreneurial angle, the whole North American landscape is open for you to do business. We see a huge number of families in the high-net-worth space that are entrepreneurial and want to set up and run their businesses here.”
Pre-immigration planning
While many high-net-worth families typically hold assets in different countries, it’s important they understand the complexities of Canada’s investment, tax and estate planning rules, says Gandhu.
“For example, in the United States, a husband and wife can file taxes jointly, but in Canada individuals must file individual tax returns. Canada also has RESPs, RRSPs and TFSAs, which require a bit of education,” Gandhu says.
Rules governing wills and estate planning also must be understood, Gandhu continues. Families arriving from civil law jurisdictions may find Canada’s combined common law and civil law system entirely alien, especially where rules differ from one province to another, he adds.
“In civil law jurisdictions there’s a concept called forced heirship, where certain assets must go to certain people. In France, for example, if you have a spouse and one child, the child must inherit 50 per cent of the property, no matter what your will says or even if you don’t have a will. It’s a very different concept to Canada, where there’s complete testamentary freedom and the next generation can challenge an estate in court.”
First, advisers need to hold conversations with the family members who are moving so they are connected with the right experts in Canada, Awrey says. The second prong is to work closely with the family’s home-country wealth advisors to educate them on the complexities of the Canadian system and to help coordinate a strategic transition.
Usha George, professor at Toronto Metropolitan University and director of the Toronto Metropolitan Centre for Immigration and Settlement, notes that even high-net-worth families need to be cautious about their spending once they have arrived in Canada. She has witnessed new Canadians struggle with the cost of living as well as managing their businesses in the face of high tax rates and labour costs. The worst case scenario is the depletion of personal savings or the collapse of a family business, she says.
“Get as much information as possible, have a plan and then start small. Get a sense of how your business is going to go, and then you can expand,” George advises.
Emigrating “is hugely disruptive to all aspects of their lives,” Awrey adds. “Families don’t want to do this only to reverse course and move back after three or four years because it didn’t work or they didn’t like it.”
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