Does the number of millionaires matter to wealth managers?

While the UK is set to lose the most millionaires of any country in the world over the next few years, other factors may be more critical to firms servicing the wealthy.

The UK is expected to suffer the most from increasing global wealth mobility over the next few years, as geopolitical tensions, economic uncertainty and social upheaval are driving a record number of millionaires to migrate, in search of greener pastures and safe harbour for their assets and family interests.

According to analysis of global wealth trends by UBS, the number of millionaires in the country is expected to drop 17 per cent, from 3m in 2023 to 2.5m in 2028, bucking a worldwide trend in which this number is set to rise in 52 of the 56 countries the global bank monitors.

UBS’s analysis echoes research by residence and citizenship advisory firm Henley & Partners, which projects net outflow of 9,500 millionaires for this year alone — second only to China worldwide — and more than double the 4,200 who left the country in 2023. 

But what are the key factors driving the rich out of the UK? And does the number of millionaires in the country matter to wealth managers? 

A key consideration driving the decision to relocate is the UK government’s decision to axe the world’s longest-lasting tax-privileged regime, dating back two centuries. 

Non-doms — those resident in the UK, but whose permanent home is outside the country — have historically been able to to avoid paying UK tax on overseas income and capital gains for up to 15 years. Non-dom status also offers protection against inheritance tax on assets outside of the UK. 

It is expected that the regime will be replaced by a much more restrictive residence-based system in April 2025, although its details are still uncertain.

“It is already clear from our interactions with clients and prospective clients that these changes will deter wealthy people who might otherwise come to the UK from relocating here, and will cause others to leave immediately or to shorten the time they intend to remain in the UK,” says Jon Conder, partner in the private wealth team at global law firm Stephenson Harwood. A key area of concern is the potential application of inheritance tax to their worldwide assets, he adds.

“The wealthy and their wealth are constantly on the move as circumstances shift around them, as they have more than most to lose,” says Mr Conder.

But while tax is an important driver of behaviour, there are other factors in play.

Push and pull factors

Competition for wealth and talent among jurisdictions has intensified, with many adjusting their immigration and tax systems to attract the wealthy to make their home there. A safe and stable environment is also highly valued by the wealthy, with security fears or political concerns important drivers to move.  

Switzerland is the “epitome of stability and predictably”, Mr Conder notes, yet some wealthy families have moved their wealth out of the jurisdiction and out of Swiss entities, concerned about the impact of the Credit Suisse fallout on the country. 

In the UK, post-Brexit economic and political instability accelerated the outflow of millionaires: between 2017 and 2023, the UK lost a total of 16,500 millionaires, according to Henley & Partners.

UBS Global Wealth Management’s chief economist Paul Donovan believes that wealth mobility is due to the “dramatic structural upheaval” the global economy is experiencing, which is driving “nomadic global wealth” out of the country.

This includes the impact of sanctions on Russia, particularly as wealthy Russians had historically used London as a home for their assets, as well as other pull factors, such as the appeal of low-tax jurisdictions, be it the UAE or Singapore.

Greater volatility of nomadic wealth is likely to have an outsized impact in countries like the UK or Netherlands, which are “disproportionately” favoured by millionaires relative to the size of their economies. The UK hosts more than three million millionaires, the third-largest number of dollar millionaires in the world, after the US (22mn) and mainland China (6mn).

The movement of wealth around the world is also becoming more of a political focus, evidenced by the “rise of economic national capitalism”, Mr Donovan says. 

The UAE and Dubai are popular destinations for UK millionaires, according to industry commentators. Most look at European jurisdictions, such as Italy, Greece or Switzerland, where wealthy foreigners can pay a fee instead of being subject to local jurisdiction.

But the grass is not always greener in these countries.

Italy, for instance, has recently doubled its flat tax for millionaires, with the local government hoping that new measures will address local concerns around rising housing costs sparked by expats. This policy change may send a signal that the country may not have “a stable regime”, according to the FT.

“There is acceptance that none of the regimes last indefinitely and that even a relocation to a non-UK jurisdiction may not be permanent,” says Charlotte​​​​ Thorne, founding partner at London-based private investment office CapGen Partners. “The wealthy are, therefore, moving to a world where they may relocate regularly.”

Geopolitical risk

Wealth today is more mobile and global than ever also because many clients have business and family ties around the world, so can “easily up-sticks and move”, states David Durlacher, CEO of Julius Baer International. 

But the lack of certainty over the non-dom regime has not caused millionaires to leave the UK yet.

“We are at too early a stage,” Mr Durlacher explains. “Much will depend on the detail … to be set out in the new government’s Budget [on 30 October], and whether changes are also made to broader taxes, including the capital gains tax regime.”

Tax is a big driver but so is quality of life. Crime may push people away, says Ms Thorne. In fact, the UK has recently been hit by the worst unrest in more than a decade, fuelled by misinformation online, the far-right and anti-immigration sentiment.

Equally, political concerns may push the wealthy out of China. 

Wealthy families are also moving for cost reasons. “Some jurisdictions have failed to maintain their competitiveness on this front,” she says, referring to the cost of fund administration and trustee services.

But there is still inward immigration of wealth into the UK. “A few Americans are making themselves émigrés from a potential Trump leadership, and they view the UK as a sensible adoptive jurisdiction,” Ms Thorne continues. Asian families are also heading to the UK for access to educational opportunities and to diversify their jurisdictional risk.

The UK, she says, is a hub for the private wealth sector and “for now it has few rivals, at least on this side of the pond. Switzerland is a challenger, but few other places in Europe can provide the breadth and depth of access available from London.”

Even Brexit, which has affected private banks and wealth managers’ ability to serve European clients, has been managed, albeit at a cost, she claims. “Most wealth managers would describe it as an additional regulatory burden, but not an insuperable impediment.” 

James Whittaker, head of UK wealth management and CEO of Deutsche Bank UK Bank believes “there is an enormous amount to weigh up when switching from one jurisdiction to another”, and the UK remains an attractive place to be for UHNW individuals, regardless of whether they are tax residents here. He also highlights the “entrepreneurism” across the country, which reflected on “significant business growth” on the single-family office side.

Yet, “there’s a broad trend among UHNW individuals of diversifying their asset base in different regions to mitigate ongoing geopolitical and market risk, as part of active portfolio risk management,” says Marco Pagliara, head of emerging markets, Private Bank, Deutsche Bank.

“In emerging markets, wealth centres like Dubai and Singapore are rapidly becoming globally relevant for a variety of reasons. Different jurisdictions offer various incentives to attract capital while the positive macro backdrop for emerging markets also supports growth in these centres.”

Strengthening relationships

Estimates about wealth growth and changes in the demographic of wealth owners help wealth managers adapt their business strategies and allocate relevant resources. 

But ultimately, what matters most is relationships. 

“Although a business can set itself strategic goals and approach the challenge from a macro, top-down perspective, success will ultimately depend on bottom-up networks and relationships,” Ms Thorne notes.

A key factor in attracting clients is the firm’s connectivity with other providers, including lawyers, accountants and trustees, she states. 

“Wealthy people are looking for a stable and secure network of advisers who work well together and it is essential to be part of that community.

“At the margin, I would prioritise developing and strengthening these networks and investing in relationship managers over starting a new business programme in a previously unfamiliar jurisdiction because a consultancy group has identified that jurisdiction as a potential growth area,” she says. 

The focus must also be on maintaining connectivity with the increasing number of female wealth owners and next gens.

Moreover, just as important as the number of wealth owners in a market is their willingness to do business in the market concerned. 

“Some jurisdictions with increasing numbers of wealth owners are ostensibly underserved by local providers, because there is a reluctance to use a local manager, connected to a mistrust of local providers, or a cultural preference for a distinct wealth management hub,” Ms Thorne adds. 

Miami, for example, is an important hub for Latin American clients, over and above more local jurisdictions. Likewise, Switzerland and London are traditionally attractive to wealth owners who are not from those jurisdictions. “The important features here are the relatively stable and predictable regimes in these jurisdictions and the extensive private client law and accounting services in place to support wealthy clients.”

Competitive economy

While statistics about millionaires are valuable for firms in the immediate term, more important for UK-based private banks’ business models and growth strategies is the extent to which the country remains competitive in the global economy, says Julius Baer’s Mr Durlacher. “Entrepreneurs and business owners often care more about corporate tax and regulatory burden, access to strong capital markets’ flows and the attractiveness of UK listing. These wealth creators will affect the ability of private banks to grow and harness new wealth.”

For existing wealth, strong regulatory and legal standards become key. Wealth managers must emphasise wealth planning, using expertise across the world to help advise clients who think less in territorial market-based terms. “Models that allow this flexibility within firms’ global footprints will become increasingly important.”

While any significant millionaire outflow from a country will increase competition within the market, the UK is already a highly competitive wealth management environment. “Firms in the UK will succeed by serving existing clients in a more comprehensive manner and by increasingly differentiating themselves to generate new business,” Mr Durlacher believes.

While emerging economies with higher growth rates will increase their share of wealth faster than long-established centres such as the UK, for banks with many multi-generational family client relationships, “it is who holds the wealth now, and who will they pass it on to, that are arguably more valuable metrics.

“Being able to engage with, and speak the same language as, these younger generations is something the industry must adapt to, and quickly,” Mr Durlacher says. “They hold different values to older generations and have a strong sense of purpose for their wealth and the impact it can create.”