Andrew Henderson is the founder and managing partner of Nomad Capitalist, a business that assists clients in the acquisition of second passports, the establishment of foreign bank accounts and other complementary pursuits. STAR Businessweek correspondent Ed Kennedy spoke with Andrew on the contemporary landscape of tax, Citizenship by Investment Programmes (CIPs) and the impact of political volatility on the industry.
BUSINESSWEEK: You’ve made a selling point of tax minimisation. Many countries have looked to clamp down on what they see as tax avoidance or evasion, wanting to see instead a framework whereby profits earned locally are taxed locally. Do you see this trend becoming global or will nations, such as those in the Caribbean, resist and remain attractive to interested parties?
ANDREW: I think it will become more and more difficult to pursue tax minimisation. That said, right now, to my mind, there’s a lot of tax, and not much action – and ultimately there will always be somewhere to domicile that’s favourable. The more that pressure grows for a clampdown, the more will nations who offer low taxation find new customers, and be incentivised to keep offering such an option to high net worth individuals. I also think over time most countries will shift to doing an onshore/offshore hybrid – like the UK, where what someone pays each year on their earnings while living in London would be very different to someone who bases their tax affairs in the island of Jersey.
BUSINESSWEEK: St Kitts and Nevis has had scandals with its CIP. Do you believe such episodes diminish a CIP’s desirability or are potential applicants keen on a destination, regardless?
ANDREW: I think most people want a CIP, keen on having a back-up plan. In this regard, what each CIP offers in terms of price and other factors, and what is most convenient for the applicant – for example, an American getting a second passport for a Caribbean nation will mean their back-up is closer to home than a European one – will be a stronger drawcard. Certainly more so than whether an applicant particularly likes St Kitts’ beaches more than Dominica’s, or any scandals each nation has had accordingly.
BUSINESSWEEK: Recent political earthquakes have been the election of Donald Trump and the Brexit issue. Debate persists about whether these events are outliers or the start of a new chapter. Do you anticipate a reset, or do you believe events like this will be the new normal?
ANDREW: I think issues like this are an example of people being upset, of the middle class being upset. I get it, and the trends that underwrite it. We’ve seen a situation over the past 30 to 40 years where people in litigation and management have set about hiring people in emerging countries. As a result, wages have gone up in developing nations, but haven’t gone up in highly advanced ones like the United States. In this environment, people are frustrated and they vote for what they hope will deliver them change, whether or not the leader actually can or will.
BUSINESSWEEK: You’ve detailed what such change means domestically in nations like the US; what do you think it means internationally?
ANDREW: I think you’re going to be seeing a lot of people with pitchforks in hand, coming after those who’ve had success. Governments are not keeping up with the needs of their people. As a result, in the next 10 to 20 years, I think they’ll be a real pursuit of successful people in some countries, and also governments breaking the ‘social contract’ and dipping into people’s retirement accounts and investments like it to bankroll public spending. It’s why I always advise my clients to diversify their investments. Never put all your money in one account, even when it comes to ‘trusted’ ones like a government retirement account. Doing so is just dumb given the volatility in politics right now.
BUSINESSWEEK: We’re also seeing volatility in the world. Hong Kong’s a noted example. To what extent do you see CIPs growing in value, not only for the freedoms they offer, but for the protection of people, allowing them to avoid persecution in their native land?
ANDREW: Well, it’s no secret we have an expensive fee structure at Nomad Capitalist. We streamline a service for people with high net worth so we will typically deal with clients who look at a CIP more like a back-up plan than a ticket to freedom. Although, it’s also true that back-up plans are becoming more important for all. Sure, if you’ve 100 or 200 million dollars, you need an insurance policy in case your native nation has a crisis. Yet, even for people with a smaller net worth, it can take a lifetime to build a fortune and it can be lost overnight depending on if a government decides to freeze bank accounts. So, as more and more people become wealthier and more mobile, I could see an uptick in CIPs appealing to a wider audience.
BUSINESSWEEK: How can the CIP industry improve, going forward?
ANDREW: I think nations need to do a better job at differentiating themselves. Few have a unique selling point. I also think many overprice their CIP offering. If you have a newer CIP and it’s the same as every other one in your region for the same price, it’s naive to think business is going to boom. So more points of difference and lower prices would be nice to see.
BUSINESSWEEK: What misunderstanding do you feel needs to die in this space?
ANDREW: I think any idea CIPs are the flavour of the month is wrong. Here’s why: people need to get used to the politics of envy, of the differences between us, and that these are enduring. For example, most Americans don’t have a passport, and many haven’t even left their home state. My business isn’t going to appeal to someone with that mindset. Yet these people are the same ones who think Trump is going to get coal jobs back; it won’t happen. I feel the future is about ownership – of your destiny and your assets. I’m transparent about my business and what it offers to deliver ownership. I wish politicians were more transparent about the nature of the issues out there, and to what extent they could actually fix them.
To learn more about Andrew Henderson and the work of Nomad Capitalist, visit www.nomadcapitalist.com. You can also see Nomad Capitalist’s video blog on YouTube via www.youtube.com/user/nomadcapitalist/videos
