Why HNW brokers need to think internationally – Kemal

The financial lives of high-net-worth (HNW) clients are becoming increasingly international.

Their borrowing requirements are following the same path.

A client may live in Switzerland, receive income from an international employer, retain property in London and hold investments with banks elsewhere in Europe. For an adviser, understanding that client therefore means looking beyond where they happen to live or where a particular property is located.

This creates an increasingly important role for HNW brokers. The challenge is not simply to identify whether finance is available, but to understand which lenders and jurisdictions are best placed to interpret the client’s overall financial position.

 

A fragmented lending landscape

While private wealth has become increasingly global, lending remains relatively fragmented.

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Different institutions can take markedly different approaches to residency, currencies, income, investment assets and the jurisdictions in which they are prepared to lend. A financial profile that sits outside the appetite of one lender may therefore be viewed quite differently by another.

This is particularly relevant for internationally mobile clients whose circumstances do not fit neatly within conventional underwriting models.

Private banks, for example, may be prepared to consider the relationship between a client’s income, liquidity and investment assets. Specialist lenders may be able to take a more individual approach to complex circumstances. Equally, lenders operating across multiple jurisdictions can have different credit appetites for what appears, on the surface, to be the same transaction.

For the HNW broker, knowing these differences is becoming increasingly important.

The role is less about approaching the largest possible number of lenders and more about understanding where a particular client’s circumstances are likely to be best understood.

 

International access is only part of the equation

Having relationships with lenders internationally can broaden the options available, but access alone is not enough.

Advisers also need to understand differences in lending culture, credit appetite and private banking models between markets. Just as importantly, they need to know how a client’s financial position should be presented to different institutions.

For internationally mobile clients, this can involve bringing together income earned in one jurisdiction, assets held in another and a borrowing requirement somewhere else entirely.

The complexity is not necessarily a reflection of the client’s financial strength. Often, it is a question of interpretation.

This is where an experienced HNW broker can add value: translating a complex international financial position into a coherent proposition that a lender can assess.

 

Looking beyond the traditional mortgage

For clients with substantial assets, the conversation may also extend beyond conventional property finance.

Investment portfolios, existing private banking relationships and other eligible assets can potentially form part of a wider financing strategy, depending on the lender and the client’s circumstances.

This can be particularly relevant where a client has sufficient liquidity to complete a purchase outright but does not necessarily want to liquidate investments or concentrate a significant amount of capital in a single property.

The question then becomes not simply how much a client can borrow against the property, but how different sources of capital could work alongside one another.

A recent transaction completed by Henry Dannell Private Clients illustrates this.

The client, a British investment professional who had relocated from London to Zurich, was purchasing an CHF 11 million residential property in Switzerland.

Rather than deploying a significant proportion of existing liquidity into the purchase, the financing was structured through a Swiss private banking solution. This combined a traditional mortgage equivalent to 60% of the property value with a further 40% of financing against assets under management.

Together, the facilities provided CHF 11 million of financing while also establishing the foundations of a longer-term private banking relationship in Switzerland.

The case is useful not because every internationally mobile client will require the same structure, but because it demonstrates the breadth of the financing conversation that can be required.

 

The changing role of the HNW broker

As clients become more internationally mobile, the broker’s role is increasingly one of interpretation and coordination.

A client moving from London to Zurich should not necessarily be viewed solely through the lending relationships they established while living in the UK. Likewise, an overseas client purchasing property in Britain may have income and assets that require an understanding of financial structures outside the UK.

This means advisers need to understand both UK and international lenders, as well as institutions with the ability to consider clients whose financial affairs span several jurisdictions.

It also means recognising that the most appropriate solution may not always come from the most obvious market or from the institution with which the client already has a relationship.

For HNW brokers, this places greater emphasis on understanding the client’s wider financial position before considering individual products.

Where does the client live? Where is their income generated? In which currencies? Where are their assets held? What liquidity do they wish to retain? And how does the proposed borrowing fit alongside their wider financial arrangements?

These questions increasingly determine where a lending requirement should be placed.

The evolution of private wealth is therefore changing the nature of HNW mortgage advice. As clients, careers and assets become more international, advisers need a similarly broad understanding of the lending landscape.

The conversation is no longer simply about which mortgage is available. Increasingly, it is about identifying which institution, structure and jurisdiction can most appropriately accommodate the client’s circumstances and wider objectives.

For globally mobile clients, access to credit increasingly needs to reflect the international nature of their financial lives.