SIV & Investor Visa Update: March 2022
There is a lot happening in the Investor Visa World. In this month’s newsletter we will cover:
- Investor Visas news from around the world；
- The importance of Financial Advice over Financial Product Advice；
Investor Visa around the world
The most recent review of the BIIP and the subsequent changes introduced on 1 July 2021 were designed to both streamline the BIIP, and to help Australia get a better deal from Visa investments.
However, the overriding goal was to and to protect the integrity of the program going forward. The importance of this cannot be understated when we look at what is happening with Investor Visa Programs around the world.
In the UK, the Home Office has closed its Tier 1 Investor visa route to all new applications. As of Feb. 17, foreign nationals can no longer apply for an initial Tier 1 Investor visa. Similar to our SIV this route had allowed individuals to stay and live in the U.K. if they invested funds in companies registered in the U.K. This sudden closure was made citing security concerns and a failure to deliver benefits to the country.
UK Home Secretary, Priti Patel took this decisive action and was quoted as saying that "I have zero tolerance for abuse of our immigration system. Under my New Plan for Immigration, I want to ensure the British people have confidence in the system, including stopping corrupt elites who threaten our national security and push dirty money around our cities,".
The European Union Council has partially suspended the EU visa waiver agreement with Vanuatu. This is on the back of EU concerns about security risks associated with Vanuatu’s investor citizenship “golden passport”
In the USA On March 15, President Biden signed a law that includes new rules for an EB-5 Immigrant Investor Regional Centre Program. New rules include increased investment amounts or US$800,000 in Targeted Employment Areas (TEAs) and US$1,050,000 in non-TEAs.
New measures have been introduced to prevent fraud and abuse and to provide tools to Department of Home Security to prevent national security breaches. Several key reforms did not make it into this legislation including much-needed immigrant visa backlog relief. Along with the very strict and onerous job creation rules the wait time for an EB5 can still be well over 5 years.
Compared to other investor visa programs around the world, Australia’s Business Innovation & Investment Program (BIIP) is a great alternative for those looking for a new home and a safe place to invest.
Personal Financial Advice Vs Financial Product Advice
Lately, we have been meeting with prospective visa applicants who have indicated that they have received personal financial advice from an SIV Fund Manager that their migration agent had referred them to.
There still seems to be some confusion over the distinction between what constitutes Financial Product Advice and who can provide Personal Financial Advice.
In Australia you must be authorised under an Australian financial services licence (AFSL) to provide financial product advice.
ASIC Regulatory Guide 175.8 states that “Financial product advice is a recommendation or a statement of opinion, or a report of either of those things, that is, or could reasonably be regarded as being, intended to influence a person or persons in making a decision about a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products”.
In a nutshell this means that fund managers can give product advice on their own financial services and products. It is important to remember that this is not unbiased financial advice as they can only recommend their own products.
ASIC Registered Financial Advisers do not receive commissions and are prevented from doing so under the Corporations Act 2001.
The important point for Migration professionals to remember is that fund managers are not financial advisers. Don’t take the risk of accidently arranging an investment product for your clients and breaching the financial services provisions of the Corporations Act 2001.
We have received a great deal of feedback from Migration Agents regarding recent media reports of SIV investors being sold into heavily concentrated and illiquid property investments and then being refused redemptions.
Financial Advice experts agree that maintaining a well-diversified portfolio will serve an investor well over multiple market cycles. The idea behind diversification is for you to mitigate your risk, by investing in different non-correlated assets. This way your portfolio's performance will not suffer heavily if a single security, sector, industry group, asset, or country falls out of favour.
We take this logic a step further and recommend people do the same with Fund Managers. It makes sense to use the best specialist Private Equity Manager and the best Small Companies Manager, or Property Manager, or Equity Manager or Fixed Interest Manager. The reality is that no fund manager is going to be competent let alone proficient in each asset category.
Our bespoke IV and SIV compliant portfolios are diversified across different asset classes and the best in each category asset managers. A portfolio proposal may include over 10 different managed funds from 10 different asset management firms, all accessed via our investment platform.
Clearly, now more than ever it is important that you ensure you’re your clients receive investment advice from an ASIC licenced Financial Adviser who specialises in the Investment Visa (IV & SIV) space.
“ May you live in interesting times.” From Omicron to the Ukraine
Just as we hoped Omicron seems to have led to the beginning of the end of the COVID pandemic, the world has a new crisis.
As predicted Omicron variant is being only a modest drag on the Australian economy. Australia is well positioned for above average economic growth in 2022, boosted by high vaccination rates, high levels of personal savings, a strong labour market and healthy corporate balance sheets.
Analysts did predict that Omicron’s impact should be moderate, and that Australia remains an attractive place to invest.
Over recent weeks we have been constantly asked how the invasion of the Ukraine and the sanctions that Australia has imposed on Russia, will affect the Australian economy?
The short answer to this question is zero. The sanctions that Australia has imposed are merely an extension of those applied in 2014 after Russia annexed the Crimea.
Australia’s sanctions operate across three areas:
• technological, involving bans on exports of goods for use in oil and gas exploration and weapons production;
• financial, involving bans on financial services and financial trading with designated entities;
• personal, involving travel bans and limits on commercial relations for designated people.
Economically, Australia’s sanctions lack the significant power of the US sanctions. Australia’s total two-way trade with all countries around the world was some $873 Billion in 2019-20. Of this only a miniscule $1.2 Billion was with Russia. For both Australia and Russia this figure is negligible, to the point of being irrelevant. However, they are not pointless and exhibit solidarity with most of the world in adding to the international pressure being applied to Russia.
However, Russia is the world’s leading exporter of wheat, with Ukraine not far behind. Sanctions being imposed have seen Wheat futures trading on the Chicago Board of Trade at their highest levels since the global financial crisis
As a result of the sanctions, Australia is expected to sell a lot more wheat to the Asia-Pacific region, particularly Indonesia and Vietnam. China, despite having imposed trade restrictions on several Australian products, has increased wheat imports from Australia by over 50%.
Australia as the world's sixth-largest wheat producer and fifth-largest exporter is going to benefit greatly from both the increased demand and the high prices for wheat caused by sanctions against Russia.
While the US economy is booming, powered by huge excess saving, a wealth surge and extreme stimulus. This is driving deepening capacity shortages, with the US labour market at its tightest in 50 years. All of this has pushed US inflation to a 40-year high. Markets outside the US and particularly Australia is now better placed, with cheaper stock prices and stronger growth potential.
Please note from the chart below (see arrow) that the ASX has risen since the Russian invasion of Ukraine commenced.
With the ongoing commodity boom, record external surpluses, the end to RBA Quantitative Easing , undervaluation, and the easing of policy in China the AUD should appreciate to the mid-to-high-70’s over the next year. Overall, Australia is still a great place to invest.
Choosing to apply for an SIV or an IV and choosing which state to be nominated by used to be just a lifestyle choice. With all the new state / territory specific criteria and restrictive investment conditions being imposed choosing who to be nominated by has become vitally important albeit complicated choice. Please contact us at [email protected] and help your clients make an informed decision.
For more details we invite you to check out our website at https://ords.com.au/significant-investor-visa-siv-ord-minnett-ords/
MANAGING DIRECTOR - SIV INVESTMENT SERVICE
After a career spanning over 25 years of Private Banking and Trade Finance, Brett moved to Asia joining ipac Singapre as a Senior Vice President in 2005. Joined Ord Minnett in 2012, and established the SIV Ord Minnett Investment Service.
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