When Investors Invest Globally


Because the economy of the world is increasingly global in nature, American investors are looking beyond the borders of their own country for investment opportunities. At the same time, the fractious atmosphere of some foreign economies create concern for American investors.

While wealthy investors do invest globally, they do so with caution. For every dollar spent on investments in the political maelstrom that is China, for example, three dollars are spent on average in the relatively more settled economic climate of Europe.

Of course, with the emergence of Brexit-style negotiations over imports and exports, the investment picture in Europe can become more complicated.

There are many investors who are adamant about keeping their investment funds in domestic investment products, but there are others who understand the opportunities that are present in global markets. Advisors should be aware what their clients think in regards to global investment products and services. 

Spectrem’s recent research with wealthy investors in three different wealth segments – Asset Allocations, Portfolios and Primary Providers - asked their opinion of global investing. In general, the wealthier the investor, the more they were willing to invest in properties and vehicles with foreign addresses.

For instance, 30 percent of Ultra High Net Worth investors with a net worth between $5 million and $25 million plan to invest in Europe. That’s a 4 percent increase from the same question asked in 2014, and it is 9 percent higher than the 21 percent of Millionaire investors (with a net worth between $1 million and $5 million) and 17 percent higher than the 13 percent of Mass Affluent investors (with a net worth between $100,000 and $1 million).

Simply speaking, the more money an investor has to invest, the more likely that investor is to seek a diverse set of investment products, and the diversity can include where the investment is based. 

America’s northern neighbor, Canada, is about as stable a financial market as you find outside of the United States, and 14 percent of UHNW investors plan to invest there. Twelve percent would like to invest in the United Kingdom.

Interestingly, plans to invest in Canada have dropped among Millionaire investors, from 14 percent in 2014 to 9 percent in 2015. Interest in European investments has increased among Mass Affluent investors, from 10 percent to 13 percent in one year’s time.

Advisors need to keep an eye on international markets and politics to make sure their clients are investing in relatively safe markets. There are many investment opportunities in Asia, for example, but with China and North Korea in that mix, it can be a volatile place to invest.

The investment interest in Japan and China registered at just 11 percent in the Spectrem study, despite a perceived opportunity for significant growth in both countries.

There is clearly a sense of risk when it comes to investing outside of the United States, and the less wealthy the investor is, the less he is willing to take investment risks. Fifty percent of UHNW investors are unwilling to invest in foreign countries, while 60 percent of Millionaires and 72 percent of Mass Affluent investors are unwilling to make foreign investments. 

The interest in international investing includes buying international mutual funds, and follows a similar pattern with wealthier investors being more involved. While 57 percent of UHNW investors invest in international and foreign mutual funds, only 43 percent of Millionaires do and only 24 percent of Mass Affluent investors have investments in international mutual funds.

Top Takeaways for Advisors 

There are myriad investment opportunities in global markets and advisors should be prepared to access products for clients who are interested in expanding their portfolios in that manner. However, this push to international investing requires a huge amount of education and constant updates regarding global issues and economic situations in countries other than the United States.

Clients that express an interest in global investing should be made aware of any potential or additional risk.

Discuss with clients whether they are truly interested in investing in a particular market or region or whether they are merely interested in global companies.  Global companies might include Apple, Honda or other familiar names.  Sometimes, investors might believe that a company such as Honda is "international" because it is not headquartered in the U.S.  Make sure you understand your customer's intentions.


For those who are interested but hesitant, international mutual funds and ETFs may provide a good starting point.



©2016 Spectrem Group