BUSINESS NEWS :
Every year, thousands of Americans move abroad. Many turn to their financial adviser for help making the transition.
Whether they’re moving for a job, lifestyle change or retirement, cross-border financial issues can cause headaches. Advisers typically revise a client’s financial plan to account for their new status as an expat.
That’s assuming the client retains their adviser. For individuals who intend to relocate for good, they may decide that they no longer wish to continue working with a U.S.-based financial planner.
From an adviser’s standpoint, the feeling can be mutual. Clients planning a long-term move overseas usually transfer much of their liquid assets to their destination country (often gradually, not all at once). For advisers who earn a percentage of assets under management, they can be looking at a loss of income even as the client’s need for financial advice soars as they get settled in a foreign land.
Judith Lu, a Los Angeles-based adviser, has retained all her clients who have relocated abroad. She attributes that in part to her ability to help clients with both the financial issues and “cultural fit” challenges that they face. She speaks from experience, as she moved overseas for work earlier in her career.
“Most people who move abroad have a financial life in the U.S. that still needs to be managed,” Lu said. Depending on their net worth and other factors, they may not need an adviser “if they have a family member who can manage all their money affairs back in the U.S.”
Since 2020, Lu says that several clients have moved overseas. The ability to work remotely led some of them to seek out a different country to ride out the pandemic.
One of her first questions to them is their planned length of stay. If it’s a six-month getaway, the to-do list is simpler.
She cautions clients to keep an open mind about their plans and not overcommit from the outset. Some make declarative statements (“I’m changing my life: I’m moving to Italy”) without weighing the repercussions.
“They think it’s going to be indefinite,” she said. “So I might say, ‘Spend six months and go from there before you move all your financial pieces around. Do a test run.’”
Longer relocations present more challenges. Due to tax implications (both U.S. and foreign), advisers often enlist an accountant who understands tax laws across different jurisdictions.
There’s also the question of how individuals will access their cash from their new home. At some point, they will need to set up a local bank account, which can entangle unsuspecting newcomers in myriad financial reporting requirements.
“Many people have their money wired quarterly or twice a year from their U.S. bank to their new bank,” Lu said. “When my clients have moved overseas, one of the things we help with is maintaining steady cash flow into their foreign bank account.”
Remittances are often onerous, she says, because of foreign exchange conversion, wiring fees and other transaction costs. The adviser’s role then changes from traditional financial planning to managing clients’ global holdings in an effort to minimize taxes and maximize convenience and liquidity.
“We may go from investment management to reviewing your portfolio construction to match your needs,” Lu said.
Specifically, advisers might discuss how to tally and track a client’s assets and liabilities in a base currency, the tax rules that apply to those assets and cost-saving tips to time foreign currency exchanges throughout the year.
Advisers who work alone or in small firms may lack the bandwidth to help clients who move abroad for long periods. Aside from all the complexities tied to account transfers, cash management, foreign tax laws and investment reporting, it’s tricky to master each country’s regulatory requirements for financial planners.
If advisers work with a client in a foreign country, they need to comply with regulatory standards in that country.
“In the bigger countries, they tend to have more elaborate regulations regimes,” said Gerry Joyce, managing director at Fiduciary Trust International in New York City. Depending on the country, licensing and compliance can prove burdensome for advisers who continue working with their expat clients.
Advisers may also get caught up in the client’s dreamy desire to move abroad. In all the excitement, it’s easy to overlook seemingly minor matters that can have a major impact on their financial future.
“It’s important to look at all of your personal documents, like your will, and coordinate them with your overall estate plan,” Joyce said. “You may need to pick a non-U.S. person to be trustee of your family trust, and making that change can have tremendous implications.”
Some clients will need someone to pay U.S. bills that don’t stop just because they’ve relocated overseas. If they own property in the U.S., there’s maintenance and oversight of their real estate to consider.
“A lot of this stuff you don’t learn about or think about until you get [overseas],” Lu said. “But if you have an adviser who has gone through it, that can help.”
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