Every year, thousands of Americans move abroad. Many turn to their financial adviser for help with the transition.
Whether 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 expat status.
This presupposes that the customer retains his adviser. For individuals who intend to move permanently, they may decide that they no longer wish to continue working with a US-based financial planner.
From a counselor’s point of view, the feeling may be mutual. Clients planning a long-term move abroad usually transfer much of their liquid assets to their destination country (often gradually, not all at once). For advisors who earn a percentage of assets under management, they could be looking at a loss of income even as the client’s need for financial advice skyrockets as they become settled in a foreign country.
Judith Lu, a Los Angeles-based counselor, has retained all of her clients who have moved overseas. She attributes that in part to her ability to help clients with both the financial issues and “cultural adjustment” challenges they face. She speaks from experience as she moved abroad to work earlier in her career.
“Most people who move abroad have a financial life in the United States that still needs to be managed,” Lu said. Depending on their net worth and other factors, they may not need an advisor “if they have a family member who can handle all their money matters back in the US”
Since 2020, Lu says that more customers have moved abroad. The ability to work remotely led some of them to seek out another country to get out of the pandemic.
One of her first questions for them is their planned length of stay. If it’s a six-month vacation, the to-do list is simpler.
She cautions clients to keep an open mind about their plans and not commit from the start. Some make declarative statements (“I’m changing my life: I’m moving to Italy”) without weighing the consequences.
“They think it will be indefinitely,” she said. “So I might say, ‘Take six months and go from there before you move all your financial pieces around.’ Do a test drive.”
Longer moves present more challenges. Because of tax implications (both US and foreign), advisors often hire an accountant who understands tax laws across different jurisdictions.
There is also the question of how individuals will access their cash from their new home. At some point, they’ll need to set up a local bank account, which can entangle unsuspecting newcomers with myriad financial reporting requirements.
“Many people have their money transferred quarterly or twice a year from their US bank to their new bank,” Lu said. “When my clients have moved abroad, one of the things we help with is maintaining a steady cash flow to their foreign bank account.”
Transfers are often cumbersome, she says, because of currency conversion, wire fees and other transaction costs. The advisor’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 can go from investment management to reviewing your portfolio construction to match your needs,” Lu said.
Specifically, advisors can discuss how to count and track a client’s assets and liabilities in a base currency, the tax rules that apply to those assets, and cost-saving tips for timing foreign currency exchanges throughout the year.
Advisors working alone or in small businesses may lack the bandwidth to assist clients who move abroad for long periods of time. Apart from all the complexities associated with account transfers, cash management, foreign tax laws and investment reporting, mastering each country’s regulatory requirements for financial planners is difficult.
If advisers work with a client in a foreign country, they must comply with regulatory standards in that country.
“In the larger countries, they tend to have more extensive regulatory 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 advisors who continue to work with their expatriate clients.
Advisors can 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 big 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 choose a non-U.S. person to be the trustee of your family trust, and making that change can have enormous consequences.”
Some clients need someone to pay US bills that won’t stop just because they’ve moved overseas. If they own property in the United States, there is maintenance and oversight of their real estate to consider.
“A lot of these things you don’t learn about or think about until you come (overseas),” Lu said. “But if you have a counselor who has gone through it, it can help.”
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