The Expat Financial Advice Guide

The Expat Financial Advice Guide
The Expat Guide to Financial Advice Abroad
This guide will help you understand whether you need financial advice to fully benefit from your expat advantage and how to choose a professional advisor

When you move abroad, at least semi-permanently, you become known as an expat. You also become non-resident for tax purposes in your old home nation – it’s at this point in time that the expat advantage exists for you to embrace.

In simple terms, once you’re non-resident for tax in your old home country a whole new world of financial opportunity opens up for you – but to use it successfully you need qualified expat financial advice.

Planned well, your moving abroad can be your opportunity to get ahead in money management terms.

As an expatriate you may well gain a financial advantage that is of benefit to you in the form of legitimate tax savings and/or more interesting and diverse savings and investment opportunities.

We call this the expat advantage – it is all about making the most of your money when you’re living abroad and have direct access to the offshore and international financial marketplace.

How Do I Make the Most of My Expat Advantage?

The key to making the very most of your expat advantage is to understand the international opportunities open to you for the management and investment of your wealth.

You will need to take in to consideration the nation you’ve left behind and their tax rules.  For example, if you’re from the UK originally then when you become non-resident in Britain for tax purposes you’re fairly free of the system, compared to an American living abroad for example.

You then need to understand the tax rules in your new country, and also think about whether it makes any sense to remit money to your new or even back to your old nation – in most cases it’s usually safer to retain money outside of either jurisdiction.

Choices and decisions will all be based on your own personal position, as well as your personal objectives, risk profile, wealth status, age etc.  However, they will also be influenced by the new world of opportunity open to you abroad.

In order to embrace your personal expat advantage it might literally pay to take the advice of an expert financial adviser.  Through their knowledge you can advance your own understanding of the solutions and opportunities that are out there, and find the investment path, offshore jurisdiction and secure wealth management plan to suit you.

In so doing you will be taking and making the most of your expat advantage.

Do I Need Specialist Expat Financial Advice?

In terms of where to seek advice perfectly structured for your unique expatriate financial status, it can be very difficult to know where to start looking and how to choose the right adviser to be sure that they have the correct knowledge to assist you.

For example, your previous UK based financial adviser may not be able to introduce you to the potentially tax saving and financially enhancing opportunities available offshore anymore.  What’s more, they may not be regulated to advise you once you become non-resident in Britain.

A local adviser in your new nation is unlikely to understand your unique expatriate status, how that relates to any tax saving potential in the nation in which you’re residing, and how you need to structure your affairs appropriately in case you should ever want to repatriate or relocate elsewhere.

A local adviser may be able to advise you on the money that you receive in your new country of residence.  However, they may not be able to provide you with the best advice for any pension or assets you have outside the country already.

This can mean that you need to choose a specialist international financial advisor to help you with your financial planning decisions.

Should I Get Financial Advice Before I Retire Abroad?

If you’re hoping or planning to retire abroad, one of the most important factors to get right in advance of your money is your financial position.

Factors to consider include whether or not you can actually afford to move and live abroad in the country of your choosing, and at the standard you want!

Assuming you’ve taken the basic steps to ensuring you can afford your move, there are plenty of other considerations to cover and it may well be to your advantage to speak to a financial adviser before you move.

If you do speak to an adviser in the UK to correctly structure your financial position before you relocate, make sure they are clear about the fact you’re about to become non-resident in Britain for tax purposes.

Conveniently for soon-to-be expats there are some British and international firms that work in parallel to help soundly structure someone’s wealth ahead, and then following, their move.

Why is an International Financial Adviser Worth Considering?

Although you may speak the language in your new country of residence, seeking advice from an independent, international adviser may be far more beneficial when reviewing your finances on an international and not just a local level.

An international adviser will be able to understand your expat status and how that relates to your tax position.  Furthermore they will be able to take into account any pensions, investments and savings plans you already have in place – whether back home or onshore in your new nation of residence.

Ultimately an international financial adviser will have as international an outlook as you, now that you’re an expat.

Finally, another reason to consider an international financial adviser when you need financial planning assistance is because they may be more used to working via email or telephone, so that wherever you move to next in the world they can remain your point of contact, maintaining continuity for your money.

What Do I Need to Look for in a Financial Adviser?

1) You need an independent adviser who has as international a perspective as you.  There’s no point using a local adviser if you may move to another country or even go back to the UK at some point in the future.

This is even more apparent if the local adviser only specialises in advising clients where you are currently based.  Planned correctly, a move to another country, repatriation to the UK, (or even death), can have future tax advantages for your wealth and estate – a local adviser may not know about this.

2) You need to ensure that your adviser provides the best advice for your international outlook.

3) You need an adviser who understands how your previous financial affairs were managed, how your current status can benefit you, and how future requirements may lead you to or from certain courses of action.

4) You need an adviser who understands expatriates and the offshore/international world of tax and financial planning.

They should not be tied to any financial institution as independence of advice is essential.

5) The adviser needs to be qualified, experienced, professional and ideally backed by a brokerage large enough to have influence with the major financial institutions.

6) Your adviser needs to be correctly regulated to give you advice.

Should I Choose a Commission or Fee Based Adviser?

Unlike in the UK, most international independent financial advisers, i.e., those who are not tied to giving advice based on one bank’s products only, currently charge a fee for the advice they give, or they receive commission after they have placed your business with the best bank or financial institution that meets your personal requirements.

Occasionally some advisers charge a fee and receive commission.

Since 2012 the UK has changed the rules about how financial advisors in Britain receive payment, and all advisors in the UK will only be able to charge fees for advice giving.

This is to bring greater transparency to financial advice giving in Britain.

As an expat, rather than being forced to speak to an IFA in the UK who may misunderstand your new tax status or who may only be able to recommend you use often unsuitable savings and investment products onshore in the UK, (such as ISAs you’re no longer eligible for when you become non-resident, and pensions on which you cannot receive tax relief), you can call on the services of an offshore or international financial adviser.

Offshore financial advisers may refer to themselves as international wealth managers, expat financial advisors or just independent financial advisers.

Currently, such advisers based in Europe, (not UK), are still free to charge a fee for advice giving, or to take commission.

There is no ‘right’ way for your adviser to be paid.

Some of the better advisories that ensure they maintain an ongoing client relationship, by offering a regular review of your financial arrangements to make sure they are still suitable, receive an ongoing management fee rather than a one off commission from an institution they have placed a client’s business with.

Such companies may instead make it clear to you, their client, that there is an ongoing fee due for payment for their ongoing commitment to the correct management of your money.

Ultimately, when you choose an adviser, you must ask them how they will be paid for giving you advice.  Most advisers will offer this information up front anyway.  And where a fee is chargeable this must be agreed with you in advance.  Where commission is paid, this must be detailed to you transparently.

Fee based IFAs claim their method is best because it means they are not ‘encouraged’ to place your money with the bank that pays them the highest commissions.

A commission based IFA will claim that their method is best because they are fully incentivised to continue working with you, their client, forever.  What’s more, they always point out that once a client has paid a fee for advice and invested their money, they are always reluctant to have to pay another fee every few months just to have the adviser check that they are still correctly invested.

Apparently this can mean an expat doesn’t keep on top of their financial portfolio as often as they should if they choose a fee-based adviser.

A commission-based IFA will offer this financial review service for free on an ongoing basis, thus ensuring an investor’s portfolio is very regularly checked to make sure it still matches the client’s circumstances.

The type of adviser you choose will obviously depend in part on whether you prefer to pay a regular fee every time you need to ask a question or change an investment approach, or whether you’re comfortable for your adviser to receive commission or a management fee from a bank/finance house when they do a good job for you.

Either way, you are paying for the advice, just as you would pay a plumber for advice (and help) if you had a burst pipe, or in the same way you would pay a doctor for advice about a medical complaint.  Even when you choose a commission based advice service, the commission paid is factored in to the fees and charges you pay to the bank or finance house for the investment of your money.

How Are Offshore Financial Advisers Regulated?

In the EU there is a Markets in Financial Instruments Directive which: “provides harmonised regulation for investment services” throughout the EEA.  Under this directive the concept of ‘passporting’ exists.

Passporting is a term that is relevant to how an offshore financial adviser, based in Europe, is regulated to give you advice.

An offshore IFA based in the EU should be regulated somewhere within Europe; common countries for regulation include Belgium, Ireland and Germany because other member states deem them to have the best regulation procedures in place.

Once regulated therein an advisory can give advice.  They can also have a branch office elsewhere in Europe for example, from which they may advise expats too, and because of passporting they can advise expats in other EU member states.

So, assuming you’re resident in Europe you need to ensure the company your IFA works for is regulated and therefore licensed to give financial advice.  You need to ensure that they are regulated in a jurisdiction within the EEA where you are afforded good protection.  What’s more, you need to find out about their indemnity insurances in case things go wrong, and discuss how their compliance and complaints processes work too.

There is strong regulation within the financial advice arena in Europe. Regulated advisories must abide by the terms of their licensing in the jurisdiction in which they are regulated.

What Qualifications Should a Financial Adviser Have?

Just as no one would put their health at risk by knowingly taking medical advice from an unqualified practitioner, so no one should put their fiscal health at risk by knowingly taking financial advice from an unqualified financial adviser.

Despite the fact that the UK rules relating to financial advice giving no longer apply and cover you when you’re an expat, living abroad and taking financial advice from an offshore financial adviser, the UK’s qualifications for financial advisers are still among the best in the world.

What’s more, for Britons living abroad and considering investing their money offshore, most are likely to favour a British adviser to give best advice.

This is because there are many technical elements to understand – from what constitutes a good investment fund to where is the safest offshore jurisdiction for your money for example.  And to understand this most Britons probably prefer to speak with someone who is a native English speaker.

So, whilst this is not a hard and fast rule – you can perhaps be more reassured that your financial adviser knows what they’re talking about if they have the likes of the CFP* certification for example.

*CFP (Certified Financial Planner) certification is from the Institute of Financial Planning, and here’s what they say about the qualification: “CFP certification is an advanced qualification which tests a candidate’s ability to apply their detailed knowledge and skills in order to produce an effective financial plan…Becoming a CFP professional is not easy.  It’s a real challenge and that is why CFP certification is highly respected as an international standard.”

Alternative qualifications to look out for include the International Certificate in Financial Advice from the Securities and Investment Institute and the FPC qualifications from the Chartered Insurance Institute.

What Can I Do If I Receive Bad Financial Advice?

From the outset a good financial adviser will have informed you about where their company is regulated and licensed and how their compliance and complaints processes work.

The license they have in place should give you peace of mind that they are a professional financial brokerage in the business of giving best advice.

Defining the compliance procedure should make it clear to you that they carefully check that advice given is right, based on elements such as your risk profile and country of tax residence for example.

What’s more, it is in a professional advisory’s best interest to ensure you get best advice, as their best business referrals come from satisfied clients.

Having said all of this, there are occasions when expats could have cause to complain.

You can ask your adviser for their complaints procedure before you even consider trusting their advice.  Or, if you need to make a complaint later on, approach the advisory first to see if they can put right whatever element you need to complain about.

If the adviser or brokerage cannot or will not help (remember it really is in their best interests to do so and you can remind them of this), your right to complain should go back to the regulatory authorities in the country in which the company is regulated and licensed.

Always ensure any adviser you work with is correctly regulated, qualified, licensed and experienced – and you need an independent adviser who can open up the whole offshore and international financial marketplace for you if you’re an expatriate living abroad.

Do your own careful due diligence on anyone you consider trusting to give you expat financial advice, and always read any documentation before you sign it and commit to a given investment approach.

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