“Financial planning and discipline is key to one’s financial freedom” - Kishorkumar Bapalli
As an expat, your financial life can be complicated. Where you invest (in the US or the country where you’re living) and the both countries’ regulatory and tax implications depending on what you invest in can quickly cloud the waters.
This is where an expat specialist financial advisor becomes invaluable. They will be able to guide you through the different scenarios and implications of what you may be thinking of investing in, and furthermore, thanks to their experience, they can advise you on how best to achieve your long term goals given your current and future situation, your investment time horizon, and your risk tolerance.
In this article, you’ll learn about:
• The importance of seeking specialist financial advice as a US expat
• Finding an expat financial advisor
• What to ask your prospective expat financial advisor
The importance of seeking specialist financial advice as a US expat
According to one report, around 8.7 million Americans live in more than 160 countries. As an expat, which country you live in and its regulatory and tax regimes can significantly impact your investment choices, so it’s important to find an advisor who has specialist knowledge and experience working with American expats in the country where you live.
Most financial advisors in the US won’t be familiar with financial planning techniques and tax implications relevant for Americans abroad, and using such an advisor can have costly implications. As an example, many US investment products aren’t available to Americans living in the EU due to EU rules. Conversely, many foreign financial products can trigger expensive and burdensome US tax and reporting requirements.
Consulting an expat financial specialist however ensures your long-term financial stability, as they evaluate your financial and dual tax status as a US citizen, your risk tolerance and goals, and apply the experience while incorporating their currency management knowledge, too.
Managing cross-border investments for a US expat is best undertaken by a global wealth manager who is familiar with the unique requirements of globally mobile clients. An expat finance specialist is aware of the effects of the laws that specifically influence US citizens residing abroad, like the Foreign Account Tax Compliance Act, US citizenship-based taxation, expatriation and other regulations.
Similarly, insurance options change when one moves across borders. A US expat may also face issues with their retirement funds and social security accounts.
When you move abroad, you may need to strategically rebalance your portfolios, figuring out the best cross-border tax-efficient investment options, retirement accounts, estate planning, currency management, insurance, charitable giving and compliance. Only an expat specialist financial advisor will be able to help you do this in the most convenient, beneficial and tax efficient way possible.
Before meeting with a financial advisor, determine which areas of your financial life require assistance. You should be prepared to describe your specific needs and goals when you first meet with an advisor. Thus, it is crucial to have a precise list of requirements in mind.
Expat financial advisors offer services in several fields. For example, they offer advice on cross-border investments, ensuring that your portfolio remains risk-appropriate and tax-efficient, and minimizing your currency exposure long-term. Expat financial advisors may also review your insurance policies to find coverage gaps or suggest new policies. Therefore, it makes sense to determine your requirements, risk tolerance and goals first to ensure that your expat financial advisor is a good fit for your needs.
Finding an expat financial advisor
Expat specialist financial advisors based outside the US won’t be subject to federal regulation (other than relating to investments they make in the US). As such, it is important to ensure that they are regulated in the country where they’re registered. You should start by searching online to find some options, then further research their client reviews and backgrounds, and, if possible, fee schedules.
Additionally, talk to other expats who have been using the services of the expat financial advisors that you’re considering using to manage your finances. Having a good relationship with your expat financial advisor is important, so getting first-hand feedback as to their personality, working practices and effectiveness is a must.
What to ask your prospective expat financial advisor
Once you’ve found a potential expat financial advisor, it is essential to meet with them to discuss your requirements.
Here are five important questions to ask them when you meet to ensure they’re the right fit for you.
1. What are their credentials, qualifications and experience
Financial advisors are subject to regulation in almost all countries in different areas such as accounting services, investment advice, and financial planning. In addition, depending on the kinds and amounts of assets they manage, they might also be required to register with certain regulatory national bodies.
Also check if they possess the right personal qualifications and certifications to be your expat financial advisor. While financial advisor firms may not legally require certifications, it is certainly preferable.
It is of course also essential that they have significant experience and expertise working with American citizens in the country where you live.
2. What are their personal and firm values
It’s beneficial to ask your expat financial advisor about their personal and firm values and vision. They will have immediate access to your most private information, goals, and plans. Thus, if your values are compatible, it will give you the confidence to put your funds in their hands. For example, you may have ESG (ethical, social and governance) investment preferences that you will want them to be able to cater for. On the other hand, if their values are dissimilar from yours, they may not be a good match for you.
3. What is their investment approach
Financial advisors are responsible for recommending and selecting investments for you. You can ask them what approach they take to this, and how they sort through the thousands of available potential assets to create a suitable portfolio that will meet your requirements.
Your financial advisor will gauge your risk tolerance before suggesting any investments. Most advisors use model portfolios that they customize to each client's needs and preferences. You should have a fundamental grasp of your advisors' investment philosophy, as it will influence asset selection. Ensure that you are comfortable with the investment strategy that your advisor uses.
This question will also reveal whether your financial advisor has a coherent, empirically supported plan that can be shared.
4. What is their communication policy
Communication is the key to good relationships, and asking how an advisor would communicate will reassure you that you can check on your investments, that they will be responsible, clear and transparent when you have questions, and let you better comprehend their way of operating. This question can include asking for details like how often you two would meet, the mode of meetings, and how often they will update you on your portfolio performance.
5. What is their fee structure
Last but not least, ask about their fee structure. Always inquire about a financial advisor's fee schedule, method of payment, and inclusions before choosing one. Financial advisors receive varying types of compensation, that may include transaction fees, commissions, and portfolio-based percentages. Advisor fees reduce your portfolio gains, so you will want to ensure that you are aware of what they are, and that they are competitive and appropriate for the service and performance you are benefiting from.
If you have any questions, don't hesitate to contact us.
DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.
Copyright © 2023 Dunhill Financial. All rights reserved.