Problem: Brokers and advisors outside the United States do not understand how U.S. taxation works, and most brokers and advisors in the U.S. do not under- stand the special issues of Americans abroad.
How can I choose a proper advisor?
Recommendation: Seek out the advice of a “fee-only” Registered Investment Advisor with experience working with expats.
Fee-only advisors are compensated only by their clients. By not taking commissions or maintaining fee splitting agreements with fund companies and brokerages, the potential for conflict of interest between the client and advisor is reduced.
Why Registered Investment Advisors (RIAs)?
RIAs are legally bound to act as fiduciaries to their clients. That is, they have a legal obligation to put the clients’ interests ahead of their own. Brokers are not RIAs and do not have a fiduciary obligation to their clients.
What to avoid?
Avoid relying on investment ad- vice from advisors such as stockbrokers or insurance agents, who are compensated by selling products through commissions and fee sharing agreements with the issuers. In these situations, the advisor is likely to recommend investments based on the size of their potential compensation rather than the quality of the investment and strategy. Additionally, investors should be especially careful when considering investments registered in “off-shore” locations. There is a high incidence of fraud among these operations. Even legitimate investment schemes in these regions typically lack investor safeguards that exist in the U.S. Finally, understand the tax rules regarding investments outside the United States.
