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5 Questions U.S. Expat Investors Should Ask an Advisor

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The Importance of Choosing an Advisor With Expat Experience

As a U.S. citizen living abroad, you face complex financial and tax planning challenges. From multi-jurisdictional tax complexities to rapidly changing regulatory requirements and investment restrictions, it can be difficult to navigate your financial life as an expat.

Fortunately, an experienced wealth advisor can help you make smart decisions regarding your investments, taxes, savings, estate planning and more. But how can you be sure the advisor sitting across the desk is qualified to successfully manage your financial life? Start by asking the following five questions when choosing an expat advisor.

#1 – Do you serve as a fiduciary advisor to clients?

Perhaps the most important question to ask is whether the advisor serves as a fiduciary to clients. A fiduciary advisor is legally obligated to act in your best interests at all times.

Not only is a fiduciary advisor required to provide advice that’s in your best interests but he/she is also required to provide ongoing advice and guidance throughout your relationship. Fiduciary advisors typically charge a percentage fee based on the assets they manage on your behalf. This fee structure helps align the advisor’s interests with yours.

In contrast to fiduciary financial advisors, some advisors charge a commission and generally conduct transaction-specific recommendations rather than providing advice that’s focused on helping you achieve your long-term goals. These advisors are held to a best interest standard, which requires the investment be suitable for your needs at the time of the recommendation.

However, because they’re often paid commissions for the investment products they sell, advisors held to a best interest standard may be incentivized to push certain products over others and make frequent portfolio transactions. This can create a conflict of interest between what’s best for you and what’s most profitable for the advisor.

The bottom line? It’s important to ensure your expat advisor is serving in a fiduciary capacity, providing you with comprehensive cross-border wealth management.

#2 – How will you help me navigate the complexities of cross-border investing?

Making an investing mistake as a U.S. expat can be financially devastating. For example, if you mistakenly invest in a passive foreign investment company (PFIC), you may face significant tax consequences. That’s why it’s important for your potential advisor to have an understanding of various investable assets and cross-border regulations.

Ask any potential advisor about his or her experience establishing broadly diversified, multi-currency portfolios for U.S. expat clients. The advisor should be able to discuss the specific cross-border investing challenges you face as an expat living in your specific country of residence. The advisor should also be able to articulate the currency risks you face and how he/she will help you navigate them while also developing a custom portfolio to help achieve your specific financial goals.

#3 – What’s your experience navigating my country of residence’s tax regulations?

The United States is somewhat unique in that it taxes based on citizenship, not place of residence. Even though you might have no U.S. tax liabilities as a U.S. citizen living abroad, you’re still required to file taxes in the United States. This means, as an expat, you’re subject to the tax regulations of your country of residence as well as those of the United States. As you can imagine, this creates multiple challenges for U.S. citizens/green card holders living overseas.

To avoid overpaying, it’s absolutely vital that your wealth advisor has experience with multi-jurisdictional tax complexities in general, as well as the specific tax treaty of your current country.

#4 – How will you ensure my estate plan continues to meet my needs while I’m living abroad?

American expats who wish to leave a financial legacy for U.S. family members face several estate planning challenges. If you drafted an estate plan before moving overseas, it’s likely subject to an entirely new set of laws in your current country. If you hadn’t considered these foreign laws when drafting your documents, your assets may not pass to your loved ones or beneficiaries as you had intended. Making sure your potential advisor has experience with your country of residence’s estate planning laws and their interaction with those of the U.S. will help to ensure your estate plan still satisfies your needs.

#5 – What’s your experience working with inheritance taxes in my country of residence?

If you receive an inheritance as an American citizen living overseas, you’ll likely be subject to inheritance tax imposed by your country of residence. This means it’s important to work with a wealth advisor who understands your tax liabilities based on several factors, including but not limited to:

  • Country of domicile and citizenship of the decedent
  • Country of residence and citizenship of the beneficiary
  • Nature of assets
  • Estate tax treaties

If you’re still searching for a qualified advisor to help you navigate your financial life as a U.S. expat, Creative Planning International is here for you. We specialize in helping expats and cross-border families maximize their wealth and avoid costly mistakes.

We understand the complex interaction of multi-jurisdiction tax and regulatory regimes and consider currency, diversification and investment considerations as we implement custom planning strategies to meet your specific needs. Because we serve in a fiduciary capacity, you can be confident we’re acting solely in your best interests.

To learn more, request a meeting with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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