Key Takeaways
- Americans abroad face unique financial challenges and complexities.
- An experienced international wealth manager can help you avoid common investing pitfalls, minimize your tax exposure and optimize your wealth-building potential as a U.S. expat.
The complexities of managing your financial life as a U.S. expat can be overwhelming, and mistakes can result in significant tax and financial consequences. Having an experienced international wealth manager in your corner can help you avoid common investing pitfalls, minimize your tax exposure and optimize your wealth-building potential. But how do you find a financial advisor you can trust?
Read on for what to look for in an international wealth manager.
A Fiduciary Standard of Care
This is the most important consideration when choosing an international wealth manager as a U.S. expat. A fiduciary financial advisor is someone who is held to a “fiduciary standard of care,” which means they’re legally obligated to put your best interests first at all times. This fiduciary standard includes both a duty of care and a duty of loyalty.
Duty of care
This includes not only providing advice that’s in the client’s best interest but also executing that advice in the best way possible for the client. The duty of care standard also requires that the fiduciary advisor provide ongoing advice and guidance throughout the life of his or her relationship with the client.
Duty of loyalty
This requires that the financial advisor put clients’ interests ahead of their own interests. It also obligates the advisor to provide clients with full and fair disclosure of all material facts relating to the advisory relationship. Furthermore, the advisor must seek to eradicate, or make the client aware of, all conflicts of interest.
In addition to providing advice that’s in your best interests, a fiduciary advisor focuses on building long-term relationships rather than transaction-based interactions. Fiduciary wealth managers typically charge a percentage fee based on the assets they manage on your behalf. This is advantageous to you, as it helps to ensure the wealth manager’s interests are aligned with your success — as your wealth grows, so does the advisor’s fee.
In contrast to fiduciary wealth managers, some advisors are held to a “best interest standard,” which means they must provide recommendations that are suitable for your needs at that time. However, there’s no requirement that their recommendations be in your long-term best interests.
Non-fiduciary advisors typically charge a commission and conduct transaction-specific recommendations. This approach can incentivize these advisors to push certain investment products and make frequent portfolio transactions in order to generate additional fees, which can create a conflict of interest between what’s best for you and what’s most profitable for the advisor.
The bottom line is that it’s important to make sure your international wealth manager is serving in a fiduciary capacity, as this helps to ensure you’re receiving comprehensive cross-border wealth management services that are in your best interests.
Experience Navigating Cross-Border Financial, Investing and Tax Planning Challenges
Investing as an American living abroad comes with unique challenges that, if not properly managed, can be financially devastating. For example, if you mistakenly invest in a passive foreign investment company (PFIC) while living overseas, you could face significant tax consequences.
Your wealth manager should have significant experience helping U.S. expats navigate the challenges of maintaining a broadly diversified multi-currency portfolio, planning for retirement, mitigating currency risk, minimizing tax exposure, planning for wealth transfer, establishing or revising an estate plan, handling banking and investment complexities, and more.
Look for wealth managers who understand how to structure investment management strategies that comply with both U.S. regulations and the rules of your country of residence. The right wealth management firm will also be able to help you manage assets across multiple countries while coordinating financial planning strategies that account for currency fluctuations, local tax laws and international reporting requirements.
When evaluating a firm, ask about their experience with asset management for expats and how their approach differs from domestic wealth management services.
Experience With Your Country of Residence
Unlike many countries, the United States’ taxes are based on citizenship, not residence. This means you will still need to file a U.S. tax return while living abroad while also being subject to the tax regulations of your current country of residence. This situation presents multiple tax planning challenges, including the potential for double taxation.
Similarly, estate and inheritance planning becomes challenging for Americans living abroad, thanks to the interaction of multiple estate and inheritance tax regimes and requirements.
In order to navigate the particular challenges of your current country of residence, it’s essential to work with a wealth manager who understands those challenges. A qualified international wealth manager will be able to optimize your tax and financial planning strategies, taking into account the country-specific challenges that impact you. Before moving abroad or when establishing a relationship with a new advisor, consider reviewing these key wealth management questions to ensure you’re fully prepared.
Comprehensive Wealth Management Services
When evaluating potential advisors, it’s important to understand the full scope of wealth management services offered by their firm. A truly comprehensive approach to wealth management goes beyond simple investment management to include:
- Portfolio management and asset allocation tailored to your unique cross-border situation
- Tax-efficient investment strategies that account for multiple tax jurisdictions
- Retirement planning that considers Social Security, foreign pensions and tax-advantaged accounts in multiple countries
- Estate planning coordination to ensure your wealth transfer plans work across borders
- Currency risk management to protect your wealth from exchange rate volatility
- Asset management that addresses both tangible and intangible holdings across borders
Many wealth management firms specialize in serving high-net-worth individuals with complex financial situations, which often includes Americans living abroad. When interviewing potential advisors at a wealth management firm, ask about their experience managing wealth for expats and their familiarity with the specific financial planning needs of your situation.
The distinction between wealth management firms can be significant. Some firms focus primarily on investment management, while others provide integrated wealth planning that encompasses your complete financial life. For expats, working with a firm that offers comprehensive wealth management is often crucial to success.
The Support of a Team
Another important consideration is to find an international wealth manager that’s backed by other experienced professionals. As an expat, you likely face a variety of complexities that require the support of not only a wealth manager but also an international tax advisor and estate planning attorney. Look for a firm with a team of professionals willing to collaborate on your behalf and act in your best interests.
Leading wealth management firms take an integrated approach, with wealth managers, tax specialists, estate planning attorneys and other financial professionals working together under one roof. This coordination helps to ensure your investment decisions align with your tax strategy, estate plan and broader financial goals. The collective expertise at a well-structured firm can make a meaningful difference in your long-term wealth outcomes.
If you’re wondering what questions to ask a potential advisor, start by understanding how their firm is structured, who you’ll be working with and how different specialists coordinate on client wealth management.
Ongoing Communication and Annual Reviews
Once you’ve selected a wealth manager, it’s important to maintain regular communication. Your financial advisor should proactively reach out for annual reviews to discuss changes in your financial situation, goals or country of residence. These reviews are critical for expats, as regulations and tax laws in multiple countries can change frequently.
During these meetings, your wealth manager should cover important topics that affect your wealth, including portfolio management performance, tax law changes, estate planning updates and any life changes that may impact your financial plan. This ongoing wealth management relationship helps ensure your strategy remains aligned with your evolving needs.
How Creative Planning International Can Help
A great place to start is by reaching out to Creative Planning International. Our experienced team members work together to help American families living abroad maximize their wealth and avoid costly mistakes. We understand the complex interaction of multijurisdictional tax and regulatory regimes and take into account currency, diversification, tax, estate planning and other considerations as we help you plan and invest for the future.
Our comprehensive wealth management approach integrates investment management, financial planning, tax strategy and estate planning to provide coordinated support for your complete financial life. As a fiduciary firm, we’re committed to putting your interests first and providing transparent, objective advice tailored to your unique situation as a U.S. expat.
Our firm’s wealth managers bring decades of combined experience serving Americans abroad, and our integrated model means you benefit from the collective expertise of specialists across multiple disciplines. This collaborative wealth management approach sets our firm apart and helps to ensure you receive comprehensive support.
