Working With a Fiduciary U.S. Expat Financial Advisor

Understanding the qualifications and model of service when receiving financial advice is critical. International financial advisors use different designations and follow different standards of client service than U.S. financial advisors. Not all models have the best interest of a client at heart. This is especially true in many international jurisdictions where there is no uniform regulatory standard for financial advisors.

U.S. citizens living abroad should work with a U.S. expat investment advisor who operates under the fiduciary standard. A U.S. expat financial advisor also has specialized knowledge that is essential for globally mobile U.S. citizen clients who face U.S. worldwide taxation on their investments and oftentimes local taxation. This article explains some nuances related to the fiduciary standard and a sample of some of the unique financial issues that U.S. expat financial advisors solve.

Why Work With a U.S. Expat Financial Advisor Who Is a Fiduciary?

A fiduciary investment advisor is required to act in the best interest of their clients, putting the client’s interests ahead of the advisor’s own interests. This operating philosophy and legal requirement is known as the fiduciary standard. Under the fiduciary standard, an investment advisor must provide advice and investment recommendations that they view as best for the client. An investment advisor subject to the fiduciary standard must disclose all potential conflicts of interest. As such, an investment advisor is prohibited from giving investment advice that may conflict with their client’s needs. Ultimately, this will lead to the best long-term investment strategy for the client.

On the other hand, brokers are another type of financial service provider and are generally compensated through trading commissions and/or the products they sell to their clients. Given this compensation arrangement, a broker may be incentivized to place a client into less ideal investment products, but ones for which the broker receives a higher commission. Brokers are held to a lower standard—the suitability standard—that merely requires them to ensure that investment options fit clients’ objectives, time horizons and experiences, without regard as to whether the investment is the best for them.

Why Work With a Specialist U.S. Expat Investment Advisor?

Cross-border investing requires an international wealth manager who understands the specific needs and objectives of globally mobile investors, especially U.S. citizens who live abroad. There are many benefits of working with an advisor who primarily works with U.S. expats. A U.S. expat financial advisor understands the impact of the Foreign Account Tax Compliance Act, U.S. citizenship-based taxation, expatriation and other regulations that uniquely affect U.S. citizens living in another country.

The tax and legal regime of a foreign country may also create complications when crafting an appropriate financial plan. For U.S. expats, common U.S. financial planning strategies may be counterproductive in those foreign jurisdictions. Many financial professionals in the United States do not understand the unique circumstances faced by individuals living in another country. Their actions may unknowingly create adverse long-term effects.

Furthermore, investors should be cautious when considering offshore advisors or non-U.S. financial products, which may offer high commissions to incentivize a broker. Many of these solutions, which may include non-U.S. listed mutual funds (PFICs), are subject to higher U.S. tax rates and require more complicated tax reporting. Offshore financial advisors who do not routinely work with U.S. citizens may be unaware of some of these U.S. tax considerations, which ultimately create a headache and significant U.S. tax cost for their American expat clients.

Common Issues for U.S. Expat Financial Advisors

U.S. expats must deal with unique financial, tax and legal issues that investors living in the United States do not routinely encounter. A sample of some of the expat financial planning and cross-border investing issues might include:

• Income tax planning (tax treaties and foreign tax credits)
• Cross-border estate planning across multiple jurisdictions (gifts/inheritance tax, estate tax treaties, transfer of assets and international probate)
• Use of retirement accounts and pensions both in the United States and foreign country
• Selection of a U.S. expat-compliant brokerage firm and custodian
• Currency management
• Insurance needs
• Charitable giving structures in different countries

These are just a sample of possible U.S. expat financial planning issues that may be encountered by U.S. citizens living abroad. A U.S. expat financial advisor will be able to provide proper guidance on navigating these important international financial decisions. Advisors who focus solely on these areas will also be able to make the best recommendations to other professionals such as cross-border accountants or estate planning attorneys to form a family wealth management team.

Effective U.S. Expat Wealth Management

Working with a fiduciary financial advisor is essential to receive the most appropriate advice and financial outcomes. Cerity Partners operates in a fiduciary capacity and takes a client-centric approach to helping families and individuals achieve their financial goals, always putting the client’s interests ahead of our own. We strongly believe that it is not only the required way of serving clients from a legal perspective but also the right thing to do. We also believe that by acting as a fiduciary we are in a better position to meet our client’s needs more effectively.

In addition to working with a fiduciary, U.S. expats must work with professionals who understand their unique tax, investment and legal circumstances. Cerity Partners is experienced in advising high-net-worth individuals in the United States and abroad on all aspects of investment management and financial planning, including strategies for cross-border tax-efficient investments, retirement accounts, estate planning, currency management, insurance, charitable giving and compliance with financial regulations in all applicable jurisdictions.

Cerity Partners LLC (“Cerity Partners”) is an SEC-registered investment adviser with offices in throughout the United States. Registration of an Investment Advisor does not imply any level of skill or training. The foregoing is limited to general information about Cerity Partners’ services, which may not be suitable for everyone. You should not construe the information contained herein as personalized investment, insurance, tax, or legal advice. There is no guarantee that the views and opinions expressed in this presentation will come to pass. Before making any decision or taking any action that may affect your finances or your company’s finances, you should consult a qualified professional adviser. The information presented is subject to change without notice and is deemed reliable but is not guaranteed. For information pertaining to the registration status of Cerity Partners, please contact us or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). For additional information about Cerity Partners, including fees and services, send for our disclosure statement as set forth on Form CRS and ADV Part 2 using the contact information herein. Please read the disclosure statement carefully before you invest or send money.