Over the course of a long relationship with their advisor, a client's circumstances can change in many ways, from a growing family, to changing jobs, to ultimately retiring. While each of these transitions can create planning issues to be addressed, an advisor's ability to continue working with the client typically remains unchanged. However, a different type of client transition – relocating abroad – can be particularly challenging for advisors, not only in the technical planning questions such a move raises, but, more fundamentally, how (and whether) the advisory relationship may continue.
In this guest post, Ashley Murphy, co-founder and executive director of the Global Financial Planning Institute (GFPI) and the founder and principal of Arete Wealth Strategists Australia, discusses how a client's international move can affect everything about the advisory relationship, including the regulatory landscape that an advisor is subject to (even if nothing else has changed), as well as custodial options and capabilities.
To start, when a U.S.-based client moves abroad, the U.S. regulatory framework doesn't go away; rather, the new country's rules and regulations are added on as another layer of scrutiny. While different locales have their own regulations concerning when an advisor is "doing business" in the country, it's important for advisors to recognize that advising a client living there could be viewed as engaging in that country even if they don't have a physical presence there, potentially generating licensing and/or registration requirements.
Another key consideration when assessing whether continuing to serve the client is possible is how the client will be treated by the advisor's custodian, as some custodians have country- and account-specific restrictions that might not make it possible for a client to keep their current accounts with the custodian after moving abroad. Also, the advisor can examine their E&O policy to determine whether the client's new jurisdiction is covered at all and, if so, what the policy protects against.
Notably, the impact of a client's move abroad can differ based on the duration and permanence of the change. For instance, a client relocating for work for two years before returning to the United States might need relatively limited adjustments, while those who are moving permanently in retirement present greater complications. With this in mind, understanding the nature of a client's relocation plans (well in advance of the actual move) can help an advisor understand how the scope of the engagement might change if they continue working with the client.
Ultimately, the key point is that while an advisor's first instinct upon hearing that a client is moving abroad might be to dig into the technical planning details (e.g., tax laws and currency exchange issues) that such a move can create, a more important question to consider is whether they can continue serving the client in the first place. Which means that understanding the client's relocation plans and the unique issues that the new country may present (perhaps assisted by a professional network of local experts) can help the advisor decide whether they want to continue the relationship and, if so, determine what actions they need to take to do so effectively (and compliantly).
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And if you want to go deeper on this topic, hear directly from the author on the Financial Advisor Technician podcast. |
