Nerd's Eye View Archives On General Financial Planning

Enhancing Client Conversations About Charitable Giving: Sample Questions, Scripts, And Tools For Better Engagement

November 27, 2024 07:03 am 0 Comments CATEGORY: General Planning

Charitable giving is an essential aspect of many people's financial lives. Some give through established channels, such as by donating to charities or volunteer work, others may give informally to family members on a regular but less structured basis – and some simply aspire to "do more". Yet, despite the important role that charitable giving can play, studies show that many advisors hesitate to bring up the topic with clients. Advisors may worry about overstepping boundaries or feel uncertain about a client's interest in philanthropy. However, advisors play a critical role in helping clients navigate the complex landscape of charitable giving. By integrating philanthropic planning into their services, advisors can add significant value to client relationships and provide more holistic planning.

In this guest post, Kathleen Rehl, a "reFired" financial planner and educator in philanthropic planning, shares insights, thought-provoking questions, and sample scenarios to help advisors begin and navigate charitable giving conversations, reducing any risk of awkwardness or overstepping.

Introducing the subject of charitable giving may feel daunting. However, with a few thoughtful approaches, these conversations can feel more natural and rewarding for both client and advisors. They can ease into the discussion by normalizing it – such as sharing their own giving experiences like donating a portion of their income or supporting local charities. Open-ended questions, like asking what legacy a client wishes to leave, can also allow the client to share their vision. From there, advisors can offer their technical expertise on strategies and options that a client may not have considered. Resources like handouts or educational videos can also be helpful tools to inform clients – often, many people are simply unaware of the range of possibilities!

Beyond these initial steps, advisors can support clients' charitable goals in other ways, such as by vetting charities that align with their clients' interests or educating them on various giving strategies. Advisors may also introduce tax-advantaged approaches that add value in multiple ways – for example, helping grandparents set up donor-advised funds that support future generations while creating tax benefits. Additionally, life events that change a client's financial circumstances, such as retirement, receiving a windfall, or selling a business, can be ideal opportunities to revisit charitable giving as part of a client's evolving financial and personal goals.

As clients and advisors get deeper into charitable conversations, it may be helpful for clients to create a personal charitable mission statement – a guiding star for their giving decisions during and beyond their lifetimes. These statements often stem from clients' life stories and core values., passions, and most closely held causes. If clients need guidance, advisors can offer a template or list of values to help get them started. Once clarified, these values empower advisors to suggest charitable options that align closely with what matters most to the client.

Ultimately, the key point is that charitable giving conversations create a meaningful space for mutual exploration – where clients can discover and clarify their values and priorities while learning about the various options and vehicles available to support the causes they care about. By encouraging productive philanthropic conversations with clients, advisors not only help clients give with purpose but also deepen client satisfaction and trust. And when clients are enabled to support the causes closest to them, they experience the true impact of a financial plan that aligns with their personal legacy!

Quantifying (More Accurately) The Real Impact Of A Financial Advisor’s Costs On Their Clients’ Nest Eggs

October 23, 2024 07:02 am 0 Comments CATEGORY: General Planning

While the financial advice industry has transformed in many ways over the past several decades, one aspect that has remained relatively constant is the use of the Assets Under Management (AUM) fee model as a common way for many advisors to get paid. Though in practice, while a 1% AUM fee is a common 'starting point' in the industry, the actual fee structure can vary based on the firm's approach; for example, some firms may reduce the fee for high-net-worth clients, or charge an additional fee for separate and additional services (from deeper financial planning to add-ons like tax preparation).

However, over the years, the 1% AUM fee has faced criticism from those who argue that it reduces the value of a portfolio by more than the advisor's guidance adds. This argument is particularly common in the financial independence and personal finance space, with financial educators like Ramit Sethi being a notable critic. AUM detractors like Sethi often present a calculation that compares the performance of 2 identical portfolios – one managed by an advisor who charges a 1% AUM fee for 20+ years, and one without an advisor – illustrating how the fee can significantly erode the cumulative value of their portfolio by the time they reach retirement.

With this line of criticism becoming increasingly common in online financial spaces, how can advisors with a 1% fee structure explain their value to curious (or critical) prospects? One key starting point is to acknowledge that technically, all spending reduces the total amount that a person could have saved and had available for retirement. And almost any 'normal' household expenditure can add up to a lot when it's compounded out, at a market rate of return, for multiple decades. For example, buying a new Honda every 10 years, instead of saving those payments, may take a greater piece of a client's retirement nest egg than a 1% advisory fee. So too does the impact of the infamous daily latte. Comparing expenses to what they could have been worth if saved in a portfolio can be misleading – because from that perspective, every expense seems unfavorable! And in practice, even flat-fee and subscription models of financial planning can still have a similar long-term impact on a consumer's financial future, when only the advisor's ongoing costs are considered.

Additionally, it's worth noting that while Sethi and other financial influencers advocate against the 1% AUM fee, much of their criticism targets those who charge a percentage of AUM but focus more on selling products than on supporting a client's long-term well-being, conflating financial salespeople with actual financial advisors. However, many consumers may not fully understand these nuances of the financial advice industry, and could mistakenly assume that all advisors charging AUM fees operate this way.

For prospects concerned about long-term AUM costs – and financial advisors exploring the benefits of a financial planning engagement with them – it may be helpful to highlight the value advisors provide beyond 'just' asset allocation. For example, firms that offer services like tax-loss harvesting, systematic rebalancing, and behavioral coaching often more than 'earn' their 1% AUM fee by saving clients money in taxes and other areas. Advisors who can explain their fee in the context of a holistic strategy – and connect it back to the pain points a client faces – can address these concerns before prospects become clients.

Ultimately, the key point is that while criticism of the 1% AUM fee may be widespread, and it's fair to recognize that financial advice does have a cost that advisors should be expected to offset by the value they provide, advisors who lead with holistic financial planning have a lot of value to demonstrate, especially when engaged on an ongoing basis, to help prospects better understand the true costs and benefits of having a trusted financial advisor in their corner!

Planning For Adoption: Understanding Different Pathways And Their Costs, Tax Breaks, And Financial Assistance Available

August 2, 2023 07:03 am 0 Comments CATEGORY: General Planning

Adoption, the social and legal process in which an adult is formally made the parent of another individual (typically a child), helps fill a critical need in society: to unite children who need loving families with those who want to raise children. At the same time, adoption can be expensive, with costs that can add up to $70,000 or more. Which means that financial advisors can play an important role in adoption planning – helping clients strategically plan for the costs involved in the process, including accessing tax credits that can significantly defray these expenses.

The costs of adopting a child can vary significantly depending on the method of adoption. For example, one of the least expensive options (with an average cost of $2,744) is to care for a child in the foster care system with adoption as an ultimate goal (though sometimes the children being fostered end up being reunited with their biological family). Another relatively less-expensive option (at around $10,000 or more) is an independent adoption, where the birth and adoptive parents typically forgo the services of an adoption agency and instead work with a trusted attorney to complete the process (this option is commonly used when the birth and adoptive parents already know each other and have a good relationship). At the higher end of expenses are agency adoptions (with costs of $20,000–$70,000 or more), where parents looking to adopt work through an agency that provides matching and screening services, as well as international adoptions (estimated at $22,000–$32,000 or more), where parents adopt a child from another country.

The Federal government and some state governments provide tax breaks to help defray "reasonable and necessary" adoption costs. For instance, the Federal Adoption Credit provides a nonrefundable credit of up to $15,950 per child for adoptions in 2023 (claimed on tax returns filed in 2024), with no limit on the number of adopted children to whom this credit can apply. However, because the credit has MAGI phaseouts (generously ranging from $239,230–$279,230 for 2023), financial advisors can assist clients with income and expense planning to take full advantage of the credit. For example, if the adoptive parent's income is too high to claim the credit in the current year due to income phaseouts, the advisor may suggest deferring the payment of eligible adoption expenses to the next year after the adoption is finalized. Alternatively, shifting taxable income to a later year is another way to help clients avoid the loss of adoption tax benefits due to phaseouts for high-income earners.

In addition to taking advantage of available tax breaks, advisors and their clients can also consider other methods to defray the adoption costs. These include tapping employer-provided resources for adoption support, seeking out grants from charitable organizations, or, if funds are very tight, taking out loans or taking distributions from retirement plans (as the SECURE Act created a new opportunity for parents to withdraw up to $5,000 from their IRAs or employer-sponsored plans without the 10% early distribution excise tax following the birth or adoption of a minor child, though this must now be repaid within 3 years).

Ultimately, the key point is that because adopting a child is an expensive process, financial advisors can play an important role in helping adoptive parents plan for the costs involved and providing them with an understanding of the various tax breaks and other options that are available to defray these expenses, helping make adoption a reality for clients eager to grow their families!

Creating A (Just In Case) Game Plan For Clients Facing Layoffs

January 25, 2023 07:01 am 0 Comments CATEGORY: General Planning

With the U.S. economy predicted by many experts to slow down in the near future, many people’s thoughts have turned to the prospect of a recession. And along with those expectations may come concerns for those still in the workforce about the possibility of layoffs, and needing to get by without income for an unknown period of time. Such periods can be fraught with anxiety, since beyond 'just' the fear of losing one’s livelihood is the realization that there is little way to control whether or when one is laid off. This uncertainty makes it difficult to prepare for the possibility of a layoff, since there is often little real knowledge of what to prepare for.

Financial advisors with clients who are worried about being laid off can play a role in alleviating those worries by helping the client regain a sense of control over their future. And while there are many things to consider when planning for a layoff, these considerations can be grouped into two distinct types of conversations.

First, the advisor can help the client take stock of their current situation to assess their current preparedness for a layoff. This can include inventorying the client’s ‘safety net’ (i.e., the asset and debt options they have available to use if they aren’t employed), listing their essential expenses, and using those figures to estimate how long of a layoff they could potentially sustain. Additionally, there are some actions that may be best to get done before the client loses their employee benefits, such as getting medical work done, using FSA funds, and obtaining individual life and/or disability insurance.

Next, the advisor and client can make a ‘game plan’ which would take effect if the client is actually laid off. These actions can go in order from most to least urgent: starting with immediate concerns (like setting up sources of liquidity, finding new health insurance, and reducing expenses), moving to less-urgent but still time-sensitive tasks (like exercising employee stock options), and finally taking advantage of potential tactical planning opportunities (like making Roth conversions to take advantage of a low-income year or rolling over assets from an undesirable 401(k) plan).

The key point is that although advisors can’t reduce the probability of a layoff themselves, they can reduce some of the feeling of stress and anxiety felt by clients who fear a layoff is coming. Because, even though the game plan for being laid off will ideally never be used because the client is never laid off to begin with, there is peace of mind in having a strategy for when things go wrong. And if the worst case does happen, having a plan already set up to ensure the client's financial security can help ensure they can focus on finding their next opportunity!

Client Cash Management: Why It’s Important, And The Next Generation Of Technology To Make It Better

August 22, 2022 07:02 am 8 Comments CATEGORY: General Planning

Cash tends to exist at the forefront of individuals' day-to-day lives for many reasons: as a stable savings vehicle for near-term goals, a safety net for unforeseen emergency expenses, and, of course, to pay for daily living expenses, just to name a few. And this nearness to daily life means that cash - and how it is used - is also often at the forefront of individuals' minds. In general, this means that people are more likely to be more aware of how much cash they're holding than the other numbers in their financial life, like the balances on their retirement accounts (which, being less 'immediate' in their intended purpose, are not often at the forefront of most people's minds to the same extent that cash is).

However, despite the impact that cash may have on a person's mindset, advisors have traditionally spent little time advising clients on what to do with their cash - except simply to tell them not to hold too much for risk of losing value to inflation. With recent economic changes, though, there are renewed opportunities for advisors to help clients manage their cash more effectively. For example, bank account balances have increased sharply in the last three years due to governmental programs in response to the pandemic and also to generally rising wages and salaries. At the same time, the Federal Reserve has recently raised key interest rates, which has resulted in higher yields on bank accounts, CDs, and other cash-like assets. Which means that, for the first time in years, individuals might start earning non-trivial yields on their cash, and potentially have a higher amount of cash on hand to manage as well. And so advisors have an opportunity to add value in new ways by advising clients on the questions of how much cash to hold and where to keep it!

While high-yield savings accounts at online banks have been a popular place for storing cash for the last decade, in more recent years the FinTech world has developed more options that could create more value for advisors and their clients. One example is cash management accounts developed by digitally-focused broker-dealers and robo-advisors, which while similar to savings accounts from a customer's perspective, provide key features (like higher FDIC coverage limits and a streamlined experience with the customer's existing investment accounts) that distinguish them from traditional savings accounts.

Though many of these accounts exist primarily to serve retail customers of broker-dealers and robo-advisors (which might make advisors hesitant to recommend them for fear of introducing customers to a potential competitor), there are also multiple options for cash management accounts developed solely for clients of financial advisors. With these options, advisors can offer a cash management service within the rest of their financial planning 'ecosystem', offering competitive yields on cash and FDIC coverage limits of up to $25 million, without having to send clients out to other financial institutions that might want to lure them away from the advisor!

Ultimately, the key point is that while the current economic environment provides a particular opportunity to focus on cash management, the reality is that the value of cash management can be ongoing despite the ebb and flow of economic conditions. For advisors looking to be paid directly for this value, a small, flat cash-management fee might be feasible without eating up too much of the yield on clients' cash. However, in most cases, cash management may actually be a worthwhile 'free' service – both only as a differentiator for prospects, but also as a way to renew existing client relationships and continually provide ongoing value!

Serving Pro Bono Clients As A Busy Advisor: How Advisers Give Back Makes Volunteering Easy

August 15, 2022 07:07 am 1 Comment CATEGORY: General Planning

Working as a financial advisor can be both financially rewarding and emotionally satisfying. By helping clients develop financial goals, creating a financial plan, and supporting the implementation and monitoring of the plan, advisors help clients live their best lives. But while new fee models have allowed fee-only advisors to reach an expanding range of potential clients, there are many Americans who could benefit from professional financial advice but might not have sufficient income or assets to pay for it. This gives advisors the opportunity to offer their services on a pro bono basis, and the Advisers Give Back platform allows them to do so in as little as one hour per month.

Pro bono financial planning refers to free, no-strings-attached financial advice and planning for underserved people. Most advisors are already familiar with many of the issues these individuals face, from setting goals to debt management, although the specifics might be slightly different given the typically lower incomes and wealth of pro bono clients. In addition to providing a valuable service to the community and serving as a meaningful activity for advisors, pro bono planning is also an important part of growing financial planning into a profession, similar to other fields (e.g., law) with established pro bono programs. Further, pro bono planning can help advisors develop their skills, whether it is working with individuals of different ages or incomes than their usual clients to practicing their empathetic listening and client meeting skills (which is especially relevant for more junior advisors whose primary functions may be focused on back office responsibilities supporting senior advisors, and who might not have as many opportunities for substantive one-on-one client interactions!).

Given the demands from running (or working for) an advisory firm as well as the time needed to research ways to offer pro bono planning, the non-profit group Advisers Give Back (AGB) has created a platform that allows advisors to participate in pro bono planning for as little as one hour per month. AGB allows advisors to meet with clients and develop recommendations while significantly reducing the potential friction involved in getting started with pro bono planning. For instance, AGB connects with pro bono clients so advisors do not need to spend time advertising their services.

Any advisor with the CFP certification can use the AGB platform after completing an online, 60-minute training session, after which advisors can set their availability for pro bono client meetings. The AGB platform facilitates multiple meetings with the same pro bono clients, allowing advisors to build relationships with their clients and to track their progress, so that both short-term stressors and long-term goals can be addressed. AGB also offers dedicated assistants who help with administrative tasks, communicating with clients and tracking their progress between meetings, which saves advisors even more time.

Ultimately, the key point is that the Advisers Give Back (AGB) platform allows busy advisors to engage in pro bono planning in as little as one hour per month. Which is important, because even though volunteering can offer advisors the personal satisfaction of offering a valuable service to the community, participating in pro bono opportunities is also a vital part of the business of financial advice itself becoming a recognized profession, and is an important contribution to the growth of financial planning as well!

Why Childfree People Require A Unique Financial Planning Process

August 3, 2022 07:07 am 0 Comments CATEGORY: General Planning

For financial advisors, dealing with issues concerning clients’ children, from education costs to legacy goals, is a common part of the planning process. But a growing number of individuals are going through life without ever having children. And no matter the reason, clients without children have unique planning needs that are important for advisors to recognize.

First, advisors can determine whether a client is “childless” (does not currently have children but might in the future) or “Childfree” (does not currently have children and does not ever plan on having children). And if a prospect or client does identify as Childfree, advisors can respect their lifestyle by refraining from asking whether they are certain about the decision or prying into their reasoning behind the decision (because questioning along these lines can often be misinterpreted as judgment calls, and the Childfree client likely already has to field these intimate questions from friends and family on a regular basis!).

For advisors with Childfree clients, it is important to recognize that these clients often have different lifestyle arrangements than clients with children. For example, they may be in a long-term relationship without being legally married, or they may live in more-than-2-person groups for both personal and financial reasons. In addition, Childfree clients often have more flexibility and mobility when it comes to relocating or taking extended time away from work throughout their careers (which increases the opportunity to do the detailed cash flow planning to make that happen!). Yet being Childfree can also come with additional burdens, such as being expected to take care of aging parents or other dependent family members (because they are often expected to have ‘extra’ time by not having to care for their own children).

Because of their particular situation, Childfree clients often have unique planning needs, particularly when it comes to insurance. For instance, Childfree clients, especially those who are single, may have less need for life insurance than couples with dependent children. On the other hand, Childfree clients often have an increased need for disability coverage, as they might not have a support system to carry them through their retirement. Similarly, Childfree clients often prioritize long-term care insurance as a way to ensure they are not a burden on others in old age.

Childfree clients can also face unique estate planning challenges. For example, it is more common for Childfree people to want to spend or gift their money during their lives (as they do not have children or grandchildren to leave money to upon their death). Which means that advisors with Childfree clients who opt for a ‘Die With Zero’ approach must balance their spending and gifting by maintaining a sufficient financial cushion to cover their lifetime spending needs. Also, because they might not have any immediate relatives, Childfree clients might explore the option of using a professional trustee and fiduciary as their executor, POA, and medical proxy.

Ultimately, the key point is that Childfree individuals have unique goals and challenges to address in the planning process. And those advisors who are able to address the specific needs of Childfree clients have a potentially profitable opportunity to serve a growing niche market!

Sabbatical Financial Planning: Taking Extended Time Off Without Derailing The Career Or Retirement

July 20, 2022 07:09 am 0 Comments CATEGORY: General Planning

For many workers, a typical career entails a series of successive jobs over several decades, with the end goal of retiring and finally being able to ‘relax’. And while most breaks from work on the traditional path are limited to short vacations, there is a growing movement of individuals who want to take extended time off during their working years to take advantage of their health and opportunities that might not be available to them once they reach ‘normal’ retirement age. One way to do so is through a sabbatical, and advisors can play an important role in supporting clients who are interested in taking this step.

A sabbatical refers to a period of time in which someone takes an extended, planned break from work prior to retirement, often as an opportunity to focus on their wellbeing and/or to gain valuable perspectives of life outside of work. While sabbaticals can involve as little as 1 month for some individuals, taking a sabbatical for 6–12 months is not uncommon. However, longer sabbaticals do carry more substantial financial and career ramifications that require careful planning, especially when extensive travel plans are involved.

One of the biggest challenges of planning a sabbatical is enduring a period of little or no income and coordinating job opportunities after the sabbatical is completed. While some employers have formal sabbatical programs that guarantee the individual can return to the same job after their time away, others may be willing to allow a sabbatical on an ad hoc basis. And there are other employers who are less flexible that may require the individual to quit their job altogether in order to take significant time away from work.

With this in mind, advisors can help clients assess how their sabbatical plans will affect their other financial goals. This could include planning for how their expenses will change during the sabbatical as well as simulating how the sabbatical will impact their financial picture going forward. Advisors can also add value by analyzing tax planning opportunities during the sabbatical; for example, having reduced (or no) income during the sabbatical could create unique opportunities for Roth conversions or harvesting capital gains.

Advisors with clients who might be interested in taking a sabbatical can start the conversation at a strategic level, thinking about their goals for the time off as well as how it relates to their other life objectives. For example, some clients might be fine with taking a one-year sabbatical that pushes out their projected retirement date by two years, while other clients might prefer to stick with an earlier retirement date. In addition, advisors can help clients explore contingency scenarios if they do go through with the sabbatical. For example, an advisor can model what the client’s financial picture will look like if it takes 3 months longer than anticipated to find a job after returning from the sabbatical.

Ultimately, the key point is that advisors are uniquely positioned to add significant value for clients who are considering a sabbatical, both in conceptualizing what the sabbatical would entail and how it would affect their other financial goals. In the end, while taking a sabbatical might not maximize a client’s net worth, it could be a decision that maximizes how they experience their life!

The One-Page Financial Plan: Focusing Advice On What Matters Most

October 18, 2021 07:05 am 10 Comments CATEGORY: General Planning

In the delivery of “the financial plan,” advisors have traditionally presented the thick, leather-bound, firm logo-embossed, three-inch binder to clients. On top of being a tool to present “the plan” to clients, this also was an outward demonstration of the sheer depth of analysis the advisor completed to compile this plan; a physical manifestation of the advisor’s “value”. Yet while that depth of meticulously compiled information can be helpful, it also comes with drawbacks. As, in practice, the especially thorough financial plan can be overwhelming to clients, if they open it at all. And at the end of the day, in-depth financial planning analyses can also quickly become out-of-date. To address this challenge, several years ago financial advisor and client communication guru Carl Richards made the alternative case – in his book The One-Page Financial Plan – that all of a client’s “need to know” information ought to be distilled into just a single page instead. In other words, the advisor would simply deliver a One-Page Financial Plan.

It’s worth noting that a One-Page Financial Plan (OPFP) doesn’t mean that the three-inch binder’s worth of information doesn’t exist; the OPFP is an alternative for a deliverable, not an alternative to the work itself. It’s about making a distinction between what advisors could share with a client, versus what a client needs (and really wants?) to know. Which means the creation of an OPFP is all about focusing that limited space to hone in on what each client truly needs to see and wants to talk about.

Beyond the sheer time savings of not producing such a lengthy physical financial plan deliverable, one of the major advantages of the OPFP is its ability to be a “living plan”. Because the traditional financial plan is often so long and time-consuming to produce, most firms only update it once every several years. By contrast, the OPFP can easily be updated on an ongoing basis every year, or even at every check-in meeting with the client throughout the year – which makes it easier for an advisor to pivot in unforeseen circumstances and disruptions (such as, for example, a pandemic!). Rather than reacting to a few years’ worth of changes, advisors can proactively adjust and update the plan as life happens.

Because the OPFP is a living document, a first draft can be constructed as soon as an advisor begins meeting with a new client, simply using standard Document and Spreadsheet tools (e.g., Word and Excel in Microsoft, or Docs and Sheets in Google). As while the Plan will shift a lot over the first few weeks, it nonetheless provides a framework that advisors and clients can work through together to reach mutual clarity. And once an OPFP has been refined and has buy-in from both an advisor and client, it can even become the centerpiece of meetings, because both parties agree that the OPFP has the most important information in order to make informed decisions.

Simmering down a financial plan to one page may be a hard adjustment at first, but it is certainly worth pursuing as a time- and information-efficient option to show clients what they need to know. Many advisors also refine their OPFP strategies over time, opting for more graphics (built from templates to ensure they’re easy to update), or building in automations to make the Plan even easier to compile and comprehend. But ultimately, the OPFP is useful as a tool to drill down to a client’s two biggest questions: “Am I doing OK?” and “What should I do next?” Providing a one-stop-shop to answer these two questions nudges clients (and advisors!) to stay focused on the right things—and work together to keep heading in the right direction!

Cross-Border Financial Planning: Issues When Advising International Clients

October 14, 2020 07:02 am 0 Comments CATEGORY: General Planning

As the growing international economy and prevalence of virtual communication continue to flatten the world, millions of individuals are finding it easier to cross national borders, leaving their native countries for opportunities to work and live abroad, whether going from the US to other countries or coming from other countries to work and live in the US. Yet crossing international borders introduces a number of unique issues and challenges, from financial reporting obligations to tax complexities, moving money across currencies to moving retirement benefits between countries… which on the one hand creates a unique opportunity for financial planners to specialize in the needs of cross-border clients to differentiate themselves… but also increases the burden of what financial advisors must learn to be able to effectively provide advice to an international clientele.

In this guest post, Ashley Murphy – Founder and Executive Director of the Global Financial Planning Institute in Minneapolis, MN – shares a framework for financial advisors to classify common issues that arise with inbound or outbound cross-border clients, and discusses some of the main challenges that advisors must be aware of when working with an international clientele. Additionally, he offers resources and suggestions for financial advisors to expand and hone their knowledge of the issues that their cross-border financial planning clients require from them.

The types of services cross-border planning clients require from financial advisors can often be categorized by their particular stage of transition with respect to crossing national borders. These stages include 1) Pre-Move, 2) Acclimation, 3) Global Integration, and 4) Retirement and Independence. Each comes with unique planning issues, and by identifying the specific transition stage that applies to their client, financial advisors can more readily pinpoint their international clients’ current needs and anticipate what they may require in the future. For example, clients in the Pre-Move stage may need help with immigration logistics and pre-move planning, banking and cash management, and ironing out family issues (e.g., identifying education standards for children, work options for spouses and other family members, etc.), whereas clients in the Acclimation stage may need help with worldwide tax questions and establishing or transitioning retirement plans. Clients in the Global Integration stage might need more help with longer-term immigration planning and coordinating and allocating their worldwide assets, and clients in the last retirement and independence stage may have the ‘usual’ planning needs (e.g., retirement and estate planning), but advisors will need to understand the international aspects of these areas to help their clients effectively.

Cross-border planning clients have unique considerations that financial advisors must take into account when helping them set their financial planning goals. For nearly every international client, advisors should know how long the client expects to stay in their destination country; the US and foreign tax implications of all income sources, including any capital gains; the protocols in place for foreign investment and performance reporting; and the account transfers that the client will need to make, along with the logistical issues that may arise from those transfers (especially when these transfers are between different countries). Notably, advisors should also be cognizant of Foreign Bank Account Reporting (FBAR) requirements and potential penalties related to Passive Foreign Investment Corporations (PFICs) that may affect their clients.

In addition to helping clients identify goals, advisors also must be familiar with the resources and services that their clients will need to make progress toward and realize their goals. For instance, advisors should be able to identify appropriate products (e.g., life insurance, disability insurance, investment funds, etc.), suitable broker-dealers or custodians to service their clients (as many won’t accept international clients, due to the additional compliance burdens), and competent experts to step in when specialized services are needed (e.g., international tax planning professionals and estate planning attorneys).

When it comes to servicing international clients, financial advisors will have their own operational needs. For instance, an advisor with cross-border clients will need to understand the relevant regulatory and licensing requirements in place with the foreign countries where their clients are located. They may want to review their Errors & Omissions (E&O) coverage to ensure that exposures unique to their international clients’ planning needs (e.g., trading in foreign securities) are sufficiently covered by their policies (which isn’t always the case). Furthermore, advisors may even wish to review their business model to ensure they are servicing their international clients most profitably, as the traditional AUM model (which typically is reliant on a long-term US-based portfolio) will not always be the best solution for the advisor.

Finding suitable products and service providers not only for clients but for financial advisors themselves can be a challenge when there may be limited means available to vet such products and services. However, there are resources to help advisors with their international research needs, such as the Financial Planning Standards Board (FPSB), which oversees international CFP certification standards, and the Global Financial Planning Institute (GFPI), which offers resources specifically to support advisors with international clients.

Ultimately, the key point is that while advisors with international and cross-border planning clients need to understand a wide range of rules applicable to the other countries in which their clients reside and be able to access services and products that their clients may need, there are resources and specialists available to the advisor that can help them serve their clients effectively. And because of the growing community of expats around the globe, financial advisors may find it worthwhile to establish competency in these cross-border financial planning issues to help their international clients… no matter where they may live!