World Citizens - the challenges of multi-jurisdictional clients

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Phil Billingham considers the diverse challenges of advising multi-jurisdictional clients.

In 2011, around 7.5 million of the resident population of England and Wales were born outside the UK. In return, over 5 million UK passport holders are now said to reside abroad.

This means that an increasing number of potential clients, especially wealthier people who are more likely to both need and use a financial adviser, have residence, assets, income attachments or liabilities in more than one jurisdiction.

This has led to some consumers falling into unscrupulous hands, and in turn, led to some very poor outcomes. Sometimes this is due to outright ‘scams’. But some of these have been through a lack of knowledge as well as poorly designed and regulated products, with some eye watering charges.

We also need to be careful with jurisdictions where the consumer protection isn’t always as good as you’d expect.

This subject is close to our hearts, partially because it describes us. Between me and my wife, Shannon Currie CFP, we have lived in Zimbabwe, the USA, South Africa and of course the UK. So we meet these ‘world citizens’ at bars and hotels and airports as we travel.

We have essentially four groups to consider:

1. UK clients who have moved to the EU

A typical scenario would be those who retire to Spain or France. This group is currently covered by MiFID and ‘passporting’ rules apply. These should be simple. But often are not.

2. EU clients in the UK

It is tempting to just say, “the EU means MiFID, which means UK law applies”. Well, perhaps. The trick here is to be aware of how any advice affects them back in their ‘home’ country, especially as they may well be UK resident but non-UK domicile. And, of course, they could be a tax resident in more than one country at a time!

And that’s without mentioning the potential shape or impact of Brexit on this issue, of which we have been given no clarity, at the time of writing

But if we are planning five or ten years ahead, then we need to be assuming that new advice, new action – moving to France for example – will become a non-UK/EU case and make our plans accordingly

3. UK clients elsewhere in the world

I often get asked about passporting for these clients. Of course, EU rules, including passporting, do not apply to anywhere outside the EU. That’s the good news. The bad news is that there is no one source of information or regulation. Each country has different rules.

These range from the USA approach, where any citizen – note not just residents – must declare and pay tax on all their worldwide income or gains. Often, non-US tax wrappers such as trusts, ISA’s and even pensions are disregarded.

And be very careful when dealing with pension transfers for Canadian tax residents – they may trigger a tax charge in Canada, even if the monies remain within some form of UK pension wrapper. So great care is needed here.

4. Non EU clients in the UK

By now you will have spotted that the big red button is US passport holders. Even if they have dual nationality, the USA assumes that domestic US law overrides any other legal system.

It’s easy to pick on the USA, and it makes great headlines, but what other countries have similar tax laws? No idea? And why should you, unless you have direct knowledge and expertise in that particular jurisdiction.

Taken together, tax and regulation could have a massive effect on the suitability of any advice, which, in turn, has severe implications on the potential regulatory and civil liability of the adviser or planner involved. It’s all about suitability.

Naturally, if you have a succession of clients from South Africa, or who have moved to Brazil, then you will develop expertise of your own, and that may be enough.

But then again it may not be. And when it’s not, what do we do?

In practice, this will mean reaching out through our own networks, or via the local equivalent of the ‘find a planner’ function, to make contact with a local firm who can help. I have even had an approach on Twitter.

It’s all about the coordination of advice, so the client gets proper, joined up, planning that is safe, relevant and technically sound.

So we are looking for the local version of Chartered or Certified Financial Planners.

That sounds elitist, but the harsh truth is that in many countries, the wild west sales culture of the UK in the 1980s still applies. So we need to work with people with strong professional ethical standards to ensure we can deal fairly with the client. Hence the need for proper accreditation.

I hope this helps, and good luck.

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