It is time to think internationally

When we write or talk about affluent investors, we usually use the word “global” in connection with asset allocation.

When we write or talk about affluent investors, we usually use the word “global” in connection with asset allocation. But today’s high-net-worth clients are global in many other ways, and understanding this can give financial advisers a marketing advantage.

Charlotte Beyer, chief executive of the New York-based Institute for Private Investors, an educational and networking resource for private investors and their advisers, has seen this international mind-set among her members.

“Their world is much larger [than the United States],” she said. “And most families can count on some member of the family marrying someone other than an American.”

It isn’t just marriage that is changing the picture. Clients are more likely to have worked or lived overseas, or to be planning to move to another country during retirement.

They also might have bought property or invested in a business outside the United States, receive a pension from a foreign company or expect an inheritance from family members outside the country.

“If you have high-net-worth clients with cross-border assets, you have no choice but to think globally. And to do that, you must understand what is happening locally, and have core resources locally, regarding legal, compliance issues and specifically taxes — whether that’s Singapore, France or China,” said Connie Chen, president of Chen Planning Consultants, a financial planning and wealth management firm in New York.

“Many of these clients are not corporate executives but business owners, and often own multiple businesses,” she said, explaining that advisers must know the best place to domicile assets, from the view of both ownership and bequests.

“Without this, you are unable to look at your client’s cash flow, investment allocations, tax status or estate planning,” Ms. Chen said.

Having all the answers, however, won’t bring in international clients. To do that, advisers must know what questions to ask in the first place. In addition to requesting that clients disclose all their sources of income, Ms. Chen suggests that advisers ask the following:

What is your citizenship and place of residence, and that of your parents and children? Ms. Chen pointed out that clients often are not aware that as U.S. citizens, all of their assets and income — regardless of where it was generated or earned —are subject to U.S. taxation.

Where do you plan to retire? Many wealthy clients are considering changing their primary residence once they retire. Ms. Chen noted that even if they give up their American citizenship, they still may owe U.S. taxes for many years.

What property do you own and where is it registered? Taxation is a question of domicile as well as citizenship, she said. Upon death, every jurisdiction that can claim taxes will do so, making it very important that clients plan ahead.

Are you acquainted with Form 706? Clients probably are not aware of the 41-page form, which is the United States Estate (and Generations-Skipping Transfer) Tax Return. It asks for detailed financial information about virtually every asset and debt of the deceased, and usually is filed by the executor of an estate. The form is required for every U.S. citizen, regardless of where he or she lives, and of every U.S. resident, even if the resident is not a U.S. citizen.

To get the international information you need, there are many sources of information, starting with the Internet. Thanks to the Google search engine, you can now enter almost any keywords, such as “inheriting in Argentina” or “taxes in Croatia,” and find something relevant on the topic.

Additionally, there are groups such as the International Association of Registered Financial Consultants and the Financial Planning Association’s FPA Global Forum, where advisers can connect with their counterparts in other countries. There are also accounting organizations such as the International Federation of Accountants and the International Lawyers Network.

Another way to find resources is through the American Chambers of Commerce Abroad (AmChams). There are 105 AmChams in 91 countries. Also, foreign embassies located in Washington and other major U.S. cities can be sources of information.

“Connecting the dots is more important than anything else,” Ms. Chen said. “Clients need us to integrate the information for them, so we have to be sure we get complete disclosure. Only then can we start to help them.”

Libby Dubick is president of Dubick & Associates Ltd., a New York firm that helps advisers and financial services firms identify and develop distribution and marketing opportunities. She can be reached at [email protected].

For archived columns, go to investmentnews.com/marketingstrategies.