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  • Alan Sell

Finding a Financial Advisor for US Expats



As an American expat, life is complex, and managing your finances is no different. From establishing local banking relationships to navigating unique tax scenarios, your financial situation has more twists and turns than your Stateside counterparts. That’s why it’s so important to find a financial advisor who specifically works with US expats. A typical financial advisor who doesn’t usually work with Americans abroad may not have the skills and expertise necessary to navigate cross-border financial planning questions. Here are some of the specific reasons that necessitate finding someone who specializes in expat financial advice:


American Expat looking for Financial Advisor

Why You Need a Financial Advisor for American Expats

1. Understanding the Tax Code

There are several tax laws with direct implications for Americans living abroad. Making the right decisions around these tax laws can have both short- and long-term consequences, since they often affect both your tax bill this year and your ability to save for the future. It’s important to work with an advisor who understands the key distinctions so they can help you make the right moves. Here are a few of the specific tax laws that can make expat tax planning complex:


The Foreign Earned Income Exclusion – which many US expats take advantage of to reduce their income taxes at home – has consequences for retirement saving. If an expat chooses to exclude all of their income from taxation, they may not be able to make IRA or Roth IRA contributions for that tax year. One alternative may be to consider the Foreign Tax Credit instead, but it has its own advantages and drawbacks. Here’s further reading.


The FATCA (Foreign Account Tax Compliance Act) requires American taxpayers to report assets owned outside the US to the IRS through Form 8938. The FBAR (Foreign Bank Account Report) likewise requires Americans to report their overseas bank and investment accounts. Here’s further reading on the FATCA and FBAR.


Passive Foreign Investment Companies (PFIC’s) are businesses located overseas that create income by passive means. Typically, foreign mutual funds are classified as PFIC’s. Unfortunately, the tax laws around PFIC’s are not very forgiving, which means that investing in foreign mutual funds often results in a hefty tax bill. Given the choice between two similar mutual funds, one domiciled in the US and the other abroad, it often makes more sense for American taxpayers to choose the mutual fund located in the US.


2. Assistance with Retirement Planning

Retirement planning scenarios for expats are complicated. Often, Americans who live overseas have different retirement goals, and an experienced financial advisor for US expats will be able to ask the right questions to make sure you're prepared. This can mean that the strategies needed to fund your retirement may be different from your Stateside peers. For example, the decision to retire away from the US or in a different location than they spent their career can mean typical guidance for retirement savings rates doesn't apply to them. Access to needed services such as medical care could be cheaper or more expensive than the norm, and travel expenses can become a major budget item in order to maintain ties to family and friends. A good financial planner needs to be able to uncover and plan for the unique goals that come with an international lifestyle.


That said, there are some specific situations that require specialized understanding to navigate. One such situation is the interplay between foreign and domestic taxes and retirement systems. For example, a financial advisors who specializes in working with American expats should be able to help potential retirees understand the relationships between the American Social Security system and the Social Security system of their host country. The US does have some treaties with certain countries that streamline Social Security for Americans living overseas, but there are often situations where the two systems don't interact well. One prominent example is the Medicare system, which is often unusable to Americans who choose to retire abroad.


Furthermore, IRA and Roth IRA contributions and distributions can be taxed differently by the host country than they are by the United States, which creates complicated planning scenarios as savers look for the best way to plan for retirement. Some countries don't recognize Roth IRA distributions as tax-free, which can create an unfortunate loss of tax benefits for saving in these retirement vehicles.


These are just a few of the differences in retirement planning that American expats experience. A good expat-friendly financial planner should be able to uncover the specific areas where cross-border expertise is needed.


3. Knowledge of Investment Options

As a US expat, you may have different investment options available to you than those who reside in America. Not all brokerage services accept clients who live overseas, and those who do may not offer service in your area. A financial advisor should be able to help you navigate the various brokerage services available.


Furthermore, some local investments such as foreign mutual funds may not be advisable, either due to their status as PFIC’s or the added reporting requirements involved in owning them.


Real estate and other direct investments overseas, while they may or may not be a good decision in their own right, can often create tax and legal complexities. For example, estate planning tools such as wills and trusts may need to be created in both the United States and in the host country to account for assets located outside the United States.


Additionally, currency fluctuations are a reality of expat investing that a financial advisor needs to be equipped to deal with. An American expat retiree, for example, could suddenly find their retirement savings worth much more or less in the local economy than originally planned because of changes in exchange rates. An advisor who is experienced with these issues can help mitigate the problems that come from exchange rate fluctuations.


These are just a few examples of the importance of finding a qualified financial advisor who works with Americans abroad. But how do you choose an advisor when there are so many out there? Not every advisor is a good fit for a given client. Some advisors don’t provide the specific services a client is looking for. Other advisors don’t usually handle the types of situations the client is facing. Still others lack the expertise to provide great advice. Here are some tips to find the perfect advisor for you.


What to Look For in a Financial Advisor for US expats

1. Make sure they have experience working with expats.

We’ve discussed earlier in this post just a few of the specific financial planning details that make American expats unique. A financial advisor should have experience working with these scenarios so they’re not learning on the fly with YOU as their test-case.


2. Consider a Fee-Only advisor

The way an expat financial advisor is paid matters. Advisors who are Fee-Only are paid only for their advice. They are usually held to a fiduciary standard, which means they are required to offer advice that they believe is in your best interest.


In contrast, when an advisor earns part of their paycheck based on commissions, they have an incentive to recommend products that keep them well-paid. These advisors are typically held to a standard of advice called the suitability standard. This means they are required to offer advice that is suitable to you, but not necessarily the best for you. As long as a product is suitable for you, they can recommend it if it pays them higher commission.


3. Decide What Expertise You Need

Not all advisors specialize in the same thing. While many specialize in investment expertise, some are focused mainly on offering insurance products like life insurance or annuities. Others offer consulting services for major financial and life decisions.


Decide beforehand what specific services you’re looking for, so you know when you’ve found the right fit (or when you haven’t!)



4. Check the Advisor’s Credentials

Not all licenses and certifications are created equal. Some certifications signal expertise that may be irrelevant for what you’re looking for. For financial planners, the Certified Financial Planner® (CFP®) designation is the gold standard among certifications.


You may also consider checking an advisor’s regulatory record. If an advisor has a spotty track record, the Investment Adviser Public Disclosure website is required to disclose any disciplinary events in their history.


Polaris Asset Management is a financial advisory firm that specializes in investment management for Americans living abroad. Contact us to learn more about how we can help you solve your expat financial questions!



None of the above material should be construed as investment advice or as a recommendation to buy or sell a specific security. Consult a financial professional prior to making investment decisions.


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