Tailor-Made Independent Advice

Let’s talk about the role of an international independent financial advisor… that’s quite a mouthful so we’ll shorten it to advisor.  The essence of our job is providing peace of mind… not beating the market in the short term.

Disclaimer:  We are providing guidance and personal opinions which should not be interpreted as investment or tax advice.  

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If your questions to the advisor are similar to: ‘What are your returns like this year?’ – ‘When is the market going to crash?’ – ‘Do you day-trade for your clients?’ … then we might as well just grab a café or an açai and talk about beach volleyball.  Because we’re not going to be the right fit.   

Our role is helping expatriates and global executives to make informed financial and tax planning decisions to provide greater security in the medium to long term.   

It may not be as exciting as Gordon Gekko:GREED financial independence is good!”, however we are here to guide you towards some of the most satisfying goals in life such as an early retirement or covering the cost of your children’s education.  

We can assure you that achieving early financial independence is exciting!

It’s even more important nowadays to start your financial planning at an earlier age if you would to enjoy a full or semi-retirement starting in your 50s or early 60s.  Bear in mind that life expectancies are increasing and, in most countries, people will have to reduce their dependence on the state for pension income and subsidised healthcare. State finances are already under pressure to cater for ageing populations and long-term care requirements given the rise of complex illnesses. Most of us have come across senior citizens with both financial and health problems and I’m sure you do not want to face financial hardship in old age.

Our advice and solutions are tailored to the requirements of each client, just like a tailor-made suit where, instead of assessing the chest size, shoulder width and posture, we consider income, assets, tax status, family situation and long-term goals.  The same way, a tailor-made suit provides a better fit whilst incorporating some of your style preferences, a tailored financial planning strategy provides greater peace of mind whilst incorporating personal preferences e.g. risk tolerance, lifestyle priorities and ethical values.

Our process starts with an introductory phone call or meeting to get to know each other and for us to understand your general objectives.  Within say, 30 minutes, we would understand if we can genuinely add value to your financial planning and if so, we recommend taking it to the next stage, the fact find meeting.    

The fact find should be seen as a detailed discussion document rather than merely a form-filling and box-ticking exercise, which is how some inexperienced advisors approach the meeting.  This is a unique opportunity to develop an understanding of the client’s financial situation, priorities and concerns and to provide both positive and critical feedback.  A sincere advisor will not be afraid to challenge the client if he or she is facing potential risks and shortfalls in relation to their security and objectives.  A competent advisor will be able to break down the key risks facing the client and use the fact find as a base document to review progress at say quarterly or annual meetings.

The international advisor is also often providing advice based on two or more currencies, investment strategies and tax regimes. Significant changes in either can have an impact on the client’s financial position from one review to the next.  Consider the example of a British expat, leaving an assignment in Brazil in 2019 and returning to the UK to retire.  In the first quarter of 2020, the Brazilian stock market fell by approximately 40% and the Brazilian Real lost 19% of its value against Sterling.  For a retiree, wishing to draw money from BRL savings, the heavy double impact would require a change in strategy to seek alternative sources of pension income and understand the tax implications.

The same applies to the risk questionnaire, which again, is not about ticking boxes and going through the motions.  It should be treated as a deep dive to understand the client’s investment experience and risk appetite and to explain the likely outcomes from adopting say, a more aggressive or conservative approach to building capital.  Some advisors, who lack conviction, prefer to appease the client in order to win or retain the relationship. If a certain asset allocation strategy is unlikely to obtain the desired outcome for the client, it should be clearly communicated to manage expectations. 

More about the fact find and principles of asuccessful client-advisor relationship HERE.

The next stage for the advisor is analysing all findings and providing recommendations, in order of priority, and a suitability report, explaining the rationale behind each solution. The financial ‘tailor-made suit’ would include some or all of the following:

Cash flow modelling of income and capital growth in one or more currencies over time. The cash flow model is a detailed analysis of all income and cost lines and simulates the growth of capital.  We can therefore identify potential shortfalls in relation to capital required to achieve a certain retirement income by a certain age.  This also applies to important capital targets like school fees for children and housing deposits.  Update 09/2022: Given the sharp decline of the pound following the UK Mini-budget, we encourage expats to review their projections, especially if you are heavily-weighted in GBP with expenses in USD and BRL. 

Asset allocation must be designed and rebalanced for clients based on their risk appetite and investment horizon.  Given the dynamic nature of markets, a robust strategy must be diversified across geography, sector, currency and asset class. 

Cost reductions make a significant difference to long-term investment returns.  In our experience, we have recommended alternative providers and underlying assets to enable clients to enjoy enhanced returns for lower fees. 

Consolidation.  In other posts, we have mentioned how expats are typically busy individuals who have worked in several countries and have assets scattered geographically with insufficient time to streamline. We can recommend ‘wrap’ solutions to bring such assets under one umbrella in a tax-efficient manner.

Tax-efficiency.  From the fact find itself, we can usually identify some quick wins before referring you to an accountant, subject to the complexity of your tax position. Many individuals benefit from our ‘generalist overview’.  

Decumulation strategy.  Given longer life expectancies and potential long-term care costs in later life, it is even more important to ensure that your income withdrawal strategy is optimised to be as sustainable and tax-efficient as possible.  Many advisors quote a straightforward ‘safe withdrawal rate’ of 4% p.a. but it really is not that simple given the number of variables at play including life circumstances and inflation. Update 09/2022: The pound has reached its lowest level against the USD in living memory.  This highlights the importance of reviewing changes in capital and potential income in order to make changes to your income withdrawal strategy. 

Succession planning is complex enough on a domestic basis let alone for expats who may have dependents and beneficiaries in say Brazil, the UK and beyond. Cross-border estate planning is a growing area of advice and many individuals are aware of the importance of a seamless strategy to ensure their loved ones and important causes benefit from their legacies.

If would like to discuss any of the above topics, please contact us here.

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