The investment vehicles of wealthy families are internalising asset management and professionalising their investment teams at a rapid rate, according to Citi Private.
The government may have proposed it as a “modest” change to the super system, but the effects will be far reaching. For advisers dealing with this latest regulatory intervention, a handful of key questions need answering.
Borderless world still needs advice moored in jurisdictional expertise
“Expats” is an out-of-date term; Edward Cole prefers “globally mobile individuals.” It’s a large but often under-served group in terms of specialist financial advice, but ironically, it’s a group that probably needs it more than most.
As a ‘globally mobile individual’ (GMI) himself – born in the UK, Cole lives and works in California – he gets that people like him have special needs when it comes to financial advice.
“They and their families typically have unique complexities in their personal finances and wealth management needs,” Cole tells The Inside Adviser. “We specialise in that field, and we provide financial planning solutions that take into account the tax, currency and legal implications of clients’ current country of residence, as well as their past and future plans.”
Cole is a partner in Anglo-American firm Cross Border Financial Planning, which started out in 2016 providing financial advice for British expatriates who had left assets behind in the UK. But after opening a sister business, Cross Border Financial Planning USA, in Philadelphia in 2022, the firm broadened its focus to advising people moving between the United Kingdom, United States and Australia.
He was a GMI from early on, which has significantly affected his career path. Born in Wales, Cole attended the University of Swansea, where he studied for a Bachelor of Arts in politics and American Studies, spending his third year studying political science and government at the University of Utah in Salt Lake City, on an exchange program.
“My interest in finance and investing started in high school, but at that point I didn’t know about all the different careers or what aspects I enjoyed the most,” Cole says. “It was probably during my year studying in the US where I took some personal finance and investment classes that I started to realize this was something I enjoyed.”
After graduating from university, Cole was offered a role as a trainee wealth manager at a national firm, which involved becoming qualified as a financial adviser in the UK through the Chartered Insurance Institute (CII). As with most financial advice firms, he realised the focus would be on domestic clients and planning; but the GMI bug was active in his sub-conscious.
“My time studying finance in the US, and the access to the amazing outdoor sports that I had whilst I lived there, led me down the path of exploring how I could combine these factors. It was at this point that I realized there was a lot of demand for cross-border financial planning, but there were very few companies specializing in this field where the planning was truly client-focused and not driven by the commissions from product sales.”
As luck would have it, at an industry event in 2016 Cole met Philip Teague, a dual US/UK-qualified financial adviser who had run the Expat and Emigration division at British financial advice firm Alexander Beard Group, which had originally been set up to serve globe-trotting clients in the music and entertainment industry and who was in the process of setting-up a specialist business called Cross Border Financial Planning.
“I joined Phillip and began studying for the US Series 65 exam (an exam and securities licence required for individuals to act as investment advisers in the US.) I worked alongside Phillip from 2016 to 2022, when I made the move over to Philadelphia in the US to help set up Cross Border Financial Planning. I moved to California, to open the office in Marina del Rey, in June 2023.”
Cole says “about 25 per cent” of his clients are Australian, who are either living in the US or Australia. Of those, the biggest contingent are Australians who lived in the US and have returned to Australia, followed by Australians who still live in the US. “There is growing demand for UK-Australia planning and US-Australia planning, but I would say demand for US-Australia planning is growing at a faster pace,” he says.
The business has mainly grown organically through referrals from professional connections and existing clients. “When it comes to working with international clients, financial planning and investment management very much go hand-in-hand due to the tax outcome of an investment often being very different when you move countries,” says Cole. “An example of this would be an Australian expatriate who has continued to hold investments in Australia that are deemed to be Passive Foreign Investment Companies (PFIC) from a US tax perspective. This will impact most people who invest in exchange-traded funds (ETFs) and mutual funds in Australia. PFICs are taxed very punitively by the Internal Revenue Service (IRS) as ordinary income, and do not benefit from the lower long-term US capital gains rates.”
The issue of investing in PFICs will impact what a US citizen living in Australia can invest in, says Cole, if they want to avoid the problems and prohibitive tax consequences that come with it.
“A British citizen, on the other hand, does not need to consider this and can invest much more freely without having to worry about the adverse tax consequences. The fact that the UK does not tax based on citizenship also opens up more opportunities for tax planning, such as the ability to transfer a UK pension to an Australian super fund if it is also a QROPs. Although changes to the rules have reduced the number of QROPs transfers, it is still a possibility for someone in Australia with a UK pension, which is not an option for a US retirement account.”
The firm’s priority has to be flexibility, says Cole, as many GMIs do not know for sure where they will reside in the future.
“We help our clients with the normal planning such as how to fund different life events, retirement income and estate planning, but with the added factor of what happens where they live, and where their citizenship is,” Cole says.
“The different ways in which the US, UK and Australia treat the same investment or account can also mean that non-financial decisions – such as citizenship – can have a much bigger impact than people realise.
