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HOW TO HELP CLIENTS OPTIMISE THEIR WEALTH MANAGEMENT STRATEGY WHEN MOVING ABROAD

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Ben Barratt, Head of Investment at Arlo Group

 

The growing list of green and amber destinations has made international travel a real possibility with many in the UK thinking about their travel prospects. But while a holiday abroad might come as a long-awaited grasp of freedom, the pandemic will have caused others to reassess completely whether the UK remains where they want to stay more permanently. The greater outdoor space and larger homes, which can be found more affordably abroad, is more than ever an extremely attractive option for many people across the country.

As the number of people looking to move away internationally increases, it is key for advisers to be adequately equipped to help their relocating clients consider how this might affect their finances and financial plans. This includes preventive moves such as assessing existing assets, savings, and investments; carefully considering tax; planning to keep bills to a minimum, and ensuring they are compliant with legislation both in the UK and the country to which they wish to move.

How can advisers best help their clients optimise their finances when moving abroad?

 

Cross border legislation

As a first step, it’s crucial for advisers to be aware and make their clients aware of the legislation between the country of origin and destination nation, which is likely to vary. Helping clients to establish themselves in their new country is an important part of the role, but they should also ensure that clients remain within the legal parameters of both systems throughout the full process.

In that respect, a key consideration for any client looking to move abroad is tax. Without the right preparation ahead of the departure, clients could potentially face a few unnecessary and costly complications, including cross-border financial issues and tax overpayment.

It’s the role of advisers to ensure their clients are aware of the legalities surrounding primary and secondary residences for example, as well as how this might affect their tax payments. Capital Gains Tax (CGT), for example, differs considerably between primary and secondary residences. Therefore, a client who is not aware that spending more than six months abroad will mean their UK residence is no longer classed as their primary residence in turn making it eligible for Gains tax when selling, might have to bear unnecessary tax payments as a result.

 

Product suitability

Carefully assessing which products are available and relevant to each country is of paramount importance. These should be tailored to the clients’ needs as certain products, such as ISAs (Investment Savings Accountants) are not available in certain countries (Spain in this case). Advisers should ensure clients are aware of the full range of options and alternatives which are available to them and an adviser should ensure a client is aware of their full range of options, and alternative which are tailored to their circumstance.

Furthermore, clients looking to make investments overseas will look for open and honest conversations regarding the feasibility and worthiness of their proposed venture. Choosing and advising options for clients should be made with transparency and with the overall financial wellbeing of the client in mind. As an indicator, with general investment might incur anything up to 20% CGT, it is important for professional to consider other options such as offshore bonds which might be a better use of the client’s money.

 

Getting the full context

Understanding the clients’ personal objectives, and pondering it against any savings, investments, assets, and expenditure will allow for a holistic service which has the best result. This is necessary to grasp the full extent of a client’s financial goals and projects and reduce any liability or risk. Clients should be aware that if they decide to move back to the UK some financial tools may be irreversible.

People having recently reached retirement age often look to move abroad in the following months, however, it’s common that they change their mind due to family concerns or fear of separation and wish to return home. If a client goes ahead and places money in an offshore bond but ultimately decides not to move away, withdrawing the money back may have tax implications. Ensuring they are cognizant of whether they are committing to something permanent or changeable is then crucial.

 

Taking account of external factors

Factors such as Brexit also play a significant role in the financial advice clients will seek as regulations will only become more divergent between the UK and the EU. Clients wishing to move abroad must be aware of how changing regulations will affect their finances and advisers should recommend products that are up to date with British/EU regulations. In the same way, if moving into the EU clients should deal with someone who is regulated in the EU and can advise them with the right type of product accordingly. If that is not the case, asking for guidance from a colleague might be welcomed.

Increasingly, prospective expats are also being approached by unregulated advisers from countries whose regulatory framework differs from the UK. This can in turn lead to unnecessary charges and payments if the right framework is not applied. Financial advisers should discuss the implications of accepting unregulated advice with clients, including the financial consequences that may incur if they are not helped by a professional that has international credentials. Advisers need to reassure clients about their existing international credentials and should not be scared of getting multiple people involved in order to deliver the best comprehensive expert service.

Financial advisers should create an approach where their objective is to find solutions to their clients problem with on overall understanding of their finances rather than just trying to sell a specific product. Providing clients with a 360-degree view of their options will help them to make informed decisions about their finances when relocating and enable them to be discerning in their expatriation project.

 

Business

IT COST MANAGEMENT: 10 STEPS BUSINESSES CAN’T IGNORE

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By Matt Dando, Director, Strategic Business Value Consulting at Serviceware

 

In today’s ever-accelerating digital era, and as we recover from a global pandemic, digital transformation has stepped more firmly into the limelight. Over the last 18 months, digital initiatives have accelerated, with investment in the cloud also increasing dramatically. Digitalisation is arming CFOs and CIOs with data, but understanding what to do with it can be overwhelming, especially when battling to manage cost data from the various vendors associated with both cloud and existing on-premises investments.

With pressure around sustainability acting as another catalyst for cloud adoption, never has there been a greater need for businesses to have a complete, detailed and transparent view of all IT costs. In fact, now is the time for businesses to ensure that they are managing IT costs effectively – not just in terms of cutting, but also optimising, investments, and reinvesting in the tools and technologies that can and will enable them to keep up with the wider business strategy. Luckily, there are 10 simple steps that businesses can follow in order to ensure a comprehensive, detailed and streamlined control over all IT costs.

Step 1: Building a comprehensive IT service catalogue

The starting point for IT cost control is the creation of an IT service catalogue. This catalogue outlines individual IT services, information about their purpose, location and costs, to create a detailed overview. Having a clear and complete definition creates standards for available services and bridges the gap between different departments.

Matt Dando

Step 2: Effectively monitoring IT costs

One of the most important tools for the efficient tracking of IT costs is the control of the value chain, from the smallest cost units to finished business units. With the help of service catalogues, benchmarks, the use of IT Financial Management (ITFM) or what is often referred to as Technology Business Management (TBM) solutions, comprehensive access to this data can be guaranteed, creating a ‘cost-to-service flow’ that identifies and controls the availability of IT costs.

Step 3: Assessing IT budget management

Even with perfect transparency of IT costs, there are different approaches to allocating IT budget – centralised, decentralised and iterative. With a centralised approach, the budget is determined in advance and distributed to operating cost centres and projects in a top-down process, allowing for easy, tight budget allocation. With this approach, however, there is the risk of overlooking projects that offer potential growth opportunities. With the decentralised approach, the process is reversed. Operating costs are precisely calculated before budgeting and projects are determined. The downside is that budget demands might exceed available resources.

Finally, the iterative approach tries to unify both methods. Set budgets, overhead and prospective projects are put together to make a detailed assessment of the most viable course of action. Although the most lucrative approach, it also requires the most resources. None of these approaches are necessarily superior. Instead, it depends on the available resources, and the enterprise’s structural organisation.

Step 4: Managing IT budget for growth

Before allocating IT budget, it is important to define costs into two categories: ‘run’ and ‘grow’ costs. ‘Run’ costs usually include operating costs, while ‘grow’ costs refer to all services and products that are intended to change, transform or expand the business. Benchmarks and standard definitions can help with this categorisation, but do not necessarily have to be followed, as long as cost allocation remains consistent. When definitions have been clearly determined and projects assigned, the IT budget needs to be allocated and decisions need to be made on how to split the budget. Whilst a split of 70% run/30% grow is the norm across most enterprises, there is no one-size-fits-all approach, and decisions will rely on varying factors such as availability of resources and the goals of the enterprise as a whole.

Step 5: Keeping a positive gross profit margin

By following the steps above, organisations can achieve complete transparency with regards to which products and services are offered, where IT costs stem from, and where budgets are allocated. This makes it easier to analyse how much of the IT budget is being used and where costs lead to profits and losses. If the profit margin is positive, the controlling processes can be further optimised, and, if the profit margin is negative, appropriate, or timely, corrective measures can be initiated.

Step 6: Staying tax compliant

One additional important factor in comprehensive IT cost control is tax compliance. The more the enterprise of a company operates internationally, the more relevant it is to stay on top of varying international tax regulations. IT products and services that are marketed abroad are subject to country-specific tax laws and, to ensure that they are adhered to without errors, it is necessary to provide correct transfer price documentation. This in turn depends on three factors:

  • Transparent analysis and calculation of IT services based on the value chain
  • Evaluation of the services used and the associated billing processes
  • Access to the management of service contracts between providers and consumers as the legal basis for IT services.

By achieving the transparency enabled by the previous steps, it is possible to demonstrate international tax compliance.

Step 7: Benchmarking IT service pricing

The first step in pricing IT services is to collect benchmark data. These can be researched or determined using existing ITFM solutions that are able to obtain them automatically from different – interconnected – databases. Next, a unit cost calculation is necessary in order to define exactly and effectively what individual IT services – and their preliminary products – cost. This enables businesses to easily compare internal unit cost calculations with the benchmarks and competitor prices, before making decisions about pricing.

Step 8: Providing factual cross-driver analysis

A properly modelled value chain makes it clear which IT services or associated preliminary products and cost centres incur the greatest costs and why. This analysis allows for concise adjustment to expenditure and helps to avoid misunderstandings about cost drivers – for example, the importance of infrastructure on the generation of IT costs. Then, strategies can be developed to reduce IT costs effectively and determine more careful use of expensive resources.

Step 9: Accounting and invoicing IT costs

IT cost control through the value chain enables efficient usage-based billing and invoicing of IT services and products. If IT costs are visualised transparently, they can easily be assigned to IT customers. This increases the transparency of the billing process, and provides opportunities to analyse the value of IT in more detail. There are two options for informing managers and users about their consumption: either through the showback process – highlighting the costs generated and how they are incurred – or through the chargeback process, in which costs incurred are sent directly to customers and subcontractors.

Step 10: Managing supply and demand

The manual nature of Excel spreadsheets poses a risk to data integrity and should therefore be avoided, as they are impossible to keep up to date all the time and require significant effort to maintain. A holistic analysis and greater cost transparency results in a larger, more detailed overall picture of IT service consumption, which allows conclusions to be drawn in a timely manner to enable the optimisation of supply and demand for IT services in various business areas.

Optimising and maintaining IT cost control

Following the above steps will ultimately enable businesses to reach new levels of efficiency and maturity – and, more importantly, create a secure, transparent, and sustainable IT cost control environment. Budgets can be optimally utilised, IT costs can be cut and overall productivity significantly boosted. However, businesses that ignore this advice will be severely hindered if they do not stay on top of the ever-changing conditions of the current market landscape.

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Finance

QUESTIONS TO ASK YOUR FINANCIAL ADVISER

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With World Financial Planning Day approaching, it is the ideal reminder to meet with your financial adviser and review your financial position. To help you prepare, Jaco Prinsloo, certified financial planner at Alexander Forbes, outlines some questions to ask:

 

Am I sufficiently covered?

Just like insuring your car against a loss or damage, you also need to insure your life and your ability to generate an income. Your financial planner can assist you in setting up a personal insurance policy to protect you against the loss of income or life. You can use the proceeds from the policy to replace your income or take care of your loved ones when you are no longer here to provide for them. A good financial adviser will also warn you if you are over-insured, as this leads to paying unnecessary premiums which could be better used elsewhere.

 

Jaco Prinsloo

Am I invested according to my risk profile and goals?

Knowing your risk profile will help you determine your risk appetite to reach your investment goals. You might like the safety and security of money market funds, but saving for retirement using money market funds means your money will not grow fast enough. You exchange the risk of your money fluctuating with the market, with the risk that you will not be able to retire due to insufficient savings. Your financial adviser can help you find a balance between your comfort level and your investment goals to make sure you sleep well at night while being able to retire one day.

 

Are my investment goals on track?

Your investment returns must be secondary to your goals. Ask your financial adviser to give you a future cash flow projection for your goal to see if you are on track. Although the projection is just an assumption, it will give you a target to aim for. In addition, if you need to make adjustments, your financial adviser can help you find a cost-effective and tax-efficient solution to meet your investment goals.

 

What fees am I paying?

Some investors believe that they are not paying any fees or that there are no costs associated with their investments. However, reinvesting dividends, issuing statements, and buying and selling shares all come at a cost. Ask your financial adviser what your effective annual cost (EAC) is. This will show you the total cost of managing your investment. If you are paying above the industry average, ask your financial adviser to help you to explore alternatives. With investments, you get what you pay for. So do not always look for the cheapest option – look for the option where you believe you could get the most value for your money.

 

How is my financial adviser doing?

As you will be sharing personal information about your finances, it’s important to build a trusting relationship with your financial adviser. To ensure you receive up-to-date and current advice, remain current with industry changes and do not be afraid to question your financial advisor on these developments and the potential impact to yourself. An informed decision will give you the trust and confidence to act on any advice provided by your financial adviser, as you know it is the best for you.

Our emotions and feelings are often our worst enemy when it comes to personal finances. Your financial adviser cannot pick the next hot stock or make your debt go away. But they can save you from making emotional decisions and provide you with the support to reach your goals. Schedule that meeting with your financial adviser – and if you don’t have one as yet, there’s no time like the present.

 

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