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.
