The answer: extraordinarily easy if you’re a US federal government agent involved in the devising and implementation of America’s latest great tax evasion rule applying to expatriate citizens – the Foreign Account Tax Compliance Act (FATCA) – which will be enacted come July next year.
There’s an irony here in that the word ‘expatriate’ actually hails from the United States. Ex-patriot was the label given to any American leaving the country to seek work elsewhere. The overwhelming consensus back in the early days of the last century, was, ‘Why would an American want to leave their country?’ Yet out of today’s seven million US expats who are abroad, over one thousand this year alone have also chucked away their national identity.
They have done so due to the impending FATCA rules which threaten their own financial planning continuity, cutting off access to channels of advice and financial management.
The reporting restrictions to the American taxman – the IRS – that FATCA places on all non-US companies dealing with US clients are now deemed far too complex and costly for large institutions to comply with. To which end their doors are closed, or are closing, to American expats.
Now believe me I can understand why large non-US institutions have decided not to take up the IRS’s invitation to become a penpal. It’s time consuming, costly and yet more boxes to tick in a world of increasing regulatory requirements.
But at the same time it doesn’t feel quite right that a large swathe of expats is now restricted to a narrow choice of banking and wealth management tools. Indeed, there is a very real threat that the wealth ambitions and aspirations of US expats are being blown apart. Long term planning is particularly vulnerable as we see an increasing number of pension providers stall for time and so threaten savings strategies and thwart income expectations.
The upshot is that advisers in the field have a real opportunity to step in and help while at the same time increase their client base by putting in place the kind of support that will be necessary for American expats to survive a post-FATCA world. And yes, this means honing up on double taxation agreements, checking out the most efficient investment wrappers with compliant structures, setting up new partnerships and discovering US qualified products to suit long term savings needs.
But it’s nothing we can’t do. Setting in place structures is something we are used to, and support is something we excel at. Plus as we are not looking at the same volume of clients as large institutions, FATCA compliance is, dare I say, a less daunting prospect.
So while the big boys wave goodbye to US expats, there is an army of small boutique wealth managers out there who have a chance to extend a hand of friendship and fill the void of financial planning advice that US expats looking for an international approach to wealth management will increasingly need.
