There are more than nine million Americans living outside the US, and maybe as many as three times this number of US connected persons (married to an American, born in the US but without a US passport, etc.), writes Janice Diaz, business development consultant at North Bright Consulting.
This population has trillions of dollars to invest, with very few financial institutions willing to work with them.
Often these Americans and foreign nationals with US connections hold assets in both their country of residence and in the US, making this a solid business development opportunity for international financial advisers with proper licensing and access to compliant products for this American abroad market.
Why is this such an underserved market?
The American expat and US-connected individual is taxed on global income, regardless of their residence, and is bound by complex US laws and tax rules.
- FATCA – Foreign Account & Tax Compliance Act
- PFIC – Passive Foreign Investment Company
- SEC – Securities & Exchange Commission
- IRS – Internal Revenue Service
Not only will many foreign financial institutions (FFIs) not allow US-connected persons to hold investment products due to mandated reporting by the IRS that can be costly to the FFI via hefty tax imposed by the United States for non-compliance.
Financial institutions are also closing brokerage accounts for US- connected persons. Leaving these cross-border financial planning clients to find solutions that can match their multi-jurisdiction lifestyles while staying tax efficient.
International financial advisers servicing Americans abroad
As a result, the investment and retirement planning needs of US-connected persons are complex and multifaceted and need special review and planning from a team of expert and joined-up advisers.
This includes finance, tax, and investment specialists – licensed both in the US and outside the US.
A growing number of IFAs are announcing they’re operating in this market; few have been serving the US population for more than a couple of years. To be successful in this market, time needs to be spent on building a solid US value proposition that enriches the quality of the cross-border clients.
When entering the space, advisers need to consider:
- Developing a solid US-connected value proposition so the client can find cross-broader access in a globally mobile society;
- Working with a partner that knows how to “speak to” Americans – partners who know how to market to Americans, consider joining referral programs to generate leads;
- Ensuring coverage of all investment areas – retirement planning, insurance planning, inheritance planning, estate planning, and education planning;
- Good compliance locally and in the US;
- Joined up thinking with other providers for insurance, money transfer, and tax advice; and
- Proper licensing to maximize the opportunity by covering local needs as well as US opportunities by being licensed through a US registered investment adviser (RIA).
Offshore firms are entering the US-connected market by acquiring US licensing, but they are still focusing on the business that they are comfortable with, pension transfers, limiting their production to this type of service. The US-connected opportunity for advisers is much broader and can take on a life of its own in the right sales system setup.
There’s a whole new opportunity available to them in the US space if they can approach it in the right way. It takes getting connected to the right experts and developing strategies to approach the niche before spending money on marketing and content development.
In the race to get a piece of the market as they see local competitors on the rise, firms should take care to have the right compliance in place and make sure they have understood the value of this type of business offering.
This article was written for International Adviser by Janice Diaz, business development consultant at North Bright Consulting.