Earning Client Trust in the murky world of International Financial Planning

Working with International Client Investors

Offshore Investing has plenty of pitfalls.  Advising and servicing international expatriate clients overseas, some of whom might be based in ‘far flung’ jurisdictions, can often prove quite a precarious task.   These clients often reside in jurisdictions where there is little or no local financial services regulation or indeed trustworthy advisors on the ground.  For many international or expatriate investors, finding local financial advice therefore can be a daunting prospect, and our first task when meeting new clients is to always forewarn them about who they engage with overseas when they review their finances.   Indeed, many of the larger well-polished slick marketing offshore firms who are based overseas in typically poorly regulated jurisdictions,  who purport to offer transparent professional advice, rarely do.  Many expatriates can therefore find themselves with opaque contracts, the specifics of which they only learn more about in the latter years, when they realise their investment portfolio is hemorrhaging

fees and charges to pay for initial commissions that were not disclosed to them at inception.  It is also true to say, that firms based in Ireland or the UK with little or no experience in dealing with international clients, means the client may have to deal with their financial planning partner at ‘arm’s length.’  The client may not always benefit in the same way that he might from using the services of a firm that regularly deals with international financial planning.

Exporting best practice.

Key to the servicing of international clients is to ‘export best practice’ and advise and service those clients as if they were a UK or an Irish based client.  One must make sure they are put through the same process, the fact finds, the risk profile questionnaire, and the in-depth analysis of their existing holdings.  All these aspects of financial planning are rare overseas, they are almost like another ‘foreign language.’  One must also consider the use of a UK styled platform structure for overseas based clients,  ensuring the client stands to benefit from the ‘clean’ share class offerings.  Clean share classes strip out any additional costs such as advisory fees, this form of share class therefore is much lower than the traditional share class by typically 0.6% – 0.9% per annum on an actively managed fund. New clients should be made aware of the ‘ongoing charges figure’ (OCF) of their existing holdings which are automatically generated on UK modelled platforms and can then enable advisor and client alike to study the benefits of the ‘reduction in yield’ and the effect the ‘RIY’ might have on future returns.  Key is to ensure the structure used is flexible for the clients change in circumstances over the longer term, and transparent regarding all fees levied.   Sadly, many overseas investor clients simply do not have any indication of what charges are being deducted from their portfolio as there is no requirement for the life company, or indeed the advisor, to disclose them.  In terms of UK styled platforms, the use of ‘clean’ share classes combined with passive strategies, often ensures the client has a cost effective structure in place, resulting in a huge saving over the longer-term, and crucially whilst they are earning overseas in jurisdictions that are sometimes tax neutral, for many overseas clients this is a once in a lifetime opportunity to earn and save monies tax free in order to purchase property or apply for a mortgage when they repatriate to their country of origin.  If they end up investing through an un-regulated and/or unethical firm overseas, that dream can be shattered overnight and financial plans put on hold for years.  The phrase ‘caveat emptor’ is sadly never more apt than in the murky world of offshore financial advice.

The need to bring in ‘specialist’ advisors.

Advising and guiding clients through the pitfalls and issues that often face overseas investors, is often very complex and may include inheritance tax planning, banking, Wills, or simply good sound solid investment advice.  As expatriates often tend to re-locate fairly often, one must also ensure the financial advice given offers flexibility, having the ability to adapt to wherever the client might re-locate in the future.   In addition,  when dealing with expatriates, it is important for the Firm to have the ability and contacts to be able to bring in professionals to assist with complex cases, such as specific tax advice in certain jurisdictions or indeed pension transfers.  It has always been our belief that one individual within a firm cannot be an expert in all areas, our solution may, therefore, involve bringing in industry professionals to advise in their specialist area, but we as the advisors remain the pivot and point of contact with the client to ensure the best outcome is achieved, and that the process is monitored and controlled and the client expectations managed effectively.

You have to work hard to earn client trust.

Essential to nurturing the relationship one has with a client overseas is the ability to earn their trust, particularly if they have previously had a poor experience with an overseas financial advisory firm.  The Firm must ensure they maintain in regular contact with overseas clients, and this may involve regular newsfeeds or updates, client newsletters or contact via regular client reviews or to simply make themselves available for clients on Skype, WhatsApp, Facetime or whatever means works best for them.  This regular contact is imperative, as expatriate clients can often face stressful times and may need to speak to an advisor no matter what the difference in time zone.  Recent research undertaken has shown that when it comes to choosing a financial planner, only a third of clients base their decision on what would be deemed the ‘hard factors.’  These may be aspects such as portfolio performance,  fees of the Firm,  the CV of the financial advisor for example.  The rest of the decision- making process comes down to the ‘soft facts’ and whether in their opinion the advisor is going to genuinely have their best interests at heart.  These ‘soft fact’ aspects also include whether the financial planner they take on has integrity, what are his / her abilities, is the firm capable, competent and resourceful?  These factors all combine into what can only be described as trust.  Importantly, building that trust then reduces the perception of risk as it helps to reassure and reduce the level of client anxiety, thus ensuring that only informed rational decisions are made in the investment and financial planning process for the years ahead.  Clients who move from one advisory firm to another will rarely benefit, not only will this prove costly in charges, but their long-term investment strategy and thus objectives are unlikely to ever be achieved.  If an advisory firm can therefore stick to maintaining its principles with client outcomes at the forefront, they will maintain clients for the long-term, further developing that trust within the relationship where the client can speak honestly to their adviser and be truly transparent about what they want to achieve as well as raise any important concerns or issues that they may have.

To summarize, taking professional advice overseas is vitally important, particularly as many firms offshore do not put the needs of the client, first and foremost.  A Firm must also be in a position to service ‘inpatriates’ as well, to keep that link going for when they return to Ireland or UK having worked overseas, as well as being able to plan ahead for their anticipated repatriation and to continue servicing them upon return.  Building the trust and forging that long-term relationship with a client however is essential, but may take years of hard work and dedication.