Investment options for American expats – FT Adviser

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According to the Office for National Statistics there were 181,000 US citizens living in the UK in 2015. As well as the usual concerns of where to live and finding the right schooling for children, the life of a US expat has not been made any easier by regulations covering US overseas assets.

The Foreign Account Tax Compliance Act (FATCA), the taxation of foreign trusts and the global remit of the Internal Revenue Service have had the practical effect of making US clients unwelcome at many non-US financial institutions.

The American expat community in the UK, like those in Frankfurt, Dubai and Singapore, has a limited range of options to choose from to manage their financial affairs. Most, understandably, want their finances to comply with local and US laws so they can get on with their lives.

The range of choices depends on the net worth of the individual. For American expats with $10m-plus (£7.72m-plus), a small number of private banks offer solutions. Often they will only take on these clients if they are able to manage all of their assets and the offerings are not always as bespoke as anyone with these financial resources would expect.

Clients who work in private equity or who have complex financial arrangements due to periods of work in various jurisdictions may find that the bespoke nature of the advice they are given by their lawyers and accountants is not matched by the standard solution proffered by large financial institutions. This segment of the US expat community does not receive the level of service and tailor-made financial offering they expect.

They are often left feeling that the only alternative is to self-invest, but this is not ideal if they have busy lives. These clients are the epitome of asset rich, time poor. The answer is to find a wealth manager who welcomes American clients – a registration with the US Securities and Exchange Commission (SEC) would be the most obvious sign of this – and is willing to tailor any investment mandate to their specific requirements.

Ideally they also would not demand that the client use only their proprietary investments, bank account and mortgage products. A high level of service from a stable team of investment professionals sounds like a statement of the obvious, but is not always easy to find alongside a long-term commitment to work with US clients.

Key Points

  • The American expat community in the UK has a limited range of options to choose from to manage their financial affairs.
  • Fidelity and Merrill Lynch have cut ties with Americans whose primary residence is outside the US.
  • This group still has to find a solution that suits their exposure to the US and UK tax regimes.

For this client group it is also essential that the wealth manager works seamlessly with tax advisers in the UK and possibly also the tax advisors and investment managers in the US. 

American expats with $1m (£772,000) to $10m (£7.72m) in liquid investable assets have even fewer options. In recent years firms including Fidelity and Merrill Lynch have cut ties with Americans whose primary residence is outside the US. This has been in reaction to both US and European legislation regulating taxation, reporting and financial product promotions. Self-directed investing has many drawbacks, not least the question of time mentioned above.

This group of clients will more than likely have assets in the US including real estate, 401Ks and IRAs. It is vital that any tax and inheritance planning they receive is truly joined up, taking into account both the US and UK impact of any investment solution.

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