WEALTH MANAGEMENT
WEALTH MANAGEMENT The Value-Add Of A US-UK Cross Border Wealth Manager The role of a wealth manager is much more than attempting to choose the best performing investments each month, quarter or year. It is about structuring and managing a diversified portfolio that helps you reach your individual financial goals and objectives. In the case of a US person living abroad, it is doing this while also navigating the potential pitfalls that exist when you are an expatriate. The success of an individual’s investment journey represents a collection of everyday financial decisions that impact the bigger picture. It does not only involve decisions to help achieve various short-term and longterm wealth goals. A good wealth manager will help to ensure that the everyday decisions support (and don’t detract from) a cohesive strategy seeking to maximise the chances of completing your investment journey successfully. Published research by Vanguard estimates that a good wealth manager has the ability to add around 3% in net returns for clients through suitable asset allocation, cost-effective implementation, disciplined rebalancing, behavioural coaching, asset location and a tax-efficient spending strategy (1) . This quantifiable value is not something that can be expected annually, but instead is likely realised in a lumpy fashion over time. In reality, the most significant opportunities to add value do not present themselves consistently, but intermittently over the years, and often during periods of both market highs and lows. In fact, behavioural coaching seems to be the biggest contributor to that value-add figure. According to the National Bureau of Economic Research (NBER), the average length of a business cycle is just under 5 years(2). Over 30 years of investing, that equates to roughly 6 cycles. Based on Vanguard’s findings, if a client invests $1m over 30 years, partnering with a knowledgeable wealth manager over those years may potentially translate to much more than an additional $1.43m available for retirement income, legacy goals or other personal priorities. Below is a non-exhaustive list of the five main benefits you may receive by working with a wealth manager who understands US-UK cross border financial planning issues. They will: WWW.THEAMERICANHOUR.COM
1. Help You Remain Focused On The Things That Matter Most To You
Over the short-term, markets will display volatility and different types of investments will perform better than others. If your portfolio is designed to deliver performance according to your individual needs, your very personal goals, time horizon and risk tolerance, and at the same time is also simple enough to understand, then it can be a lot easier to stay in your seat during periods of volatility. A good wealth manager serves as an objective party to hold your hand and help you steer clear of some of the behavioural biases that can often derail the success of one’s investment journey. They will also regularly review your situation and the economic environment and proactively recommend adjustments as appropriate. They will help you maintain control over your financial future in a clear and concise way.
They will help you maintain control over your financial future in a clear and concise way 2. Allow You To Maximise Your TaxAdvantaged Savings Opportunities On Both Sides Of The Pond
It is always beneficial for an individual to utilise tax-advantaged savings opportunities as part of their broader wealth plan. However, for individuals with ties to multiple jurisdictions, knowing where to place your savings to achieve your stated goals in the most tax-efficient manner becomes quite complicated. A knowledgeable wealth manager will help to outline the most relevant savings opportunities available in both the US and the UK, and will recommend
the appropriate funding strategy over the course of the tax year. Most individuals living and working in the UK pay more taxes to HMRC than the IRS. Ensuring that these excess Foreign Tax Credits (FTCs) are used smartly can be very valuable. Consider an additional rate taxpayer working in the UK for a number of years and subsequently retiring back to the US. Contributions made over their UK working years could receive 45% tax relief in the UK. Using FTCs, those contributions may become after-tax dollars for US purposes. When that individual retires back to the US, generally distributions are taxable in the US as opposed to the UK under the US-UK tax treaty. With proper planning, it may be possible to distribute the individual’s UK pension assets in the US with little to no additional cost to them for US tax purposes. Individuals who have charitable giving inclinations for a portion of their wealth can benefit from a dual qualified Donor Advised Fund (DAF) and receive both a US and UK tax deduction. Tax benefits are received today and (under current tax legislation) you remove assets from your taxable estate. These assets grow tax-free within the DAF and the decision on where you want to donate funds can be made at a future date allowing the total funds you eventually donate to continue growing tax free until the point of distribution.
3. Provide Assistance In Structuring Your Wealth In A Way That Minimises Expenses Including Income And Estate Tax Obligations
Despite all of the complexities associated with cross border taxation, there are many opportunities to minimise tax obligations associated with your wealth plan, and subsequently maximise after-tax rates of return if you structure your wealth properly. The cost of investing is much more than the expense of the assets that you own. It is the total of transaction costs, annual fund management fees, any fees paid to enter or exit a particular investment, custodial fees, annual taxes paid and annual tax compliance reporting fees. The higher those total fees, the higher the hurdle rate before your investments WWW.AMERICANINBRITAIN.CO.UK
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