Being a US citizen should not be a barrier to receiving cost effective and personalised financial advice, nor should the responsibility of providing that advice be taken lightly.
But there is a small number of excellent IFA firms in the UK that have the experience and expertise to help US expats.
As part of its offering, Waverton can partner with a specialist IFA who is able to work with these clients. They help to reorganise the finances of someone who has invested in UK funds, which are taxed as passive foreign investment companies (PFICs) by the US tax authorities, or a US fund that incurs negative tax treatment by the UK tax authorities.
Advisers who offer US expats a truly joined up service, tailored to both their US tax profile as well as their local tax profile, need to have access to investment solutions that are suitable and sit neatly alongside their advice.
If they don’t, this could create significant problems for the client down the road.
What the adviser needs
Providing the correct advice to US expats in the UK requires a team of experts usually consisting of an IFA, accountant and investment manager all of whom should have lengthy experience of US/UK solutions.
The IFA will need professional indemnity (PI) cover for US client work and the investment manager will need to be registered with the US Securities and Exchange Commission (SEC).
UK IFAs that identify a client or potential client as being a US taxpayer should make sure they work alongside one of these specialist advisers to ensure that the client receives an end result that is suitable and appropriate in every sense.
What US expats need
The investment solutions offered by UK advisers have to be compliant with US tax and Financial Conduct Authority suitability requirements.
This should be matched with reasonable fee levels that reflect the additional reporting and administrative requirements of managing money for a US taxpayer, but do not detract substantially from long term returns.
Many US expats working with a UK IFA will have UK pension assets. If a self-invested personal pension (Sipp) is chosen as the ideal pension vehicle, then the provider will clearly need to be able to accept a US citizen as a client.
A longer-term consideration will be whether that Sipp provider can convert pension income into USD and send it to a bank account in the US if that country is the retirement destination.
Any suitable investment solution will need to be able to sit inside this pension structure.
Waverton approach
It is in the context of this long check list that Waverton launched its US client model portfolios in May 2017.
The model portfolios sit alongside the firm’s bespoke portfolios that it has been running for US clients for 20 years.
Waverton’s US client model portfolios are available in GBP and USD with a minimum of £100,000/$150,000. Three mandates are available: Cautious, Balanced and Growth.
These work in the same way as model portfolios that advisers will be used to using for their domestic UK clients. The main difference is that they are invested in direct global equities and a small number of ETFs.
The key function of this investment solution is to allow the IFA to deliver appropriate risk and return solutions to the client without incurring punitive or accidental US or UK tax charges.
