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The Different Types of Global Financial Planning Clients

Updated: Aug 30


Whether it’s a non-citizen living in the U.S. or an American taxpayer abroad, there are many layers to financial planning for expatriate clients. To begin with, expatriates—and global financial planning as a whole—are far from homogeneous. Broadly, there are three types of global planning as well as three types of expatriate clients, each of which warrant unique planning considerations.

The 3 Types of Global Financial Planning

Working with global clients is hardly straightforward. Beyond understanding the differences between global and domestic financial planning, it is crucial for advisors to be aware of the three types of global planning:

  1. Inbound International - Clients and/or their assets moving into a country, e.g. an individual moving from abroad to the U.S., require “inbound international” planning. This category of global planning includes strategy and guidance before and after arrival in a foreign country. For instance, in the case of a non-citizen moving to the U.S., inbound planning involves helping clients to take care of their financial concerns in their home country and acclimate to the U.S.’s financial system.

  2. Outbound International - An American person planning to move abroad exemplifies a client in need of outbound international planning. Put simply, this type of planning caters to clients and/or their assets moving out of a country. It involves pre-departure preparation, such as helping an American client understand their financial obligations as a U.S. taxpayer abroad, and tie up their loose financial ends in the US.

  3. Cross-border - Finally, cross-border planning describes a comprehensive financial planning approach that accounts for a client and/or their assets from the perspectives of both countries involved in an international move. Arguably the most specialized type of financial planning, advising for cross-border clients requires knowledge of each country’s financial system as well as how they interact.

The 3 Types of Global Clients

While each type of planning establishes context for an advisor’s guidance, it is equally important to consider the type of client requiring advice.

The term “expatriate,” or expat for short, is generally understood as an individual who resides in a country that is not their native one. The word also describes individuals who renounce citizenship to their native country. Advisors working with expats must thus be cognizant of this distinction as well as the individual’s intent to remain abroad.

Generally, expats can be categorized as one of three types:

  1. Temporary Mover - Clients that live in another country for a limited duration, generally less than five years, are “temporary movers.” They are unlikely to accumulate significant assets in the country they’ve moved to. Financial planning for this type of client is most often limited to a cursory inbound to help the client make the most of their time in-country and then sometime later, outbound planning, where the focus is on tying up loose ends and repatriating accounts.

  2. Uncertain Mover - Clients that live in another country for an indefinite period, with neither plans to permanently stay nor plans to return to their native country, are appropriately titled “uncertain movers.” This category of expats in the U.S. requires not only a detailed overview of the American financial system, but also consideration of their financial accounts and obligations in their native country. The focus on the work with the ‘uncertain mover’ is global financial flexibility. An advisor will help a client to avoid making a financial decision with unintended long term consequences. These clients may require advice for a period of time to help them globally optimise their situation or become ongoing clients.

  3. Permanent Mover - Clients that live in another country with no plan or intention of returning to their native country are classified as “permanent movers.” These clients are likely to be long term clients. The initial focus of work will be on global integration of their financial lives. For instance, a ‘permanent mover’ to the U.S. from abroad would initially require advice about the IRS’s reporting requirements and investment restrictions for their foreign accounts before forming a plan on how to transition these accounts, among many other topics.

Each type of client merits special attention and tailored advice. After all, given their differences in domiciliary intent, a temporary mover’s long-term goals will not be in alignment with those of a permanent mover; similarly, an uncertain mover will face concerns that are not applicable to the other two.

Above all, it is important for financial planners working with expats to recognize that this group is not a monolith—in other words, individuals living in another country often have unique situations that require differing planning approaches.

Consider the following examples:

  • An American expat moves abroad for a temporary work contract and rents a home. They intend to return to the U.S. after the contract expires.

  • Another American expat moves abroad for a temporary work contract and buys a home. They sell their property in the U.S., as they do not intend to return.

  • Yet another American expat moves abroad for a temporary work contract and buys a home. However, they maintain their property in the U.S., without necessarily having made up their mind as to whether they will live. Their idea is to rent the home where they’re not living.

There are countless more situations, like individuals on working holidays, for which there is simply no one-size-fits-all tax solution. Comprehensive planning thus makes all the difference for individuals anticipating a cross-border move, whether permanent or temporary.

Financial Planning for Global Clients: Key Considerations

Expatriates in the U.S. and American taxpayers working abroad encounter the complete gamut of financial planning challenges when it comes to tax, investments, retirement, and estate planning. As such, planners must be prepared to:

  • Explain the difference between residence and domicile in determining various types of residency

  • Help clients understand the financial impacts of terminating domicile vs. keeping it

  • Present a global balance sheet totaling clients’ worldwide assets and liabilities in a base currency

  • Determine the tax reporting obligations of foreign assets

  • Offer guidance in how to choose an appropriate global custodian

  • Advise on the best course of action for the transfer of overseas retirement accounts

Most expats will be eager to maximize their financial position across their global holdings. For these clients, it is crucial to explain the financial pro’s and con’s of each different country and provide clear guidance in achieving the best outcome possible within the regulations of one’s given locations.

Final Thoughts

People around the world are more mobile than ever, fluidly changing location for both personal and professional reasons over the course of their lives. Needless to say, the financial implications of such mobility can be difficult to make sense of.

As a financial advisor, understanding the distinction between different types of global planning as well as the different types of expatriate clients is crucial for discerning issues like what income/asset is subject to tax in what location and how best to plan for one’s long-term financial goals. Without expertise in the subject, confusion about tax, investment, retirement, and estate planning is bound to ensue—and can lead to disastrous financial strategizing in the long run.

In short, global clients require carefully tailored advice to achieve their goals and build financial confidence. If you are interested in better serving expatriate clients, consider signing up for our Global Financial Planning Master Class.

Sources

The CPA Journal. “U.S. Tax Residency.”

Deloitte. “Taxation of foreign nationals by the US—2016.”

Internal Revenue Service. “Substantial Presence Test,” “Foreign Earned Income Exclusion,” “Taxation of Dual-Status Aliens.”

International Tax Blog. “U.S. ‘State’ Tax Residency (Domicile).”

Investopedia. “Domicile.”

KPMG. “U.S. taxation of Americans abroad.”