How to Work with Foreign-Born Families - Part 2

The sales cycle

Most financial advisors’ sales cycle starts with a 15- to 30-minute get-acquainted call. I have found this to be completely inadequate.

Instead, the first meeting is to get to know each other with no business discussion. It may vary a little bit based on where they are coming from.

It’s likely to take more than 30 minutes to get a good handle on the prospect’s situation.

Be patient and spend the time getting to know the individual and let the conversation flow, with them being the guide. If they bring up the money/finance issue, go with it.

A great resource I have found in this space is Dan Solin’s book, Ask. As Dan says, no agenda, no notebooks, just get to know your client by being genuinely interested in who they are, where they are coming from, and what values are important to them. Ask lots of questions and have a very open mind.

You’ll have time to talk about your firm and your planning process later, but this is not the meeting for that. If they ask specific questions, answer them, but bring the conversation back to them.

If it’s a couple, be very inclusive and ensure you are talking to both individuals, especially the one who seems more reserved. Make no assumptions about who is the decision-maker.

It may take more meetings to land this group as clients. But once you get one and do a good job for them, they are excellent about referring prospects like them to you.

Best financial services for foreign-born families

Offer different services, for example, a one-time project, financial planning only, investment management (especially with no minimums), or a combination.

This is critical, especially if they are on work visas and not sure of the future. Not knowing what their future holds (as is the case with non-immigrant visas), they are likely to be investing their excess money in their home country and the only U.S. investing they are doing is in their retirement plans.

Technical issues

When you first meet foreign-born prospects it’s crucial you ask and get clarification on their visa status, their country of origin, and what their long-term plans are. A lot of the planning strategies you’ll use depends on their visa status and whether they are coming or going.

Prospects may not be aware of the rules and regulations that affect their situation; they just know they have a financial planning challenge/problem that needs to be resolved. You may be their best option, once you’ve earned their trust.

Ashley Murphy of the GFP Institute has done a great job addressing some of these issues. He started the institute to educate advisors looking to work with clients with foreign ties.

Immigration and taxes

Besides the immigration issue – you, the advisor, need to understand the tax laws and the tax implications of being a resident or citizen of two countries. The U.S. is one of the very few countries that taxes its citizens and residents on worldwide income. In addition, ensure you understand their tax filing status.

There are severe consequences for not reporting outside income. There are tax treaties, tax laws, and provisions like the foreign tax credits that might mitigate some of the double taxation that comes out of this.

Be aware of the requirement to report foreign-based assets.

One example is the requirement to file the foreign bank and financial accounts reporting (FBAR) form every year if combined overseas account balances hit $10,000. This is a part of the 2010 Foreign Account Tax Compliance Act (FATCA), of the HIRE Act.

Failure to report the money can result in fines of close to 50% of the account.

Be careful when families overseas add the names of those in the U.S. to joint accounts in their home countries, essentially bringing those assets under IRS jurisdiction.

Investing back home

A lot of immigrants are very keen to invest “back home.” This can be in the form of rental properties, the home countries’ domestic stock market, or other businesses. Home bias, investing in what’s familiar, and sentimental reasons are a part of what drives this investment strategy.

You want to be prepared to talk through these issues and be willing to look at the investments with them (but be aware of rules and regulations).

Have a good understanding of what would be considered a passive foreign investment company (PFIC) and ways of getting out of that. The taxation of PFIC is an absolute nightmare.

Other technical areas to keep in mind involve estate planning, including foreign trusts and overseas guardianship, stock options, life and disability insurance, etc.

Retirement accounts are another special area to keep in mind; understand how other countries treat those accounts.

For example, Germany and Switzerland treat Roth accounts like any other taxable account. So, if a foreign-born client who has been saving in a Roth IRA account moves back to one of those countries, they’ll end up paying taxes to access those funds.

Every technical area that we normally address with prospects and clients needs to be addressed through a different lens that takes into consideration immigration status, future intent, asset location and type, and the ties the prospect/client has with their overseas country.

If you intend to work with foreign-born families, surround yourself with a network of immigration attorneys, international CPAs, and/or advisors working in that space.

Reach out to other advisors with knowledge in the space while you keep learning. The satisfaction that you get for a job well-done here is priceless.

Jane Mepham is the founder of Elgon Financial Advisors, a registered investment advisor in the state of Texas. She started the firm to work with foreign-born individuals after working at a well-known national planning firm. Prior to herfinancial planning career, she spent over 17 years working in the high-tech field. She holds a master’s degree in information technology and a bachelor’s degree in computer science in addition to being a CFP candidate.

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