Last Updated on 27th December 2024
An element of risk is an unavoidable aspect of investment, but for expatriates, fluctuations in currency values, changing tax reforms, and volatility in the markets themselves can all make it incredibly hard to get a real handle on the amount of risk involved in each investment product and the health of your overall portfolio.
Investment management services aren’t just about recommending specific products, funds, or securities that meet your objectives now; they’re about tracking performance, identifying how your portfolio is doing, and making timely suggestions to continue to optimise the balance of risk and reward while taking advantage of tax efficiencies.
Let’s look at why cross-border investment can be harder to manage than one-jurisdiction portfolios and the reasons expert investment assistance is often vital to achieving the outcomes and returns you expect.
Understanding the Multiple Factors Contributing to Investment Risk for Expatriates
It’s worth reiterating that there are very few investments with zero risk and that even a stable savings account in your home country could be exposed to risks, such as changes to the interest rates payable owing to rises and falls in the base rate or variations in the account fees and administrative charges deducted.
In the world of investment, these risks can vary widely. Generally, a lower-risk investment product with high-certainty returns is also less attractive in terms of payout than a higher-risk alternative.
However, investment management remains crucial when you relocate to a new country, whether you’re unsure which products you should retain, those that qualify for generous tax allowances or exemptions, and those which lose their tax efficiency once you become an expatriate.
Examples of Common Cross-Border Investment Risks
Some of the many risks we might identify when auditing a new client’s investment portfolio could relate to:
- Currency risks, where an account, fund or dividend structure is based on one denomination, but you live in a country with an alternative currency. Changes to the currency exchange rates could make a sizable difference to the net value returns you achieve.
- Economic and political factors, such as increased taxation on an asset transfer from one jurisdiction to another or evolving regulations, mean certain products or funds are allowed in one country but not the other.
- Variations in tax charges in either your home country or your place of residence, such as changes to taxation against lump-sum drawdowns or the removal of the lifetime allowance, may have had an immediate impact on some expat retirement portfolios.
- Changes to costs of living, where the regular returns, payouts or interest earned on a product may form an important part of your income, and higher living costs might mean what was once a comfortable budget is now insufficient.
Expat investment management services exist to identify and control these risks and others as they emerge or to use intelligent forecasting and analytics to advise clients about when to take action—preventing avoidable losses or depreciation in the value of their investment assets and ensuring they understand the tax benefits and drawbacks of each potential way forward.
The Value of Personalised Investment Management for Global Expats
We often talk about the importance of advice, financial expertise and support from talented wealth managers and advisers who work to get to know you and your circumstances before we make any recommendations.
Your financial objectives, timescales, expectations, planned expenditures, risk appetite and disposable income dictate the right investment strategy, which is why one generic investment plan or online platform simply isn’t a good way to manage your portfolio.
Risk management is one of the essential aspects, but it’s also essential to know how cross-border assets and portfolios will attract tax liabilities, to have ongoing oversight of what those obligations will look like, and to know how you can potentially restructure or position your investments to take advantage of the tax efficiencies available.
Whether you currently live in the UK and plan to move abroad or are a tax resident in another country and considering a relocation, there is a strong likelihood that at least some portfolio assets will attract a much higher or lower tax bill in your intended new destination.
For example, some products, such as a UK ISA, benefit from generous tax allowances but have no such advantageous treatment or comparable product elsewhere. Retaining an ISA, or a junior ISA for a child, will mean you lose the right to continue making contributions to your high-interest savings plan once you become a non-resident.
How Can Targeted Investment Advice Help Optimise a Cross-Border Portfolio?
Knowledge and timings are fundamental. An expat preparing for a move or another lifestyle change or deciding how best to reinvest or manage their assets will often find that aligning those actions with specific dates in the tax calendar, or before or after a major tax reform, can carry distinct advantages.
Experienced investment advisers can assist with:
- Decision-making around how best to diversify investment locations, such as retaining some investments and assets in your home country or selling and reinvesting the proceeds from other assets to free capital to access opportunities in a new country.
- Calculating the immediate and ongoing tax obligations linked with any changes to your portfolio or advising on allowances and exemptions that could help you limit your tax exposure while remaining compliant with all the applicable regulations.
- Integrating succession and inheritance planning into your investment decisions, understanding how the location, nature and value of your assets will influence future tax obligations.
- Forecasting events that could undermine your portfolio value or returns and navigating fluctuations, market volatility, tax reforms, or currency fluctuations strategically without making knee-jerk reactions that could be inadvisable.
Over the long-term, astute investment management for expats will equip you with the advice and insights you need to make clear judgements at every step of the way – not handing over the management of your assets to an adviser but working in partnership to ensure you know how your investments are performing, how that is likely to change, and the best moves to make to work towards financial security.
For more information about our investment management services, you are welcome to contact your nearest Chase Buchanan Wealth Management team or access our previous guide on exploring Reliable Investment Management Support for expatriate clients.
*Information correct as at December 2024