The number of U.S. citizens living overseas is growing by leaps and bounds, and constitutes a unique market for reps.
Employees on job assignments abroad have a U.S. tax exemption of $74,000 this year, and mayalso have a living allowance, leaving them with money to invest. Others work for the U.S. government or international organizations. A few are well-heeled retirees who prefer Provence or Tuscany to Florida or Arizona.
Attracting and retaining these expatriate clients requires good connections and special effort. "Anybody who thinks this is a great niche market should think twice," warns Jeffrey Hill, a CFP at LPL Financial Services in Denver, who serves American clients living in Mexico. "You can't do it by cold calling. Everything is done by referral."
The distance between the reps and their clients isn't a license to slack off. "There's no chance to make a mistake or neglect client service," Hill says. "If you do, it's over. Word gets around." He goes overboard in the service department. When clients come from Mexico to Colorado on ski vacations, he helps them find rental cars and hotel rooms.
Showing sensitivity to foreign cultures is also required. Even U.S. citizens aren't the same in a new setting. "When an expat lives in Mexico for a while, they assimilate part of the culture," Hill says. For example, they may be less prompt or more prone to put things off. "The way they look at time [in Mexico] is different. It has to be. You don't just walk into a bank the way you do here. There you take a number and you wait."
Investing information may not be readily available to these overseas clients, so communicating is important yet challenging. Some expats get a local edition of The Wall Street Journal and have Internet access. But that isn't always the case.
"They may have limited access to information they need to make financial choices, and when they vacation in the U.S., they don't want to spend their time planning finances," says Todd Reilly, president of Reilly Financial Advisors in San Diego. "Some don't have quick access to the Internet. Others try to reach a financial adviser by phone, but by the time they've finished playing phone tag, it's old information." Reilly serves many American clients living in the Middle East.
Technological hurdles can take different shapes as well. John Breon, managing director of investments with U.S. Bancorp Piper Jaffray in Minneapolis, recalls faxing a client in Central America. "He wanted to be sure the fax came in before 5 p.m. I asked why. He explained after that the power in the whole country would be turned off."
Indeed, expenses for phone, fax and FedEx all add up when serving overseas clients. Yet e-mail, which is increasingly available, is a godsend both in reducing costs and combating time differences.
In-person client meetings require additional planning and expense. And depending on the broker's perspective, traveling long distances can either be an enormous burden or it can be a chance to experience the world.
Many of the reps who work with expatriates think it's the latter. As Reilly says, "I'd rather be having dinner with a client in Singapore than here talking on the phone."
Everard Taylor, a retired diplomat turned financial adviser, serves people who work for his former employer--the State Department. As president of Money Concepts Centre in Vienna, Va., his clients include State Department employees at home and abroad, American expatriates working overseas and a few foreign nationals. About half of his clients at any given time are overseas. "They keep going back and forth," he says.
Taylor understands his clients' lifestyles. He held more than 10 overseas posts himself, including stints in Austria, Indonesia, Ethiopia and Denmark, with terms in Brazil both early and late in his career. His wife is Brazilian so he visits Rio every year and gives seminars there.
Overseas clients often need a financial plan, and he can draw it up at a distance. His familiarity with government pensions gives him an edge in working with government personnel. The Federal Employment Retirement System provides a fixed amount indexed for inflation. And government employees also have a Thrift Plan, which is similar to a 401(k) in that they may choose from three investments. Taylor helps clients balance their independent investments with the government retirement plans.
Taylor sees opportunities not only with government employees abroad but also with people who work with international organizations such as the World Bank, the United Nations and the many U.N.-affiliated agencies in Brussels and Geneva.
Todd Reilly, president of Reilly Financial Advisors in San Diego, entered the overseas business in the early 1970s by serving friends and relatives living in the Middle East during the oil boom. "They were making a nice chunk of money without many places to spend it and needed some assistance," he says.
In the beginning, these clients invested in mutual finds and limited partnerships. And since 1990, Reilly has offered them full-service financial planning.
With more than $100 million under management, Reilly says about 30 percent of his business now comes from overseas. He has many of his original clients as well as referrals. Although the majority are in Saudi Arabia, some are in Indonesia, Ecuador and Venezuela. About 10 percent have retired to such countries as Greece, Italy and France.
Because he likes to meet clients in person, Reilly takes two international trips annually. Each time, he travels four to five weeks on an around-the-world ticket. Including visits to domestic clients in other states, Reilly spends about six months of the year on the road. A married man for 18 years, he says, "It's really only nine!"
Jeffrey Hill, a CFP at LPL Financial Services in Denver, joined the financial industry in 1984 after working for airlines in Latin America. He parlayed his interest in Mexico and the Spanish language into a successful business niche.
In the early '90s, Hill matched U.S. investors with joint-venture partners and distributors in Mexico. However, there was less call for that after the devaluation of the peso. Still the contacts he'd made helped him build a fee-based financial planning practice south of the border. "I knew a lot of people in Mexico who weren't being serviced by brokers," he says.
About 40 percent of his clients are in Mexico. Some are in Argentina, El Salvador and England. "It's the fastest growing part of my business," he says.
He spends 10 days each month in an apartment he keeps in Mexico City, where there is a large contingent of working expatriates. He also visits clients, many of them retirees, elsewhere in Mexico, including Cuernavaca, Guadalajara, the Lake Chapala area, San Miguel de Allende and Morelia.
Many of his clients are multinational families--that is, U.S. citizens married to foreign nationals. Because of U.S. inheritance laws, estate planning is more complex when one spouse is not an American citizen. He believes these couples' needs should be addressed by reps who understand the difficulties involved.
"As with any niche business, it has to be a passion and a long-term commitment," Hill says. "I love the culture and the arts of Latin America." And because he wants his 10-year-old son Christopher to appreciate them, too, he takes him along to Mexico once a year.