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Brokers without Borders

Borderline, feel like I'm going to lose my mind, Madonna sang in one of her earlier hits, and many brokers share her mental anguish perhaps none more acutely than those who deal with clients who live across that border. Maintaining a foreign-client base is a challenge in any political climate. The differences in language, culture and regulation greatly complicate a U.S.-based advisor's efforts to

“Borderline, feel like I'm going to lose my mind,” Madonna sang in one of her earlier hits, and many brokers share her mental anguish — perhaps none more acutely than those who deal with clients who live across that border.

Maintaining a foreign-client base is a challenge in any political climate. The differences in language, culture and regulation greatly complicate a U.S.-based advisor's efforts to provide sophisticated financial services. But given the onerous requirements of the USA Patriot Act and the isolationist sentiments spawned by the terrorist attacks of two years ago, today's is a particularly tough foreign-business environment.

“It's a tough nut to crack,” says Donald F. Reilly, president of Reilly Financial Advisors, a 10-employee firm based in La Mesa, Calif., that serves American, Canadian and British expatriates in Europe, the Middle East and beyond.

But Reilly, and others like him, stop short of saying cross-border clients are more trouble than they're worth. In fact, for a growing number of advisors, foreign markets are a great place to expand a practice.

With more than 3.5 million Americans living outside the country and 33 million foreign-born people living here, the business of helping people negotiate the financial complexities of their multinational lives is a fertile niche.


Advisors who specialize in cross-border relationships say there are a number of unusual challenges involved in such undertakings. For starters, there is understanding two (or more) sets of financial laws and how those laws interact with one another. At the very least, this requires some extra education. For instance, Brian D. Wruk, a Phoenix-based advisor who specializes in helping Canadians settle in the United States, found it advantageous to earn CFP designations in both the U.S. and Canada.

Then there is the latest bugaboo: The Patriot Act, the 2001 law that puts advisors and other financial professionals on the front lines of the war against terrorism. In instituting more stringent know-your-customer rules and broadening the definition of “suspicious activities,” the act threatens to overwhelm advisors with paperwork while simultaneously undermining their ability to gain the trust of their clients. One case in point: An advisor in the Midwest, whose clients once included expatriates, says that when the act took effect, her firm's difficulty in differentiating between foreign clients and expatriate clients led the company to instruct her to close out the expatriate accounts. For those who can brave the regulatory waters, there are other hardships — marketing, for instance. According to Reilly, whose firm manages about $100 million, even with all the electronic tools available today, identifying and reaching good foreign prospects remains difficult. “If you're in a town in the United States, you just look at the prospects that have the money,” Reilly says. “When they're overseas, there may be 5,000 in an area, but how do you get to them? That's the hard part. Word of mouth is usually the best way to do it.” As difficult as generating that “organic” marketing buzz may be, Reilly says it's the best thing to strive for.

Reilly says he stumbled into the foreign-advice niche in 1974, when some friends working in Saudi Arabia told him his services would be in demand there among oil industry expatriates. They were right: Reilly first visited in 1975 and has returned several times a year ever since. His firm has since branched out to other foreign markets, including Prague.

Robert Keats, of Keats, Connelly & Associates, a Phoenix-based firm specializing in U.S.-Canada resettlements, took another approach. Keats wrote a book called Border Guide, now in its sixth edition. The book acted like a large marketing brochure for the firm. “We're fairly well known, so when people have questions they call us,” says Keats' associate Dale Walters. The resulting conversations are easily steered towards how the firm might be able to help the caller manage his money better.

Yet another method for increasing cross-border business is to become an expert in a particular country's financial laws and then subcontract for clients through a firm that lacks such expertise. Raoul Rodriguez-Walters, president of Mexico Advisor, an eight-person financial planning firm based in San Miguel Allende, Mexico, does just that. He specializes in serving the town's large American expatriate community as well as Mexicans moving to the U.S. Many of the former want to retain their hometown brokers but also want to ensure the cross-border money flows move smoothly.

Long-Distance Relationships

Once established, relationships in a cross-border practice can be challenging — and expensive — to maintain, advisors say. Between postage, long distance calls and even occasional visits, Reilly says that serving his scattered clients isn't cheap. But there is at least one upside to the life of Reilly: How many advisors have trips to Greece on their to-do list?

Advisors note vast differences between dealing with Americans who live abroad and dealing with indigenous foreigners. For instance, Rodriguez-Walters, says his meetings with Mexican and American clients require very different approaches. “Mexicans tend to be a lot more conservative; they open up a lot less quickly,” he says. “In order to get all the information you need to do a proper financial plan, it takes a lot more time.”

Occasionally, clients don't fully appreciate the implications of doing business internationally. For instance, the Canadian and U.S. societies are so closely related that people often are blind to the ramifications of a move, according to Brian Wruck, an independent advisor in Phoenix who specializes in helping Canadians relocate.

Wruck says he sometimes gets calls from fellow Canadians who have already moved to the States but haven't really thought about the more complicated aspects of making the transition — getting a visa and buying insurance, for instance. Wruck generally turns down such business, since in his experience such clients tend to be expensive to serve and not particularly loyal.

Advisors who are able to brave all these complications still face the issue of taxes. Rodriguez-Walters jokes that in his office they keep glasses of water handy to revive American clients after they learn that they'll have to file two tax returns. “Everybody freaks out,” he says.

The double-filing is an American peculiarity. Unlike most countries, the U.S. requires citizens to file a return wherever they live. The sting is lessened by an $80,000 annual exclusion on foreign-earned income and reciprocal tax treaties with many countries (including Mexico) to prevent double-taxation, but differences in such things as estate tax rates and capital gains accounting on home sales sometimes create huge problems, advisors say.

Coming Home

But perhaps the most surprised group of all tends to be expatriates who return to the United States for retirement. After having been away for 20-30 years, they often have lost touch with the cost of living here, Reilly says. “They always spend more money getting resettled than they anticipate, and their monthly expenses are always more than they anticipate,” he says.

Once the decision to return home — or to move to a foreign country — has been made, advisors say, it's important to begin the process of setting up accounts promptly. Doing so gives migrating clients the best range of options for protecting funds that might result from, for instance, selling a house before moving to Mexico, where the capital gains would be taxed, or making disbursements from a Canadian retirement account that's not recognized as tax-deferred in the U.S.

Another example of migration-vulnerable financial vehicle: The 529 education savings program. These only cover the costs of American colleges, says Joe Rovig, a registered rep for INVEST Corp. of Clearwater, Okla., which means that a custodial account needs to be set up for a child who will attend school near the family's permanent home abroad.

But the work of cross-border financial advice involves more than just writing up a plan and setting up the right buckets. For clients already overseas, Rovig says he is sometimes called to help with non-financial matters. The retired colonel says he sometimes helps in navigating the Veterans Administration bureaucracy to help his clients get medical treatment for their dependents. He adds that he also advises his oil worker clients in negotiating their business contracts.

“You do a hell of a lot more than just financial planning,” Rovig says.

But he and others agree: It's worth the effort.

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