Asian growth is fuelling an Australian expatriate-focused financial planning approach at Sydney-based practice Aqua Private Wealth.
“If you think about the standard executive and family back in Australia, there’s not the same call to action to get your financial house in order at home as when you’re about to go offshore,” says Sean Abbott, Aqua’s principal.
“You can either do it yourself, or get some financial advice, but there’s generally so much complexity there.”
The idea of providing financial advice to Australian expatriates (expats) first occurred to Abbott around six years ago, but targeting those in the United Arab Emirates. However, as Abbott explains, the GFC brought that to an early close.
“In 2008, everything came to a grinding halt. People’s confidence around jobs and income decreased and they weren’t comfortable about investing surpluses. It just went cold, pretty much.”
In the meantime, Asia has grown, contrasting with slow economic recovery in the traditional business hubs of the United Kingdom, Europe and North America.
This has seen Australian corporations increasingly shift overseas offices to Asian cities such as Singapore or Hong Kong instead of London or New York.
Aqua now focuses on advising clients in both these Asian cities. Higher rates of disposable income relative to domestically based Australians is one reason for his choice of these locations.
“When you’re working up there [in Singapore and Hong Kong], tax rates are circa 15 per cent.
“The way I try to summarise it is that working four years in Singapore or Hong Kong is the same as working eight years here – it’s like a two-to-one benefit.
Because many of the people relocating are senior executives taking up substantial pay packets, “you’re going to have very strong surplus cash flow, so it becomes a case of ‘what do you do with that?’”
Potential pitfalls
While Abbott is finding it a profitable area where he can add significant client value, it is not without risks.
“There are the risks that go with understanding the cross-border tax arrangements,” Abbott says.
“If someone is foraying into this field, they really, really need to understand where the border starts and stops as to where they can give advice to an expatriate.
For this reason, Australian financial planners can only advise on products and services in Australia, not the offshore location.
Aqua’s Australian Financial Services licensee, Godfrey Pembroke, also imposes restrictions on the type of advice he can provide.
“It’s a complicated area and actually dangerous to hold out that you can give advice when it crosses into the other jurisdiction. And licensees are concerned about that a little.”
“[Godfrey Pembroke] has very clear guidelines about where our advice starts and stops and the ways in which we engage.”
For instance, he is not allowed to hold prospecting seminars in another jurisdiction, though new business can be referred from existing clients.
“Some licensees are saying ‘you can’t give advice to expats’.
Tackling geography
There are also geographical challenges in this approach, which is why Abbott prefers to meet clients before they leave Australia.
“It ticks quite a few boxes that way. It’s more compliant, and the relationship is established in a better way because there are better opportunities for a far more robust discovery meeting.”
After initial face-to-face meetings, he says they often use Skype or online conferencing systems such as GoToMeeting.
“It’s less difficult when you’ve caught them before they leave. You don’t have to unwind potential messes people get into once over there.”
