Clients need guidance on estate and gift tax considerations and access to the social security benefits they have paid into and how that integrates with Canada Pension Plan.Sean Kilpatrick
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Whether retirees are moving back to Canada or clients are heading south for a new career opportunity, requests for cross-border financial advice are on the rise.
For some advisors, this has recently become a growth area in their practice – a trend they only expect to increase as clients seek to navigate complex wealth management considerations on both sides of the border.
Clark Linton, senior wealth advisor and portfolio manager with Plena Wealth Advisors at Raymond James Ltd. in Vancouver, estimates that some two-thirds of his practice’s recent client growth is on the cross-border side of his business, driven by demographic factors and the unique nature of the market.
Many of these clients are retiring back to Canada after working in the U.S. for decades as well as U.S. citizens moving north.
“They need somebody who can basically steer the ship on both sides of the border and if they don’t, there’s a lot of things that can get missed,” Mr. Linton says.
Indeed, cross-border clients have significant regulatory and taxation considerations. For example, U.S. citizens and green card holders in Canada have an ongoing U.S. tax-filing obligation. They also face other reporting requirements relating to income from certain investments and accounts located outside the U.S.
Cross-border clients also have questions about what will happen to U.S. retirement investment accounts – including individual retirement arrangements (IRAs), Roth IRAs and 401(k) – when they relocate to Canada and how to best manage the income from these accounts, Mr. Linton says. Many often run into regulatory hurdles with their U.S. financial services institution when moving jurisdictions.
They also need guidance on estate and gift tax considerations and access to the social security benefits they have paid into and how that integrates with the Canada Pension Plan.
For individuals moving back to Canada who are maintaining U.S. exposure, he says, finding an advisor who can develop an overall wealth plan that integrates cross-border issues such as estate planning with a co-ordinated investment strategy for assets on both sides of the border is crucial.
“[For] estate and tax planning, investment management is different if you’re taxed both in the U.S. and Canada,” he says.
“[They] require a special expertise, not only having somebody with the regulatory ability to look after all their accounts in one consolidated strategy on both sides of the border, but they need very precise guidance and advice.”
Creating access to other specialists
Another value-add for advisors who offer cross-border services is the multi-disciplinary networks they build for clients on both sides of the border.
Julia Chung, chief executive officer, partner and senior financial planner with Spring Planning Inc. in Vancouver, has a cross-border specialty that makes up 20 per cent of her practice. She says requests for advice are increasing.
“My focus is primarily on owners of private corporations and multi-generational family businesses and, within most of those, I’ll always find at least one U.S. citizen or a person who’s decided to go to school in the U.S.”
Ms. Chung has built a network of financial planners in the U.S., as well as cross-border accountants and tax lawyers with whom she can liaise to ensure clients have answers to questions that arise from uncommon circumstances.
“Every person’s just a little bit unique and they can be like, ‘Yes, and I’m working part-time for this U.S. company – but I’ve also been working for them in Italy,’” she says.
“[We are] able to go back to the client and say, ‘Okay, so the accountant thinks this, the tax lawyer thinks that,’ and then say, ‘So, between the two, here’s what we think your options are.’”
Managing accounts in the U.S.
Ian Peebles, senior portfolio manager and wealth advisor with Peebles Martin Wealth Management at BMO Nesbitt Burns Inc. in Toronto, has noticed that a third of new assets brought into his practice during the past year are domiciled in the U.S. He sees a positive future for cross-border advice.
Common client scenarios include Canadian professionals who work in the U.S. for a few years, open and contribute to IRA accounts, then return to Canada.
“The thing that they almost always [say] is they didn’t even know it was possible for a Canadian advisor who has a cross-border business to manage that IRA account,” he says.
“They just assume that it’s stuck in the U.S. and they’ll just deal with it when they need income or when they retire.”
Through his firm’s integrated, cross-border approach, Mr. Peebles is licensed to manage the account on a U.S. platform from Canada. Often, the alternative is an orphaned account on the other side of the border that’s difficult to contribute to because of jurisdictional issues.
“The value is actually in not just managing or being a custodian for the account, but integrating it into the [financial] plan – looking at the estate pieces, sorting out what income is going to come from it at what time,” he says.
It makes it meaningful for the client, so it isn’t just an annoying afterthought, he adds.
Adding value to clients
The initial shock of not knowing about their U.S. reporting requirements is largely over for most clients with cross-border ties, says Darren Cooper, senior investment advisor with Baun & Pate Investment Group at Wellington-Altus Private Wealth Inc. in Calgary. But the demand for advice continues.
“They’re aware of what they need to report,” he says. “They need an advisor who knows how to tie those ends together and [be there to] lean on when they need insight.”
In his practice, the biggest trends driving cross-border inquiries are the consolidation and simplification of assets and intergenerational wealth transfer. This includes clients with foreign assets becoming part of their investment portfolio, such as an inheritance, or U.S. real estate that has been liquidated.
Looking ahead, Mr. Cooper says the reality is most advisors should be at least conversant in cross-border matters to assist clients properly.
For many, that means building a network of knowledgeable contacts within and outside of their firm to refer to when the need arises.
“It adds a huge value if you can answer that need,” he says.
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