Why You Should Work with A Cross Border Financial Adviser

Written by Carson Hamill CIM®, CRPC®, Associate Financial Advisor and Assistant Branch Manager & Dean Moro BComm, CIM®, Associate Financial Advisor

When moving across borders, it’s important you work with a qualified cross-border financial advisory team that is licensed to manage client investment accounts in both Canada and the U.S. In this blog we will explain why.

1. The Problem
2. The Solution
3. Common issues when not working with a Cross-border Adviser
4. Benefits of working with a Cross Border Adviser
5. Summary

The Problem

With respect to investment accounts and advisory services, there is a problem in the marketplace for Canadians returning home to Canada after living and working in the United States. And it is an issue for Americans moving to Canada for work, marriage, or lifestyle changes. If they have not made changes or made plans in advance, issues often arise when they relocate to Canada and notify their U.S. brokerage firm of their address and residency status. In most cases, they will be notified in writing that the U.S. brokerage firm can no longer service their accounts, and they have 90, 60, or possibly as little as 30 days, to transfer their accounts or they could be liquidated. This can have severe tax implications depending on the size of the accounts in question.

This is a common issue faced by professionals in business needing to relocate, as well as athletes and entertainers. Anyone with U.S. retirement and investment accounts looking to move or retire to Canada could be facing this problem.

The Solution

American and Canadian citizens cross the border for various personal and professional reasons. It is crucial to understand that there are substantial differences between the U.S. and Canada with respect to tax, estate, and investment planning. Here we explain why you should work with a qualified cross border financial advisor when facing this issue. Most financial advisors are only licensed in one jurisdiction, concentrating in just Canada or the United States. For example, most Canadian financial advisors are only licensed to work with Canadian investment accounts and/or Canadian domiciled clients. And it’s the same case for U.S. based financial advisors – typically they are only authorized to manage U.S. investment accounts and/or American domiciled clients.This compares with a cross border financial adviser with access to a platform that can accommodate assets on both sides of the border. With the appropriate licensing, the advisor will be physically located in Canada but also registered with the appropriate authorities in the United States, allowing them to manage and administer the client’s US retirement accounts. This gives the client the opportunity to maintain the account and not have to incur potentially significant tax consequences.

Qualified cross-border advisory teams are not as common as you would think. Very few financial services firms provide the platform and the licensing capabilities to service assets on both sides of the border. At Snowbirds Wealth Management, our cross-border advisors are licensed with regulators in both Canada and the United States and understand the intricacies of cross-border wealth management.

Common Issues When Not Working with a Cross-border Advisor

Below are common issues that can arise when you don’t work with a qualified cross-border financial advisor:

1. When working with multiple advisory teams, the investment strategy and philosophy used by one financial adviser may differ from the others. Imagine trying to play hockey for two coaches when they aren't working together. How are you supposed to win the game or reach your goal? If the market turns or you need financial advice, who do you call first?
2. Ineffective, or unnecessary, transition of assets across the border. Does the advisor understand the tax implications?
3. When working with dual citizens or US persons, does the advisor understand the impact of their investment advice in the context of a cross-border compliant tax strategy. You could end up with PFIC exposure, for instance, or other costly issues.
4. If you have accounts in both Canada and the U.S. under separate advisory teams, you may have portfolios in similar investments unknowingly, which could increase risk due to lack of diversification. Or likewise, you could be over-diversified.
5. Financial plans that do not encompass all the client’s assets.
6. Having assets with multiple advisors can increase costs. Fees are often set based on the amount of money under management.
7. Often advisers will insist that clients move assets to the country in which that adviser is registered, in order to obtain the business. This can lead to unnecessary taxation and other costs.

Benefits of Working with a Cross-border Advisor

Advantages of working with a qualified cross-border financial advisory team include the following:

1. A cross-border plan that includes your assets on both sides of the border. This can lead to more efficient retirement plan, and more effective tax and estate planning.
2. Coordinated investment management services for your U.S. and Canadian investments accounts, ensuring an acceptable amount of diversification and avoiding costly PFIC related issues.
3. Unbiased advice on whether specific investment assets should be transferred to Canada or remain in the United States. Leaving retirement assets in the U.S. and having them managed by a qualified Canadian cross-border advisor is often more tax efficient.
4. Access to U.S. retirement account distribution strategies while residing in Canada.
5. Support and guidance with retirement benefits like CPP, OAS, Social Security and Medicare.
6. Access to attractive currency conversion strategies.
7. Combining and consolidating assets with one advisory team can significantly reduce management costs.

In Summary

Crossing the border, whether on a permanent basis or just temporarily, amplifies the difficulty of investment management, financial planning, and estate planning. When assets such as retirement accounts, real estate, and investment interests are accumulated in both countries, movement without appropriate planning can result in a disorganized financial plan, or no plan at all. This can result in higher taxation, misaligned portfolios, and estate planning errors. Constructing a plan prior to relocating can be extremely helpful and save you significant time and money. There are substantial differences between the U.S. and Canada with respect to tax, estate, and investment planning. It is important that individuals with cross border complexities evaluate their situation with a qualified cross-border financial advisory team that has a full understanding of their unique needs. A cross border financial advisory team should include a portfolio manager who is licensed to manage client investment accounts in both Canada and the United States, as well as a cross border financial planner who is knowledgeable in the planning complexities of both the U.S. and Canada. Protecting your wealth and having an effective cross-border investment strategy is crucial when you are preparing to move across borders, or have ties to both the United States and Canada. There is no one size fits all - the best strategy is to work with an experiences and qualified cross border advisory team that has the capability, knowledge, and platform to manage assets in both Canada and the United States.

Next Steps: If you are planning on moving to Canada and need assistance with your investments, estate planning, and portfolio management, please call or email us at Snowbirds Wealth Management, as we specialize in cross-border financial planning and wealth management. We work closely with experienced cross-border lawyers and accountants to ensure you have a team behind you.

About Snowbirds Wealth Management Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate financial advisors with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the US, they provide tailored investment solutions to minimize the tax burden when moving assets across borders.To schedule an introductory call, please click here.

Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof.

Raymond James (USA) Ltd. advisors may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Investors outside the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Raymond James (USA) Ltd. is a member of FINRA/SIPC.