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Join the jet set

As far as IFAs are concerned, the international dimension has traditionally had two aspects. First, foreign jurisdictions have allowed advisers to write offshore business for tax purposes. Second, offshore markets have presented IFAs with potential new business targets, primarily expatriats.

Klonowski & Co principal Francis Klonowski says the basic financial planning criteria apply. “It is easy to get swamped by the issue of being abroad and the products that are available. You have to be clear about the tax status of your client overseas as well as here. Do not just be in a hurry to use an offshore bond,” he says.

Advising clients who are emigrating requires detailed knowledge of legislation and regulation in both jurisdictions, says Klonowski. Like others in this part of the market, he has heard anecdotal evidence of people making disastrous decisions and receiving an enormous tax bill as a consequence. He emphasises the need to convince clients to get advice as early in the process as possible.

Given the amount of research and liaisons with other professionals that are required to do the job properly, Klonowski believes this can only be done on a fee-paying basis.

He suggests IFAs contact the Inland Revenue&#39s offices in Nottingham to learn more about some of the tax issues that arise. For example, Tessas can retain their tax privileges for expats, whereas Isas cannot. Another recommendation is to use information available at

IFAs wanting to write offshore business in trust can approach a company such as offshore corporate trustee Hemery Trust Group, based in Jersey and Mauritius. Hemery Trust Group business development consultant Kirby Stanton says there are three situations in which it is appropriate for an IFA to seek out its services – if the client lives or works abroad, if the client is just about to emigrate or if the client lives in a country in which offshore products are not marketed.

Hemery offers a basic wrapper at a cost of £250, irrespective of the amount invested in it. Unlike some offshore trusts, it allows multiple investments from different providers. A more complex offshore trust will cost £1,200 with an annual charge of £600 and, should the client need to incorporate an offshore company, Hemery can oblige in Mauritius at a cost of £2,350 plus an annual charge of £1,700.

Fiscal incentives have always been the mainstay of offshore products. Scottish Equitable technical manager Margaret Jago says tax rules introduced in 1998 mean that, next year, capital gains tax can be reduced to 10 per cent using business taper relief. An employee might have share options and a pension tied up in their company but, given the recent examples of Railtrack and Marconi, may not want to have all their eggs in one basket. The new tax rules allow an exit strategy for shareholders.

Not only can business be transported abroad but the adviser, too, can chase more favourable climes. The prospect of escaping the 1 per cent climate in the UK for the sunshine of the Costa Brava was a potent lure for County Antrim-based Laird Financial Planning senior partner Steve Laird. Having recently bought a home in Spain, Laird spotted what he believes is a big opportunity to practice as a UK-registered practice offering advice to the many expats in Spain.

Laird was surprised to see the lax regulation of the Spanish market, with local papers full of adverts making lurid claims. Advisers can claim to be independent without anyone checking their status. As a consequence, Laird says expats tend to have left their money behind because they do not trust the advice available out there.

Before setting up his Spanish branch, where he envisages spending one week out of six, Laird consulted closely with the FSA as to what he could and could not do. There is some deregulation – for example, he does not have to provide a key features document, nor does he have to send the client a report (although he intends to do so) and there is no requirement for him to disclose commission. But the requirement to know the client remains.

Expats will tend to have sorted out their life cover and pension requirements prior to leaving, says Laird. While they are nominally Spanish domiciled, most will continue to have very strong links with the UK. Investment advice will predominate. “After all, these are people who tend have a fair bit of money behind them to enable them to have made the move abroad and they will often have a sizeable equity from the sale of their home in the UK,” he says.


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