IMPORTANT WARNING: The contents of this article have been compiled in good faith by Investorsoffshore.com to provide assistance to investors, but do not constitute investment advice or recommendations. Investors should not rely upon the information given in order to choose types or routes of investment but should make their own independent enquiries before making choices. Investorsoffshore.com has taken reasonable care in researching and presenting the information herein but makes no representations as to its accuracy and accepts no liability for actions taken or not taken as a result.

Why do you need an international financial advisor?

Managing your investments is seldom easy, especially at a time like the present when uncertainty looms large in all directions, and for an expatriate, the sheer amount of knowledge and technical expertise required can be bewildering. Investment guides, magazines, and finance and investment sites (such as Investorsoffshore.com, ahem!) can provide you with a working knowledge of strategies and types of investment, but (hopefully) you wouldn't perform open heart surgery on a loved one because you had found a great medical website, so when tackling the intricacies of international tax and investment planning, there is no shame to enlisting a qualified professional to offer guidance and support.

You might, of course, already have relationships with several qualified professionals. You might feel that another qualified professional in your life is just exactly what you don't need. However, an IFA can be the one that ties it all together, streamlining the financial planning process in the long run.

For example, you may have access to the services of an international stockbroker who is excellent at picking exactly the right stocks and funds (and if this is the case, in these bearish times, I suggest you keep very quiet about him). However, without access to information concerning your overall financial situation, he may not be able to provide the proper information about sheltering those assets for estate planning purposes. Equally, your accountant may be doing a fantastic job of tax preparation, but may not be able to help you reposition your assets so as to achieve optimum tax efficiency. So whether you are just starting to consider financial planning as the result of an international move, or want to streamline an unnecessarily bulky planning procedure, hiring an IFA may well be the way to go. He (or she) should be able to help you address the current situation, set goals for the future, identify alternatives, select and implement a course of action, and review the situation on a regular basis.

As previously mentioned, the amount of technical expertise and knowledge required to manage the finances of an expatriate will usually be much greater than that needed for a 'static' employee. Although in the domestic sphere there are doubtless many financial advisors well able to juggle shrewd investment management with advice on asset protection, retirement planning, and finance management, as an expatriate, you will ideally need someone able to do this on an international scale.

Dealing with, for example, UK capital gains tax, French inheritance tax, and the implications of citizenship for personal taxation is likely to require the expertise of an international financial advisor. Also, depending on your personal circumstances and net worth, you may want to establish an offshore trust or company to protect your assets from future threat, or to hold retirement income, and a domestic financial advisor may not be completely up to date or knowledgeable about the processes and legal issues involved. As many people have found to their cost, a badly set up offshore structure can do more harm than good, and it is therefore worth making that little bit of extra effort, and hiring an international professional.

Which method of compensation?

Financial advisors, whether onshore or international, can be compensated for their services in one of several ways, and while we are not suggesting that an IFA compensated in one way is preferable to an advisor compensated in another, it is essential to be aware of how an advisor is paid for his services, not least from the point of view of your own budget. Below are some of the ways in which an advisor can be compensated:

• Fee only. Many financial advisors will charge an hourly rate, and your fee will depend on how long they spend on your situation. Depending on the complexity of the financial planning necessary, this could prove expensive, however.

• Fee and Asset Management. Some advisors will charge an initial planning fee for helping to select investments, insurance, and other financial vehicles, and will charge a percentage of the assets annually for monitoring and updating your portfolio as necessary throughout the year.

• Fee plus Commission. Some advisors charge a fee for assessing your financial situation and making recommendations, and then may help you to implement these recommendations by offering you a choice of certain investments on which they earn commission. Commissions (as with all charges) can vary greatly from one type of product to another, and from product to product (for example with mutual funds), so if your advisor receives a fee plus commission, don't feel uncomfortable about asking how much commission he receives on any given product. Also, be aware that although you may have decided not to have your IFA manage your assets, with a fee plus commission advisor, there will usually still be a yearly charge (worked out as a percentage of portfolio performance) whether 'hands-on' asset management is taking place or not…

• Commission Only. A commission only advisor will develop recommendations for your circumstances and goals, review these recommendations with you, and discuss ways in which they can be implemented. However, the only way in which they will be compensated is if you choose to buy the products or services that they are offering.

• Salary. Many banks, credit unions, and other financial organisations offer financial planning services, and in some cases, the financial advisors on their staff are just paid a salary. However, in the majority of cases, financial advisors affiliated with a financial organisation will also receive commission on any products purchased from them. The organisations themselves are compensated through the sale of their investments and/or services.

Many have concerns that the way in which an advisor is paid will affect the quality of their advice - this however, usually depends on entirely different factors. Some people believe that only a 'fee only' advisor will be able to offer impartial advice, and that financial advisors that receive commissions have a conflict of interest. However, it's really a question of the integrity of the IFA, as opposed to the method of compensation. If you choose a knowledgeable and trustworthy advisor with a thorough understanding of your financial situation, and a sensitivity towards your financial goals (ah, but how do I find this perfect creature? I hear you cry, Read on for our due diligence guide…), this shouldn't be an issue. However, if in initial discussions, an IFA refuses to reveal how he or she is compensated - run away! This issue should not affect the quality of financial advice being given, and if it is veiled in secrecy, then this may well be a red flag.

What services are offered?

Although you would think that the answer to this would be obvious, (financial advice-duh!) the range of services and products offered by international financial advisors can vary widely. Some advisors offer a wide selection of products covering all aspects of expatriate living, such as personal portfolio management, offshore capital investment, life insurance, retirement planning, and even school fees planning, which is often an area of concern for expats. Others choose to specialise in one particular area, such as pension planning.

Although it may seem counter-intuitive to hire more than one financial advisor (given that in most cases, the idea of taking on an IFA is to streamline financial planning) you may decide that specialisation necessarily implies a deeper and more thorough knowledge of the areas in question. Or you may decide that you would rather deal with an IFA offering a wider range of products for the sake of greater convenience and efficiency, and because you feel that this will enable them to better tailor a solution to your requirements. The decision needs to be based on your circumstances and requirements, so there is no right or wrong choice. However, areas of expertise and products offered should certainly be a consideration when selecting an advisor.

Do your due diligence…

It may seem that finding a qualified, objective, and international financial advisor may seem almost as challenging as doing the investment research yourself, but do not be tempted to skimp on the due diligence - remember that you are entrusting your hard earned money to this individual, so once you have narrowed down the field to advisors offering suitable products and services, it is worthwhile taking some time to make sure that you are compatible.

Interviewing prospective advisors could be the best way to do this, and although this can be achieved over the phone, you may find that you'll get better results from a face to face meeting. Obviously, this may not always be convenient, or even possible for an expatriate, but hopefully you have not been so zealous in your quest for a truly international financial advisor that you have chosen potential advisors on the other side of the world - apart from anything else, if you do decide to take them on, you don't really want to have to set your alarm clock to speak to them! As with all other international investment decisions, although geographic location of the person or service is not the prime concern, it should be taken into consideration.

When interviewing potential advisors, it would be a good idea to compile a list of core questions, and ask each one roughly the same, so that you will have some comparable information to evaluate them. The following questions may provide you with a starting point (although this is obviously not a definitive list):

• What services do you provide? See above

• What kind of clients do you serve? For example income level, profession, investment needs.

• Which jurisdiction are you established in? Although this should not bias the standard or breadth of investment and financial planning advice offered, it is still useful to know.

• What are your professional credentials, and are you registered as an investment advisor in the jurisdiction in which you do business? When you have this information, and have narrowed your choice down to one or two advisors, do a background check on this information if possible. Call the accrediting organisation or the relevant regulatory authorities.

• Are you licensed to sell financial products, and if so, do you sell financial products for a specific company/companies? If decide on a commission and fee based advisor, but are worried that commission charges may raise the costs of the service, or cause a conflict of interest, make it clear that you would like to take advantage of the advisory service offered on a fee basis, but will be purchasing investments/services direct from the provider.

• What is your preferred investment style? As previously discussed, you will probably be happier working with someone whose approach to investing and asset management mirrors your own.

• What is your area of expertise?

• How long have you been in practice? This again should be fairly easily verifiable after the interview.

• Can you provide references from previous/current clients? If not, is your performance record verified by international sources? Some IFAs will provide professional references, but prefer not to divulge details of other clients. Try to get independent references as well.

• How are you compensated? As previously discussed, an ethical and trustworthy financial advisor should not allow this to affect the financial advice given, but you still need to know.

• What services do I receive for my fee? Obviously only applies with fee based financial advisors!

• How often will my financial situation/portfolio be reviewed?

There is also the more general (but still important) consideration of whether you hit it off with the advisor on a personal level. Did they have time for you, regardless of the amount of money in question? Did they seem responsive to your opinions and financial goals? Were they prepared to explain the options to you clearly and concisely, or did they use large amounts of financial jargon?

What to expect when you've found one…

First of all, expect the tables to be turned! Instead of asking the questions, you will, in the initial stages at least, be answering them. Your financial advisor will need to know (among other things) your stage of life, your long-term financial goals and short term responsibilities, your tolerance for risk, and the degree to which you want to be personally involved in financial decision making. Your country of tax residence, country of current residence, and future career plans (if known) will also have tax and investment implications, and an international financial advisor should be able to help formulate a strategy for profitable and tax efficient saving and investing. Having a qualified professional on your side may also help to keep your emotions in check during times of change in the markets.

However, you must make sure that your financial advisor is adaptable. Your circumstances and goals will undoubtedly change over the years, and it is vital that your investment portfolio and financial planning reflect this. ABG International, for instance, offer a free international consultation in which they get to know their clients needs and circumstances, followed up by regular reports, reviews, and meetings to discuss any change of strategy necessary.

So to conclude, if your financial circumstances and liabilities have recently changed due to expatriation, or you are already investing, but without a long-term plan, you may want to seriously consider engaging the services of an international financial advisor. Even if you are a relatively experienced investor, it may still be worth considering. Presumably, (unless you are a finance professional yourself, in which case you are probably capable of advising yourself!) you will not be able to devote huge amounts of your time to financial planning, so why not delegate at least some of this responsibility to someone that has made it their career?