How ETFs Simplify Expat Wealth Management

by on August 5, 2014

The evolution of the ETF universe has helped to democratize the investment landscape over the years, allowing for self-directed investors to easily access virtually any corner of the global market, and do so in a cost-efficient and transparent manner. The advantages of the exchange-traded product structure have also caught the eye of asset managers servicing expat investors; this refers to expatriates, or individuals living in a country other than their country of citizenship. One such firm is New Jersey-based Saddle River Capital Management, which offers expat wealth management services via ETFs [see also 7 Charts to Put the ETF Industry in Perspective].

The firm recently took time to explain what role ETFs play in their model portfolios:

ETF Database (ETFdb): What sort of clients are you targeting with this new expat wealth management service? What does it entail?

Saddle River (SR): Our expat wealth management service assists expats in complying with U.S. tax regulation in investment management, retirement planning, college planning, insurance, and estate planning via exchange-traded funds (ETFs).

We typically target senior executives who have international tax obligations due to accounts in foreign countries. Many need an adviser who understands and has the resources to deal with foreign assets. We can open accounts for U.S. citizens living overseas as well as foreign expats living in the U.S. and consolidate their assets, thus reducing the tax and compliance burden.

The image below highlights the growth of the global expat population:


ETFdb: What are the challenges expat investors tend to face?

SR: We have identified many investors as stranded between tax and regulatory regimes in the U.S. and elsewhere which has prevented them from complying and meeting their investment objectives.

Many expat investors are not aware of many of the tax breaks available to them in the U.S., as they assume that they are only eligible for tax breaks in their home country. We aim to educate these investors and bring their personal tax advisor into conversations where their investments are concerned [see also 101 ETF Lessons Every Financial Advisor Should Learn].

ETFdb: How long have you been using ETFs for? Do you see this product structure as the preferred means for building diversified, low-cost, long-term portfolios?

SR: We have been using ETFs for 10 years. ETFs are especially valuable for expats in different time zones because they solve tax, cost, and liquidity issues common to other investment structures. Taxation can be a big issue especially for certain mutual funds and limited partnerships.

ETFdb: What about the ETF structure specifically makes it an ideal instrument for your expat clients’ needs?

SR: We have found that ETFs in particular, for their transparency liquidity, and cost, are the perfect investment vehicle for expat investment accounts. Furthermore, we can help clients simplify their investments by handling multi-jurisdictions in multi- currencies in one platform. Having more than one account in more than one country is a good way to lose track of your assets and to send accounting costs through the roof.

ETFdb: What happens to the account when the client decides to move back home?

SR: When expats are ready to move back home, we help them repatriate their assets and tax liabilities in their respective countries without having to change accounts. The account stays where it is and doesn’t have to close and trigger a taxable event. We can simply convert the assets into the currency of the client’s domicile.

The Bottom Line

The exchange-traded product structure is appealing to investors of all walks; in the case of expat investors, ETFs may offer a more convenient way to manage tax liabilities across various accounts denominated in different currencies. While no financial instrument is perfect, ETFs have undeniably simplified and democratized the investment process for many. 

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Disclosure: No positions at time of writing.