Wealth Management For Expats – Top Ten Mistakes To Avoid
Good wealth management planning with the help of professional and regulated financial advisors is essential for everybody.
For expats, wealth management planning and good financial advice is even more crucial; expats needs to take into account differences in laws and tax rules that may apply in their new country of residence. Seeking wealth management advice from qualified financial advisors can help expats to make the transition to life in a new country much easier and less stressful.
Here, Gavin Pluck, Guardian Wealth Management’s European director takes a look at the top 10 most common mistakes made by expats that can have a detrimental effect on their wealth management strategy.
The original version of this article was published by the International Advisor and the Financial Times, receiving nearly one and a half thousand hits on its first day!
Keeping Your Expat Wealth Management Plans In Check
1 – Miscalculating Living Expenses
When looking at life in a new country, many expats make the mistake of underestimating how much it’s going to cost to live. We get so used to budgeting around the prices that we are familiar with, that when you make the move to another country it can be quite surprising to find that food, services and other daily expenditures do not equate with the costs that we’re used to. In order to keep a grip of your wealth management planning, account for much higher costs and you’re used to – it’s always much better to overestimate than underestimate in this kind of circumstance.
2 – Not Realising The Expense Of Moving Costs
Part of your expat wealth management strategy will involve budgeting for the move itself. Be prepared to have to pay a variety of one off costs – whether you’re buying or renting a property, you may find that there are administration and legal fees to pay as well as taxes that you were not initially aware of. These hidden expenses can throw your wealth management plans right off centre, so again, make sure that you overestimate to be on the safe side.
3 – Acting Like You’re On Holiday
Moving abroad is an exciting experience and it’s only natural that you will want to make the most of exploring your new country. The problem is that any wealth management strategy you’ve put into place will not account for this extra ‘holiday spending’. It’s a good idea to set aside some extra money for those initial few months, as well as an emergency fund, when planning your expat wealth management strategy.
4 – Getting Caught Out By Exchange Rates
Fluctuating exchange rates can be a bugbear for any wealth management plans, but it’s particularly true for expats, who may still be making regular payments in their native country for things such as property or other financial commitments. It’s worth seeing if you can arrange for a fixed rate of exchange for the first year or so, in order to help keep your wealth management plans in balance.
5 – Not Accounting For Local Taxes
Even the best expat wealth management plans can be hugely disrupted if you don’t understand the taxation system in your new country. Many people believe that if they’re moving within Europe that the tax laws will not differ too much – but many European countries have tax systems that can be much tougher than what you’re used to in the UK. If you’re unsure, seek advice from a professional financial advisor.
6 – Not Writing A New Will
If you’re moving abroad, your UK Will may not be recognised in your new country. It’s essential that you seek advice from your financial advisor, in order to ensure that you have the right type of Will for your new location.
7 – Not Setting Up A Local Bank Account
As an expat, it’s important that you open a bank account in your new country of residence as soon as possible, to avoid incurring potentially massive bank charges in the UK.
8 – Not Informing HMRC
Paying tax unnecessarily is obviously bad news for any wealth management strategy! It’s essential that you fill in form P85, to notify HMRC that you’re no longer resident in the UK.
9 – Not Reviewing Life Insurance Policies
Life insurance is an important aspect of your wealth management plans – but did you know that your UK life insurance policy may not cover you in your new country? Financial advisors can help you to make sure that you have appropriate life cover in place, so it’s worth seeking advice to avoid any problems in the future.
10 – Pensions And National Insurance
If you have a UK pension and you’re moving abroad, you will need to keep up your contributions or perhaps find an alternative pension scheme. It’s also important to keep paying your national insurance contributions if you think that you may end up back in the UK in the future and will want to claim your state pension.
Wealth Management Advice For Expats
If you are considering moving abroad and starting a new life as an expat, make sure that you don’t fall victim to these common expat wealth management mistakes. If you have any concerns, you can speak to one of our regulated and professional financial advisors for help and guidance on your move to a new location.