Financial Planning Process and Plan
Financial planning is commonly construed as being mainly concerned with investment selection and management, but that is just one part of what should be a more complete process. Generally, a financial planner will follow something like the process below, whether their client is an expatriate, or otherwise:
- Collect your financial data
- Identify your long term aspirations and lifestyle goals
- Identify where you now stand in relation to those goals and where you want to be
- Agree a financial plan
- Implement your financial plan, and
- Undertake a regular, at least annual, review of your financial plan to ensure that it remains up-to-date and relevant in the current economic climate and with respect to your goals.
The Financial Plan should normally include and consider the following, with long term expatriation having a major impact on most of the planning elements:
Long term aspirations and lifestyle goals
Clearly enunciated long term aspirations and goals are intrinsic to a successful plan and need to be identified and explored by the planner and client together. These are often more complicated with expatriates who quite commonly contemplate investing or retiring outside the UK, or spending considerable amounts of time in another country post retirement.
The financial aspects of the plan will inevitably be driven by a range of assumptions, including investment rates of return, inflation, taxation rates, retirement age(s) and life expectancy. When you try and take into account retirement and taxation regimes across a number of countries, whilst trying to optimise opportunities and defer costs, then the exercise becomes appreciably more complicated than it would in a simple, domestic context. This is certainly the case when it comes to estate planning.
Tax issues normally form an intrinsic part of any plan - both in terms of tax minimisation and as a driver for the type of investment product that might be chosen. As mentioned elsewhere, planning on the basis of multiple, often overlapping, tax and fiscal regimes is normal for expatriates, but a complex necessity.
Lifestyle targets obviously need a certain amount of income to support them - and retirement planning considers how that income can be generated through savings and investments. These need to be considered in the context of the social security and tax regimes of the planned country of retirement or, if the retirement destination is unclear, designed to maintain flexibility at the smallest appreciable cost.
An expatriate lifestyle almost inevitably introduces a greater level of uncertainty and complexity into financial planning than is normally the case. That should not provide an excuse for expatriates to eschew financial planning, indeed it is the main reason why expatriates, perhaps more than most sections of the community, need to actively embrace financial planning if they are to extract full value from the opportunities that expatriation provides.