These changes call for advanced and specialised strategies from wealth managers who understand the intricacies of managing wealth in a globalised economy.

David Vacani, chief executive of Beacon Global Wealth Management and chairman of The Federation of European Independent Financial Advisers (FEIFA), provides insights into the current trends and considerations for wealth managers in this dynamic field.

Impact of global economic changes on HNW clients

The shifting global political and economic landscapes significantly affect HNW clients, who often have diverse financial interests across various countries.

They are especially vulnerable to market fluctuations and currency exchange rate volatility, heightened by geopolitical instability. Wealth managers catering to these clients must offer globally informed, personalised advice, addressing the unique investment needs and objectives of HNW clients in a complex financial world.

Investment dynamics in emerging markets

Emerging markets offer both potential opportunities and risks for HNW clients. These markets can yield higher returns but also come with the risks of political instability and economic unpredictability. Wealth managers must adeptly navigate these challenges, tailoring investment strategies to match their clients’ unique risk profiles and investment ambitions.

Challenges of evolving tax regulations

HNW clients often face complex tax scenarios due to their diverse assets and investments, further complicated by the ever-changing global tax landscape.

The introduction of new international tax regulations and cross-border agreements highlights the necessity for compliance and tax efficiency. Wealth managers must be proficient in international tax law to ensure their clients’ portfolios are compliant and optimised for tax efficiency.

Political changes and their influence on wealth management

Political shifts and changes in international relations significantly influence the investment decisions of HNW clients. Changes in global trade policies, tax treaties, and foreign investment regulations can substantially affect their wealth. Wealth managers must stay informed of these political changes and adapt strategies to protect and enhance their clients’ financial interests.

Adapting wealth management strategies for a global economy

In today’s dynamic global economy, wealth management strategies must be adaptable and flexible, particularly for HNW clients. Wealth managers must be capable of swiftly adjusting their strategies to accommodate the complexities of managing assets across different jurisdictions and market conditions.

Sustainable and responsible investing for HNW clients

Sustainable and responsible investing (SRI) is becoming an increasingly important aspect of wealth management. HNW clients are more interested in aligning their investments with their values, contributing to positive societal and environmental outcomes. Wealth managers need to be knowledgeable about SRI, integrating it into investment portfolios while achieving financial objectives and managing risks.

Continuing education and compliance in wealth management

Maintaining compliance with international financial regulations is crucial in managing the wealth of HNW clients. Ongoing education in global compliance standards, understanding diverse regulatory frameworks, and keeping up to date with changes in international tax laws and financial regulations are essential. Emphasizing continuous professional development and implementing robust compliance strategies are vital for ethical and legal financial management.

The role of technology in modern wealth management

Technology plays a vital role in managing the wealth of HNW clients. Digital tools and platforms are essential for effective, timely portfolio management and advice, especially for clients with global financial interests. Wealth managers must utilize these technological advancements to enhance traditional financial services, ensuring efficient and comprehensive wealth management.

Effectively managing the wealth of HNW clients requires a deep understanding of their unique challenges and needs in a globalized world. Staying informed about global economic trends, mastering complex international tax regulations, leveraging technology, and prioritizing ongoing education in compliance is critical for wealth managers. This ensures sophisticated, adaptable, and personalized services, offering significant opportunities for wealth managers adept at navigating this intricate landscape to guide their clients toward financial success.

This article was written for International Adviser by David Vacani, chief executive of Beacon Global Wealth Management and chairman of FEIFA.

Reflect on the former concentration of many Independent Financial Advisers (IFAs) on UK Pension Transfers. This once-booming domain, owing to shifting regulatory contours and fee structures, now feels like navigating ‘red oceans’ – a saturated space rife with competition and dwindling opportunities for differentiation.

Yet, the broader international panorama is rich in ‘blue oceans’ – untapped markets bursting with innovation and opportunities. Two prominent areas in this regard are the British expats in the US and Americans domiciled overseas.

To put things into perspective, about 700,000 British-born individuals reside in the US. This figure excludes the second or third-generation British-Americans who maintain substantial financial and cultural ties to the UK.

For these expats, financial challenges are multifaceted. They face dual taxation, the balancing act of investments in both nations, complex estate planning, and, critically, inheritance tax planning in two distinct regulatory environments.

Conversely, an impressive nine million Americans have made homes outside their birth nation. Spread globally, many retain considerable US-based assets. Their challenges are no less complex, spanning the intricacies of international financial regulations, diverse tax regimes, and inheritance planning that juggles guideline from both the US and their country of residence.

These demographics are not just numbers; they represent a significant, nuanced market. These are individuals and families with multifaceted financial concerns that demand specialised advisory services. Herein lies a golden opportunity for IFAs—if they can reorient and enrich their service models to cater to these specialised needs.

This is not about mere diversification; it is about evolution. Success in these ‘blue oceans’ demands a confluence of global financial understanding, strategic alliances across borders, tech-enabled solutions, and an adeptness at inheritance and estate planning tailored to cross-border complexities. The potential rewards? A growing and loyal client base and a distinct positioning in a market with ample room for innovation.

In conclusion, while the financial world will continue its unpredictable dance, opportunities for growth and innovation remain – if only we knew where to look.

For the modern IFA, the horizons are clear: the British expat in the US and the American abroad. As we pivot our strategies and adapt our business models, these ‘blue oceans’ beckon with promise. The question is, are we ready to dive in?

This article was written for International Adviser by Joby Gruber, president of Beacon Global Advisor Network

On 27 June 2023, UK chancellor of the exchequer Jeremy Hunt signed an agreement financial services cooperation with EU commissioner Mairead McGuinness to establish a “constructive, mutually beneficial relationship between the UK and the EU in financial services”.

The Memorandum of Understanding (MoU) signifies an important step in UK/EU relations post-Brexit. The agreement will establish an ongoing forum for the UK and the EU to discuss voluntary regulatory cooperation on financial services issues.

Hunt said: “The UK and EU’s financial markets are deeply interconnected and building a constructive, voluntary relationship is of mutual benefit to us both.

“In the UK, our financial services sector is a true British success story. Together with the related professional services sector, it was worth £275bn ($348bn, €319bn) last year, making up an estimated 12% of the British economy.

“This agreement with our European partners as sovereign equals builds on our arrangements with the US, Japan and Singapore, helping to support the sector’s role as a global financial services hub.”

Expat advice market reaction

The concept of passporting was a big loss for the expat advice market in Europe – and Brexit itself left many expats asking questions no one knew the answers to.

However, do firms believe the MoU will be a good thing for cross-border advice?

David Vacani, principal at Beacon Global Wealth Management, said: “Any increase in cooperation between the UK and EU is to be welcomed. Hopefully we can build on this new framework and get agreement in many other areas of financial services. We will have to wait and see what impact this voluntary arrangement has on UK expats, but it is a positive move forward.”

Lee Eldridge, group chief executive at Chase Buchanan, said: “Aligned regulation can almost always be a positive for investors, this agreement between the UK and EU provides an extra step to help the financial services sector in the UK return to the alignment we witnessed pre-Brexit.

“The previous cross-border understanding and regulatory cooperation could be advantageous for investors and UK expats living in the EU and will provide assurance for the UK financial sector, which is the stalwart of the British economy.”

John Westwood, group chairman at Blacktower, said: “The signed deal between the UK and the EU on financial services cooperation is expected to have a significant impact for both the UK and UK expats. The agreement signifies a constructive and mutually beneficial relationship between the UK and the EU in the financial services sector. Given the deep interconnection between their financial markets, establishing cooperation is in the best interest of both parties.

“It is likely to have a positive impact on the UK’s financial services industry, ensuring continued access to EU markets and fostering stability and growth. Additionally, UK expats who work in the financial services sector may benefit from the increased cooperation and coordination between the UK and the EU, which could lead to enhanced opportunities and protections for them.”

Jason Porter, business development director at Blevins Franks, added: “While the MoU is a welcome commitment from both sides and should result in closer ties between both sides, we shouldn’t kid ourselves and think ‘passporting’ is on the agenda.

“It does not even mean the 40-odd different areas of equivalence the UK could negotiate with the EU are formally under discussion. It does not create a framework for UK investment managers and financial advisers operating in the EU and vice versa.”

Then they had to get their heads round a whole new set of immigration rules, before they could even start a new life in Europe.

But according to Euronews, rules around long-term residency and moving around the bloc could be simpler in 2024.

The EU reportedly wants to make it easier for non-EU residents to move around the bloc in the future. It is also aiming to cut the time you need to live in a member state before gaining long-term residence status to three from five years.

The report said that the European Parliament have made their position clear but now EU governments will need to agree and negotiate to finalise the changes to the law. It is hoped that the new legislation will be completed by February 2024 – before the next European Parliament elections.

David Vacani, principal at Beacon Global Wealth Management, said: “Any way of simplifying the complicated and confusing laws around EU residency is very much to be welcomed. The ability to move around EU states after a shorter time period for a non- EU resident would be a great step forward in recognising their contribution to the EU.”

Jason Porter, business development director at Blevins Franks, added: “These proposed changes will be gratefully received and provide reassurance that we are still very welcome on the other side of the channel. The fact the permit processing time for the proposed single EU residency permit is restricted to 90 days, and the three-year permanent resident permit to 60 days, if enforced, should mean much quicker turnaround times.”

UK expats

After Brexit eventually happened, the UK nationals became non-EU residents – which made moving to the country a little more difficult.

But this could be a good sign for potential expats looking to move to Spain or Portugal.

Porter said: “Most British expatriates who are retiring to Europe choose where they want to live more on the basis of where they are attracted to rather than which is the best financially or from the perspective of tax.

“But these rules will allow those that require it greater flexibility in moving from one member state to another perhaps to plan for certain events such as a business sale.

“The fact this could include being able to leave the EU for up to 24 consecutive months without losing their status will also be attractive.”

Lee Eldridge, group chief executive of Chase Buchanan, said: “This change, making it easier to move to a European Union country, is welcome news. Particularly since Brexit and the end of freedom of movement. However, when someone decides to move to a new country; as well as where they live and possibly work, there are lots of financial considerations to make such as transferring their pension, taxes and which country to make tax payments in and inheritance planning.

However, a good international finance adviser with UK and local tax and pensions knowledge can make the move easier for them. Professional financial advice should always be sought.”

The proposals aim to allow retail investors to make investment decisions that are aligned with their needs and preferences, ensuring that they are “treated fairly and duly protected”, as the EU looks to trust and confidence into the financial industry.

As part of the package, the EU will be banning inducements for “execution-only” sales, where no advice is provided, to ensure that financial advice is “aligned with retail investors’ best interests”.

The commission said that stricter safeguards and transparency will also be introduced where inducements are allowed. This comes weeks after International Adviser confirmed that the EU was set to u-turn on its bid to ban asset managers and insurers from paying financial advisers for recommending their investment products.

EU financial services commissioner Mairead McGuinness said: “We are not proposing a full ban on inducements, or commissions, or indeed however you determine the practice linked to inducements. At this stage, we have made the assessment very carefully that it would be too disruptive to have a ban overnight.

“However, we are banning inducements for execution-only sales, where no advice is involved. We are introducing stricter requirements on when inducements can be paid.”

Changes proposed

The package also included an array of measures such as:

• Improve the way information is provided to retail investors about investment products and services, in ways that are more meaningful and standardised, by adapting disclosure rules to the digital age and investors’ growing sustainability preferences;
• Increase transparency and comparability of costs by requiring the use of a standard presentation and terminology on costs. This will ensure that investment products bring real value for money to retail investors;
• Ensure that all retail clients receive at least annually a clear view of the investment performance of their portfolio;
• Protect retail investors from misleading marketing by ensuring that financial intermediaries are fully responsible for the use (and misuse) of their marketing communication, including where it is made via social media, or via celebrities or other third parties they remunerate or incentivise;
• Preserve high standards of professional qualifications for financial advisers;
• Empower consumers to make better financial decisions, by encouraging member states to implement national measures that can support citizens’ financial literacy, regardless of their age, and social and educational background;
• Reduce administrative burdens and improve the accessibility of products and services for sophisticated retail investors, by making the eligibility criteria to become a professional investor more proportionate; and
• Enhance supervisory cooperation to make it easier for national competent authorities and European Supervisory Authorities to ensure that rules are properly and effectively applied in a coherent manner across the EU and to jointly fight fraud and malpractices.

The EC said that package is “wide-ranging in scope and touches on the entire investment journey of the consumer”.

The changes will revise the existing rules set out in the Markets in Financial Instruments Directive (Mifid II), the Insurance Distribution Directive (IDD), the Undertaking for Collective Investment in Transferable Securities (Ucits) Directive, the Alternative Investment Fund Managers Directive (AIFMD).

It will also adapt the take-up and pursuit of the business of Insurance and Reinsurance Directive (Solvency II), as well as revise the Packaged Retail and Insurance-based Investment Products (Priips) Regulation.

Lee Eldridge, group chief executive at Chase Buchanan, said: “The EU has identified a number of helpful action points to address problems that exist within the wider European market for both investment and insurance products.

“As with both the Priips and IDD legislation, we believe that the detail of how the measures are implemented will be very important. The implementation needs to be clear, and consumer-centric, not designed to fulfil compliance or bureaucratic goals.

“We welcome the requirements for increased disclosures, better adviser education, and more consistency across different national interpretations of the legislation. The more informed that our customers and consumers are, the better the financial outcomes that will arise over time.

“Above all, we are pleased to see that the EU is taking direct action on the costs of financial products across the member states. This should help create more fair outcomes for our end clients and put the EU on par with other jurisdictions worldwide.”

Change mentality

The EC said that, while Europe has one of the highest individual saving rates in the world, people are much more reluctant to invest in capital markets and financial products.

In 2021, for example, around 17% of EU households’ assets were held in financial securities – like listed shares, bonds, mutual funds, financial derivatives.

By contrast, households in the United States held around 43% of their assets in securities.

Valdis Dombrovskis, executive vice president of the EC, added that the package will boost retail investors’ “trust and confidence to make the investment decisions that suit them best”.

“Europe’s economy needs retail investors,” he said. “Our proposals are designed to encourage more of them to participate in capital markets. This is important for the Capital Markets Union to succeed, because capital markets need to work for people. We need to make Europe an attractive, safe place for people to invest.

“We are proposing to improve EU laws concerning retail investment. These include simplifying and reducing the information presented to retail investors, and making sure that products represent value for money by not charging undue or unreasonable costs. We want to ensure high professional standards for investment advisers, including in the growing area of sustainable investment. And we want to tackle any bias in the advice so that advisers act in the best interest of the client.”

Jason Porter, business development director at Blevins Franks, said: “The digital age means retail investors have access to a huge amount of information and data. But they will also find themselves confronted by misleading marketing through a variety of media channels. The Retail Investment Package aims to provide sufficient regulation and oversight in respect of the content of marketing of financial securities.”

‘Significant step’

Overall, the EU changes are looking to fundamentally improve the outcomes for retail investors – and this could have as big as an impact as the Consumer Duty in the UK.

John Westwood, chairman at Blacktower, said: “These new rules are a significant step towards empowering retail investors and ensuring they have access to clear and meaningful information. The focus on adapting disclosure rules to the digital age and sustainability preferences reflects the evolving needs of investors in today’s world.

“The emphasis on transparency will help retail investors make more informed decisions, while standardising the presentation and terminology on costs should ensure investors get real value for their money when choosing investment products.

“At the same time, the requirement for retail clients to receive an annual clear view of their investment performance is a crucial measure to enhance accountability and provide investors with a comprehensive understanding of how their portfolios are performing.

“Protecting retail investors from misleading marketing is commendable. Holding financial intermediaries responsible for the use of their marketing communication, including on social media and through third parties, ensures accountability and safeguards investors from deceptive practices.”

David Vacani, principal at Beacon Global Wealth Management, added: “We welcome these proposals and their intent and it is great to see this movement forward for clients in the EU . Any steps that make it easier for clients to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected is to be welcomed.”