A world of opportunity

Eight years ago, I came to Australia from Hong Kong hoping to persuade the financial planning industry to expand into Asia.

It seemed curious to me (and still does) that, while the world is heavily populated by financial planners who hail from the UK (a well coined expression “failed in London, try Hong Kong” or “FILTH” was very popular at the time!), you could count the number of Australian qualified planners on one hand.

When considering any offshore market, it is important to remember that, before considering the high-net-worth locals and expatriates of other countries, there are many attractive client segments which are tailor-made for Australian financial planners:

* Australian expatriates;

* Individuals planning to migrate to Australia; and

* Locals who hold an Australian passport (often with families in Australia, including children attending school and universities).

Australian expatriates

According to the Department of Foreign Affairs, there were 860,000 Australians living and working overseas as of December 2001. These are distributed across the following regions:

Australian expatriates are particularly attractive clients for Australian financial planners for many reasons:

* their earnings are generally higher than their Australian peers due to the need for their employer to provide them with incentives to live and work overseas;

* they generally pay lower rates of tax;

* their housing is often provided for them by their employer;

* they receive generous company-provided benefits (school fees, clubs, travel and so on);

* they rent out their house in Australia (thus covering some or all of their mortgage and other local commitments);

* they often accumulate substantial wealth due to their high levels of disposable income; and

* the financial advice available from the local financial planning industry is generally restricted to product advice (often involving the selection of an insurance-based product based in an offshore jurisdiction, for example, Isle of Man, Channel Islands) and does not maximise the opportunities for a non-resident Australian planning to return here one day.

Migrants

Overseas migration has played an important role in the mix of Australia’s current population. More than 130,000 people migrate to Australia each year (representing more than 50 per cent of Australia’s annual population growth) with a large proportion in recent years arriving from New Zealand, United Kingdom, China, South Africa, Yugoslavia and India.

New migrants from all countries are attractive clients for Australian financial planners for the following reasons:

* they transfer substantial assets to Australia, including retirement funds, the proceeds of property sales, savings, investments and sometimes businesses as well;

* in order to secure permanent residency in Australia, they are highly skilled, entrepreneurial and/or independently wealthy;

* they are looking to establish new relationships with Australian financial institutions (banks, fund managers, superannuation providers and so on); and

* they seek quality financial advice from an Australian financial planner who can advise them on their offshore as well as onshore tax and investment issues.

There are many opportunities for Australian financial planners to target clients living offshore who have a connection to Australia, either via their origins, birthplace, passport or family connections. This comes before the more ambitious idea of delivering superior financial advice and service to high-net-worth locals and expatriates of other nationalities — Americans, English, European and New Zealanders, where there are no language barriers.

Offshore regulations

One of the potential barriers to operating offshore is the need to operate within the licensing and regulatory framework of overseas countries. While this can be time-consuming, bureaucratic and sometimes restrictive (in terms of the recommendations and advice that can be provided in that jurisdiction), it is unlikely to be prohibitive due to Australia’s high standing in the world as:

* a mature, secure, demanding and stable financial system and regulatory environment;

* a successful and growing financial planning and retail managed funds industry; and

* a commitment to world’s best practice when it comes to delivering quality financial planning advice in a manner that serves the best interests of the client.

It follows, therefore, that Australian-based financial planners who have built a successful business in the Australian environment, are in compliance with Australia’s relatively demanding regulatory regime, and have a thorough grasp of Australia’s complex tax, social security and superannuation systems, will have no difficulty adapting their approach for other (in most cases, less demanding) markets, regulatory systems and environments. This opportunity remains the largest source of untapped potential for the Australian financial planning industry.

Getting started

So how do you get started? It’s a big world out there and you’ll need a lot of focus and effort to get results, particularly in the short-term. My advice would be to do some initial research.

* Talk to Austrade about joining the New Exporter program — it provides a package of free services designed to assist small and medium-sized Australian companies develop their businesses overseas and make their first export sale. Apart from providing practical and relevant advice, facilitating introductions and assisting with the research process, Austrade offers grants which will help contribute to some of the offshore costs.

* Familiarise yourself with offshore tax and financial planning issues, including residency rules, visa classes and requirements, the taxation of non-residents, tax treaties, offshore products (including foreign superannuation) and the tax treatment of offshore products for Australian residents.

* Talk to Australians you know living offshore. What type of advice is available to them? How relevant is it from an Australian perspective? Are they taking full advantage of their non-resident status? What will they do when they come back to Australia? This will give you a good feel for the opportunities in many countries.

* Do some research on a country that you are familiar with. How many expatriates live there? How many of them are Australian? Is there a vibrant Australian business and social community? How can you easily target Australian expatriates and migrants?

David Thomas is a consultant to the financial services industry, specialising in offshore technical issues and distribution opportunities.