From the July 2008 issue of Investment Advisor • Subscribe!

Shrinking Planet

How planning is changing overseas

Asignificant number of the new clients that Jeremy Deedes, founder and director of the Yorkshire, England-based firm Planning for Life, has taken on this year have been what he calls "international"--people who, by virtue of their lifestyles, outlook, or investment objectives are increasingly turning to planners like Deedes to help them make the most of the bountiful opportunities that globalization unveils. "You have to be aware of the impact of globalization upon a client's life," Deedes says. "It's an ongoing theme and I expect to have more international clients going forward."

Helping people in mixed marriages (European Union citizens married to U.S. citizens, for instance) and Britons who have been working overseas for many years and are looking to retire back home, has become an important part of Deedes's work. Managing their money effectively means that he's not only continually seeking out investment opportunities around the globe, but that he also needs to know about the regulatory and tax regimes that characterize individual countries. As such, Deedes's contact with overseas advisors has increased and he believes that cross-border dialogue between professionals will continue to gain momentum.

Even as globalization has opened up the world of cross-border investing and money management, individuals will only be able to realize its full potential if countries support globalization with the right kind of regulatory systems that allow individuals to take advantage of opportunities in different parts of the world from an investment and tax perspective, and also safeguard them against downturns.

Take India, for instance, where mutual funds continue to experience enormous inflows on account of the bull run in the stock market over the past four years. India's mutual fund industry is governed by one of the best regulatory frameworks in the world, says Uma Anand Iyer (no relation to this writer), Mumbai-based head of India research for consulting firm Cerulli and Associates, and as the Indian economy has boomed, many international funds have been able to invest in India and take advantage of opportunities there. Yet there has not been too much capital flowing the other way, Iyer says, so to promote this flow and allow Indian citizens to take advantage of opportunities in other markets, Iyer argues that Indian regulators need to relax some of the regulations governing cross-border funds, such as getting rid of the differential tax treatment between equity and fixed-income funds and allowing for the introduction of new products. "Despite the enhancement of cross-border limits, Indian investors have [also] been parochial and chosen to concentrate on huge returns in domestic markets rather than look outside," Iyer says. "We expect this to change, albeit slowly, as volatility in the Indian stock markets make investors question whether they can get better returns elsewhere."

Retirement Advice

Proper regulation is also extremely important at a time in which many countries in the world are moving away from defined benefit programs to defined contribution retirement systems, says Tim Burgraff, European partner at Mercer HR Consulting in Amsterdam. Advisors and plan sponsors need to keep pace with these changes and individuals also need a safety net, he says. "Regulators are paying more attention--this is the logical next step as defined contributions become the model around the planet," Burgraff explains. "They are stepping up and looking over employees' shoulders to make sure that they offer them some security as they manage their own assets, so that they have enough when they retire."

Regulators in Europe are paying greater attention to how advisors operate. Britain's Financial Services Authority (FSA), for instance, is moving from a prescriptive-based regulatory framework to a principles-based system, which will allow advisors to operate in a more personal manner with their clients and therefore better avail themselves of global opportunities, he argues.

Ideally, retirement plans that are being managed in a global world should be tax effective across the board, and this would be an important and necessary component of successful cross-border money management. But harmonizing tax regimes in Europe itself, let alone the rest of the world, is a complex and arduous process to go through, and one, says Burgraff, that might never happen. "We tried to harmonize VAT [the value-added tax added to most goods and services throughout the continent], but in Europe, we couldn't even manage that," he says. "At this stage, everyone agrees that cross-border management would be most effective if there is tax and regulatory harmony, particularly for multinational companies that are managing people and retirement plans in a moving world. But right now, everyone accepts more the idea that multinational companies in Europe will have one asset pool from which they will focus on different kinds of investing vehicles."


Savita Iyer-Ahrestani is a freelance business journalist who is currently based in Arnhem, The Newtherlands. She can be reached at siyerwriter@yahoo.com.

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