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December 27, 2011 at 04:41 AM
As a preview to my feature story for the February 2012 issue of Investment Advisor on how advisors can learn to speak their clients’ languages, here are what some of your peers have to say about global investing, taxes, divorce and more. As a follow-on, I’ve included suggestions on how to deal with these differences from my perspective as a psychotherapist and money coach.
Global Investing
“Canada is more of a melting pot; they are more culturally tolerant of differences. Canadians travel all over the world without hesitation. In the U.S., only about a quarter of Americans own a passport; in Canada, it’s well over 60 percent. The Canadian investor will be more of a global investor. Americans tend to have a local bias.”
–Robert Keats, CFP, president of Keats, Connelly & Associates in Phoenix and author of “The Border Guie,” a guide to living, working and investing across the border for Canadians and Americans living in Canada
If you normally focus on U.S.-centric investments, building a reputation for a more global perspective may help you attract clients from other cultures, including but certainly not limited to Canada.–Olivia
Marriage and Divorce
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“In our culture, marriages are viewed in the same perspective as other relationships such as paternal or maternal–i.e., once in a lifetime. It is assumed that people need to adjust and make it work. Ending the relationship isn’t often seen as a solution, while Western societies tend to be more open to that choice.”
–Devang Shah, CFP, a financial planner with Right Returns Financial Planning in Mumbai, India
No doubt you’ve worked with many American clients whose planning process has been dramatically affected by the trauma and ugly repercussions of divorce. Advising Indian clients who are in stable but difficult marriages can present different challenges, such as getting both spouses on board to make decisions. However, our culture’s use of money as “war reparation payments” probably won’t happen in an unhappy marriage between Indians.–Olivia (left)
Life Insurance
“The real frustrating part [of working with Hispanic clients] is that it’s a more passive kind of culture. They don’t like conflict, so they won’t share with you a lot of what’s on their mind. For example, a husband and wife, two kids, you know they need life insurance. You’re there telling them they need a $600,000 policy. [These are] middle or lower middle class clients, probably in their mid- or late 30s. When you talk about life insurance, he’s thinking about ‘el sancho–the guy who will take over my family when I’m gone.’ They’ll focus on the cost [without mentioning el sancho]. But if I bring up el sancho–‘You’re afraid el sancho’s gonna end up with the money!’–then we can laugh and have a real discussion about it. When I say, ‘And I can create a trust for you to avoid el sancho getting the money’; then 100% of the time, we can get them in life insurance.”
–Louis Barajas, CFP, owner of Louis Barajas Wealth Planning, Santa Fe Springs, Calif.
Barajas’ comment reminds me that it’s risky for an advisor who comes from outside the client culture to claim intimacy with it. In this case, it would be a bad idea for a non-Hispanic advisor to affect familiarity with the culture by tossing around terms like “el sancho.” Instead, you might talk to clients’ fears by saying something like “I imagine you might be concerned about leaving money to help your wife and kids. I can help you make sure that your money goes to them alone.” This may win you a loyal client who appreciates that you’ve got his back.–Olivia
Tax Planning
“The overlying issue [with wealthy Mexican clients] is that they have a big blind spot about taxes. For example, Mexico doesn’t have an estate tax, so Mexican clients are very surprised when I bring up planning for estate taxes. Also, Mexico, like most countries in the world, taxes residents [the same] regardless of where they come from. In the U.S., tax [varies] based on citizenship and residence status, which most Mexicans aren’t aware of. Resident aliens don’t have an unlimited marital deduction, while American citizens do.
“Also, resident aliens have limits to how much they can give to one another, unlike in Mexico. Let’s say there’s a wealthy couple who are U.S. residents. They have everything in the husband’s name, but then they buy a condo worth $750,000 and put it in their joint names. That may create a tax issue for them, because it’s considered a gift to her.
“Another issue is that in Mexico, there’s no tax on gifts to descendants or ascendants. So if I can talk to Mexicans before they become U.S. residents, we can help them transfer assets as gifts to their children before they come here and lower their taxes tremendously.”
–Raoul Rodriguez Walters, CFP, president of Mexico Advisor, Portland, Ore.
When you educate yourself on tax law differences and their implications, you will be able to not only advise and inform your clients more knowledgeably, but also help persuade them that you have their best interests at heart.–Olivia
“Canadians like to pay down their debt, and paying off the mortgage is ‘the thing to do.’ There are very few tax-free bonds or tax-deferred annuities in Canada. That’s why it’s better for them to pay down their mortgages. When they come to the U.S., because mortgages are tax-deductible in the States, they want to have one to be able to deduct it.
“They love the lower tax rate here. There are many opportunities in the U.S. for different kinds of tax-free or tax-deferred investments, so they can live off their investment portfolio with a higher level of after-tax income.
“The big thing for an American financial planner who’s dealing with a Canadian client in the U.S. is to understand differences on the tax side. Investments are very similar, but you need to know Canadian retirement plans. Every Canadian has the equivalent of an IRA called a Registered Retirement Savings Plan. When a Canadian client moves to the States, advisors need to understand what to do with these plans, and do things correctly and in the right order, or they’ll create both Canadian and American tax problems.”
–Robert Keats (above), CFP, president of Keats, Connelly & Associates, Phoenix
“Canadians are much better savers than Americans; they’ve been saving at a higher rate forever. Right now, they’re investing their money in U.S. real estate. Realtors say, ‘Thirty to 50 percent of my buyers are Canadian, and they all pay cash!’ We have [Canadian] clients we do tax work for who have bought a hundred homes here [in the U.S.] and paid cash for them all. They’ve helped save the real estate markets in Arizona and Florida.
“What I find fascinating about the U.S. is that once you’re there, many [people] are Americans first and something else second. For example, in America someone from Italy becomes an Italian-American, but American first, and is more likely to wave the American flag. I’m jealous of that because I think it’s a wonderful attribute. My son-in-law is Canadian-born, but from an Italian family. His parents came to Canada when they were very young. And he considers himself Italian.”