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Expats are often rightfully excited when they get a new assignment. But there’s also the challenge of making the most of that good salary and ensuring that some of it is not lost to financial missteps. After all, assignees can find the value of their paycheck plummeting if there’s a drastic currency fluctuation in one of the countries where they’re based. And, without the proper guidance, an expat can risk inadvertently running afoul of tax laws.
Meanwhile, you as a relocation professional aren’t a financial adviser. So, you want to steer your assignees to the experts who can help them. When you do that, some considerations are in order.
Financial education is paramount.
You may not have the time or the background to explain to assignees the intricacies of currency fluctuations and tax compliance, but the financial professionals with whom you partner should. But just because an expat is face to face with a teller doesn’t mean he or she has been handed off to the proper professional.
To avoid doing your assignee a disservice, you’ll need to vet the bank and make sure it is experienced in working with global relocations. The mobility manager should, at the very least, find a bank that offers advice to expats.
The financial institution needs to be easy for expats to work with.
There are a lot of reasons for this. For one, if the bank doesn’t have any or many expats, it probably isn’t very expat-friendly, and it is likely going to be more expensive to keep money in its checking accounts. If it isn’t a bank that is familiar with cross-border international banking, and the employee is being hit with onerous fees every time currency is converted or there’s a transfer of money from one country to another, chances are the expat is going to go on a complaining spree instead of a preferred shopping spree.
The bank also should offer tools that are easy for the expat to use. Money is complicated enough in your own language and country. You shouldn’t feel like a stranger in a strange land at your own bank.
Ideally, look for financial institutions that strike “the right balance between the convenience of self-service and a customer-centric, positive experience that gives consumers the help and connectivity to the unique products, services, and answers to meet their needs,” says Rebecca Macieira-Kaufmann, head of the International Personal Bank U.S. (IPB U.S.), a Citibank Business.
Make sure expats are given good advice regarding retirement.
The longer an employee remains an expat, and especially if there’s a lot of hopscotching around the world, retirement planning can be even more complicated than if he or she had stayed in one place.
Every country is different, though, in how it handles giving out state pensions to people who have retired elsewhere. A retiree might find that he or she will receive his or her own contributions to the pensions, but not the matching revenue that was put into the pension fund. As an expat, you’d want to know this sort of thing before you start contributing money to a state pension, rather than years after.
“Giving expats access to multiple tools and accounts in a relatively stable currency through which to build long-term savings and wealth for their retirement is critical, as is the proper tax advice on cross-border retirement or pension account activities and requirements,” Macieria-Kaufmann says.
The financial experts you connect with your assignee should include tax professionals.
David Oltman, CRP, is the chief compliance officer at Ineo LLC, a company that offers global mobility management software, outsourced mobility financial management, and specialized mobility tax services. He is based out of Wilton, Connecticut.
Oltman offers an example of how even “simple” tax cases can become complex. “Let’s say you hire a 21-year-old kid in Florida. You may not need to give him any support if he’s from Florida, but what if he just relocated from New York City?”
In that case, Oltman says, the new hire may have to pay New York state and city taxes. And what if the 21-year-old lived in New York City but worked in New Jersey? And what if that person spent part of the year studying abroad? There are more taxes to report.
“Employers need to understand compliance,” Oltman says. “Expatriates will have tax filing requirements that they may never have experienced.”
Link mobile employees with professionals who will help them build wealth.
Building wealth is the dream, and it’s a win-win for everyone.
So, if at all possible, connect employees with people who can help with banking, investing, and taxes, since often these segments are intermixed.
Hopefully, whoever is working with your expats will also give helpful wealth-building advice. For instance—and maybe this is a no-brainer— Nathalie Goldstein, co-founder and CEO of MyExpatTaxes.com in Vienna often advises expats to rent out their home-country residence while abroad and then, if possible, invest that income.
“A lot of it comes down to what is the spirit of the company’s philosophy,” Oltman says. “They’ll often offer it to senior executives who are relocated, but average people need it, too.”
The importance of good advice.
An assignment to a new part of the world is an exciting adventure, a tremendous opportunity for career-building, and an opportunity to build wealth—or risk losing it. So, if you want your assignees to someday return home in better financial shape than when they left, you’ll want to steer them to the best resources to ensure that happens.
Geoff Williams is an Ohio-based freelance writer with expat experience. He can be reached via mobility@theYGSgroup.com.
This article is excerpted from the October issue of Mobility magazine.
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