Are you an overwhelmed CFO of your family, juggling the financial responsibilities of loved ones across borders? If so, you’re not alone. In my years as a financial planner, I’ve encountered many individuals exhausted by the complexities of managing investments for family members, especially when it involves cross-border regulations.
The challenge often begins when family members move abroad (hooray for aliya!) only to discover their U.S. brokerage firm no longer wishes to maintain their account due to an overseas address. This common scenario underscores the necessity for an understanding of cross-border investment nuances and working only with companies that specialize in cross-border clients.
Understanding the Cross-Border Investment Landscape
Cross-border investing isn’t just about picking a brokerage that accepts international clients. It’s about understanding the bigger picture, including how currency changes can affect your money and the tricky tax rules for Americans investing from overseas.
Moreover, the U.S. government’s classification of foreign mutual funds as Passive Foreign Investment Companies (PFICs) introduces a punitive tax treatment that can challenge investors to find appropriate diversified investments in their new country that don’t cause overwhelming tax burdens. If you’re an American who owns Israeli mutual funds, check with your financial professionals and accountants right away.
Action Steps for Cross-Border Investors
Here are some actionable steps to enhance a cross-border investment strategy:
- Prioritize Diversification: Beyond traditional asset diversification, consider currency diversification. Balancing investments in different currencies can mitigate risks associated with currency fluctuations. Also, by virtue of the fact that your home, pension savings, and hopefully emergency savings are invested in Israel, you already have a certain amount of diversification in your portfolio. Learn more about currency diversification by scanning this code.
- Get Professional Advice: Consult with licensed financial advisors and tax professionals who specialize in cross-border finances. Their expertise can prevent costly mistakes and ensure your investments align with your financial goals.
- Educate Yourself: Financial literacy is key. While there is no need for you to become an investment expert, every decision-maker should understand the basics of investing, the importance of diversification, and the implications of cross-border taxation.
If you want guidance walking through the intricacies of cross-border investing, my team specializes in helping families like yours navigate these challenges. Schedule a free Cross-Border Financial Evaluation where we’ll explore how we can assist you.
Douglas Goldstein, CFP®️ is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published May 8, 2024.