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Tax
International Assignees Now Need Financial Planning that Goes the Extra Mile
by Olive Tan and BJ Ooi, KPMG Tax Services, Singapore
The competition for global talent has waned little even in the face of a global economic downturn. Multinational companies require top talent to contribute to the overriding business objective of increasing shareholder value. As a result, top talent, especially senior management, is sometimes caught in the so-called by-product of globalisation, i.e., the mobility of human capital. As they are moved from one country to another, there are inevitably going to be employees who could be citizens of one country, permanent residents of another, and working in a third country, with assets and sources of income potentially located in all three countries. One attribute of these highly-talented and mobile individuals is that they are managing personal assets and financial portfolios that cross countries.
Human resource (HR) professionals are doing their best to keep up and successfully meet their business objectives while at the same time serve the complex needs of their international assignees. However, one area that often gets overlooked is the assignee's financial management and planning needs.
This article looks at how international assignees can deal with their personal financial planning issues, and the assistance their employers can offer.
Personal Financial Planning
It's best to begin with a basic discussion of personal financial planning. Personal financial planning is a process that begins when an individual identifies his or her financial and other "life" priorities and goals and works towards them. The financial planning process has five basic steps:
- Set priorities and establish goals.
- Develop financial strategies and plans to achieve goals.
- Implement plans and strategies.
- Monitor progress.
- Evaluate results and revise plan if necessary.
Financial planning is, for the most part, an important key to assuring individuals achieve financial security. It helps an individual to define his or her financial goals, both short and long-term, and develop appropriate strategies to achieve them. A financial plan should include a review of the individual's net worth, property and other assets, liabilities, cash flow, investments, retirement planning, estate planning, tax planning and insurance needs, and all relevant financial strategies.
Profile of a Modern International Assignee
Today's international assignee is a valued employee who may have worked on assignments in several different countries. He or she is very mobile geographically and is likely to own assets and other financial interests spread across various jurisdictions.
In Asia, for instance, it is not unusual for a Malaysian citizen to obtain Singapore permanent residency while having bank accounts and real properties in several countries. His or her investment strategies tend to be cross border in order to reduce country-specific risks and also to seize investment opportunities wherever they occur. Such an assignee is likely to be more financially-savvy because he or she is more educated and informed. But, for the assignee, the rigors of relocation, cultural adjustment, and job performance may mean that difficulties crop up concerning the selection of appropriate investments and the effective management of his or her financial nest egg.
Financial Challenges Faced by the International Assignee
Given the relatively free movement of capital, the ups and downs of domestic (and global) economies, and changing governments, today's international assignee faces fluctuating currencies and equities in national, regional, and global markets, changing interest rates, and unpredictable economic and business environments. Adding to these challenges is the increasing complexity of investment products, insurance products, tax laws, and compensation and benefits programs.
In considering retirement, risk management, a child's education, taxation, and estate planning, for instance, issues arise that are cross border in nature since the international assignee's investment and personal profile, in many cases, is not restricted to a single jurisdiction. For example, if an assignee has assets in multiple jurisdictions, his or her estate may have to address cross-border estate issues if he or she has not arranged an appropriate property structure. Furthermore, the assignee will be confronted with a difficult maze of different laws, regulations, practices, treaties, and conventions.
Many international assignees are becoming increasingly concerned about wealth preservation over investment performance because in recent years they are likely to have sustained significant losses in their financial investment portfolios and real estate holdings. Some assignees with investments may not be properly served by advisers who tend to be too product-oriented or service-specific. Consequently, the planning may become unbalanced and incomplete. Furthermore, the financial planning offered by many consultants can be too country-specific to adequately meet the needs of today's international assignee from both the international and domestic perspectives.
Conclusion
International assignees today are impacted by events and circumstances, practices and laws in multiple jurisdictions. The assignee may be a citizen of one country, a permanent resident of another, and working in yet a third country, and, in addition, have personal assets spread across all three countries (or more). Therefore, this group of assignees requires "holistic" financial planning solutions — country-specific financial planning, which is conventional, as well as planning that integrates cross-border variables. Ultimately, experienced financial advisers, who are globally connected, will best serve and understand the personal financial planning needs of international assignees.
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