David Kuenzi addresses the taxing issues facing US-linked clients

International Investment’s Gary Robinson speaks to Thun Financial Advisors’ founding partner David Kuenzi about his specialism – looking after American expatriates  – and the sometimes harsh truths he’s learned about what it’s like to be an ex-pat Yank  these days, and how the US tracks down and taxes its expats. 

Understanding the complexities of the US tax system, particularly as it relates to investments and savings, is a tall order in itself. But when you factor in cross-border complications  – including income and investments transacted in different jurisdictions – then the complexities are multiplied.

Welcome to the world of David Kuenzi, pictured, and his team of advisers at Thun Financial. Dealing with US expatriates abroad as well as UK and other nationalities living in the US, as they do, they do battle daily in a demanding, post-Foreign Account Tax Compliance Act (FATCA) universe.

“Our firm is dedicated to working with Americans around the world, but as things have developed and grown, we have also started working extensively with non-Americans outside the US, And non-Americans inside the US,” says Kuenzi.

“We have many US-based UK expats [as clients]. We are working a lot of times with people who have worked in the US and are returning to the UK. They have accumulated assets in the US over, say, 20 years of working.

“Maybe they’ve acquired US citizenship, which is very common, or permanent US residence, which is not that easy to get. Then they have to deal with the [FATCA] complexity that is unique to Americans in the world.”

As Kuenzi reveals, even if you have spent, say, 20 years (or even as few as eight years out of 15) in the US and not acquired US citizenship  – but you have acquired permanent residency while across the pond, and then moved back to the UK  – then, just like a US-born, US-passport carrying citizen, you may still remain subject to US taxation for the rest of your life.

“In general, the country of residence has first rights to taxation,” Kuenzi continues.

“The US will always tax you, but will recognise your [foreign tax] obligations, and often allow you to have a credit against US taxes.

“Generally you can avoid double taxation. But that is a general statement.

“In many, many cases, US residents can end up paying tax twice.”

Kuenzi regularly shares his expertise on such matters with many of the 8.7 million Americans who the US State Department estimates currently live overseas through regular columns on the relatively new Wall Street Journal website for expats, WSJExpat. He also is often interviewed by, and contributes content to, the websites of such other online media organisations as CNBC, NPR, US News & World Report, The Economist and Bloomberg.

Crossing borders

Kuenzi’s interest in such issues as cross-border tax complications started some years ago, when, early on in his career, he worked on both sides of The Pond over a 15-year period, traveling back and forth between London and New York as well as around Europe.

He says it was when he was looking at returning to the US from London, where he had been living, that he was shocked to discover the lack of knowledge on offer from the industry when he sought advice about the tax implications of his own savings and investments.

During this time, he had been working for such companies as Bank of Austria, Chase Manhattan Bank, and Deutsche Bank, handling what he calls traditional European equity sales into the London market.

“Especially when in London, I was working with very sophisticated finance professionals; top-notch investment professionals, fund managers, and securities analysts,” he recalls.

“They were the best in world at investing per se, but ask them whether, if you are an American living in the UK, you should fund a US pension account, and you would get blank stares.

“I asked, ‘can I make an IRA [Individual Retirement Account] contribution in the US or UK?’ Nobody knew the answers.”

Seeking knowledge

Deciding he wanted to get out of the Wall Street “rat race”, Kuenzi decided to target what he saw as an un-tapped market: that consisting of American expatriates who, like him, needed help with their finances while living abroad, and/or looking to return.

“I came back [to the US] in 2001, worked for a couple of European brokers in New York, [and then] quit in 2005,” he says.

Thun Financial opened its doors in 2008.

“We could operate from anywhere in the world, but chose Madison, Wisconsin, as it was where myself and my wife were from. Also, the cost of opening an office there is vastly lower than London or New York.”

Kuenzi says Thun Financial rarely actually looks after clients in the Wisconsin region, as it happens. Only a small number of clients are actually in the US, and the majority of his work is done over the phone, online or, increasingly these days, through Skype.

Yet Kuenzi says he nevertheless is a firm believer in the type of personal service that has underpinned the industry for many years, insisting that it’s “very easy to conduct a traditional adviser client relationship, without having to sit down across the table from them”, which is obviously impossible to do very often when almost all of your clients are in other countries around the world.

Thanks to Skype and other electronic means of communication, Kuenzi says he feels he and his fellow Thun Financial advisers have been able to get to know their clients “quite well”, to the point where it feels is though “we have ‘sat’ in their living room [and] met their kids”, while having “very personal conversations about family issues and their money”.

“We have even got tours of their houses – all via Skype. People actually forget sometimes that they have never physically met us. You definitely could not have done it this way 15 years ago.”

Robo-advice

So what about recent rise of robo-advice? Does he think that the human element is missing in the chats conducted with clients in the way outlined?

“I think for some people and under some circumstances, a robo-adviser can help people, particularly in the way that they invest,” he says.

“A robo-adviser, at least the good ones, are good in the sense that they provide efficient asset allocation models, and focus on keeping fees low, which is very important.

“[They are] good for a younger person in a very uncomplicated tax environment, but when you get into broader, larger issues, long-term planning, and the use of different types of accounts with different tax characteristics, then the robo-adviser simply can’t help make the correct investment decisions effectively.”

               Thun Financial Advisors
Founded: 2008
Assets under advice: US$170m
No. of clients: 270
No. of advisers: 5
No. of employees: 8
No of offices: 1 (Madison, Wisconsin, US)
Regulated by: US Securities & Exchange Commission
Remuneration: Fee only
Website: www.thunfinancial.com

Asked what the most challenging aspect of what he does for his clients, Kuenzi doesn’t hesitate. It is, he says, helping American expats come to terms with the myriad complications that come from the fact of their citizenship, from which shackles they can only be freed if they go through the expensive and time-consuming business of renouncing it, as growing numbers are now seeking to do.

“As an American abroad, your situation is unique, in that you can’t take advice from a local adviser in Munich, [just as] you can’t invest the same way someone in Hong Kong would invest,” he says.

“A young Brit in Hong Kong has basically no tax liability. [Whereas] your American passport follows you around the world for the rest of your life. Everything has to go through the filter of US taxation.

“It is not just income. In the age of FATCA, however you managed your affairs in the past, it has now completely changed.”

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