Reaching out to the Aussie diaspora: Part 2 – products, services

Although many advisers have begun moving away from being glorified product churners in recent years, the business of selling investment products and insurance remains a key component of most advisory and wealth management business models. 

Yet until recently, as reported here yesterday, there were almost no products or services aimed specifically at Aussie expats.

This, though, is beginning to change.

Last year, Friends Provident International, the Isle of Man-based division of UK-based Aviva, launched a proposition specifically aimed at Australian customers and their advisers, to help them with their financial planning. In addition to a range of products for expat Aussies, it helps both the expats and their advisers with support materials, many of which may be accessed via a portal on the website.

But as a general rule, advisers who specialise in looking after expat Aussies say that it is difficult to find home-grown products suitable for their expat Aussie clients, owing to the fact that, back in Australia, dealer groups owned by the big four retail banks as well as AMP and Macquarie account for around 80% of the domestic financial advice market, and none of these entities felt the need or desire to expand their range beyond the country’s borders – at least until now.

Jarrad Brown, senior financial consultant with the Australia Expatriate Group, is among those who say change is at last in the air.

Brown’s specialty is advising Australian expats in Singapore, a category he himself falls into. And he says Australian product providers – most notably Australia’s most internationally-minded financial services company, Macquarie – are slowly recognising that the Australian expat market is a substantial one.

“Macquarie are beginning to accept offshore clients for their insurance products – so death, trauma, TPD cover,” says Brown.

“Typically they’ve put repatriation clauses around those insurance policies. But they are slowly widening those clauses, as they recognise just how much people have been missing out on.”

He says that a couple of other life companies are beginning to widen their cover, but “nothing mainstream”.

So, in lieu of an adequate range of specifically designed Australian products, Brown says he often has not choice but to advise his clients to invest in those designed for offshore investors of other nationalities, such as Britons.

“Typically the most tax efficient retirement vehicle for Australians is superannuation,” he says.

“So for the majority of my clients who are offshore, I will typically use a flexible investment vehicle that allows them to build a diversified investment portfolio across a multitude of currencies and asset classes,  but which also allows them to roll those funds into a compliant superannuation fund, if and when they do go back to Australia.”

Offshore bonds from product providers based in the Isle of Man or Malta often fit the bill, he says. But there’s a slight catch.

Under Australian rules, if you hold an onshore bond for more than 10 years, you can draw down its contents tax free. However, since 2012, the Australian Tax Office has had no rules at all on how an offshore bond should be treated.

“There is an assumption,” says Brown, “that the offshore bonds may in fact fall under the onshore bond rule, and therefore could be withdrawn after 10 years also for Australian tax residents. But given that the legisation is not concrete for Australian residents, we use them with caution.”

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