An Overview : Financial Planning Process and Plan
It is common to think of financial planning as largely being concerned with investment selection and management, but that is just one part of the process. Generally, a planner will follow something like the following process and it continues to apply in the case of expatriates:
- Collect your financial data
- Identify your long term aspirations and lifestyle goals
- Pinpoint where you are now in relation to those goals and where you want to be
- Agree a financial plan
- Implement your financial plan, and
- Undertake a periodic review of your financial plan to ensure it stays up-to-date and relevant to the current economic climate and your changing lifestyle.
The Financial Plan should normally include/consider the following, with expatriation having a major impact on most of the planning elements:
Long term aspirations and lifestyle goals
These are intrinsic to a successful plan and need to be clearly identified by the planner and client together. These are often more complicated with expatriates who often contemplate living in more than one country on retirement, or who have family members based in different parts of the world. There is also often a desire to keep "options open" in terms of where an individual might eventually retire, or indeed work.
The plan will be driven by "assumptions" such as rates of return, inflation, taxation rates, retirement age(s) and life expectancy. When you begin deal with retirement and taxation regimes in more than one country, and try to optimise opportunities and defer costs, then the exercise becomes appreciably more complicated.
Tax issues will normally form an intrinsic part of any plan - both from the perspective of tax minimisation and as driver for the type of investment product that might be chosen. Planning on the basis of multiple, often overlapping, tax and fiscal regimes is the norm with expatriates -even for those returning to Australia.
Superannuation and Retirement Planning
Lifestyle targets need a certain level of income to support them - superannuation and retirement planning considers how that income can be generated with savings and investments put in place to achieve those goals. These need to be integrated with the social security and tax regimes of the eventual country(ies) of retirement or, if the retirement destination is unclear, designed on a basis that maintains flexibility whilst impacting to the smallest possible degree on tax optimisation.
An expatriate lifestyle introduces a greater level of uncertainty and complexity into financial planning than is normally the case. That is not an excuse for expatriates not to be proactive about financial planning, indeed it is the reason why expatriates perhaps more than any other section of the wider community need to actively embrace financial planning if they are to extract full value from the opportunities expatriation provides.