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OMI targets shunned US expat segment

The firm aims to distribute a US expatriate-focused "wrapped international pension" product through private banks and family offices.

US citizens living and working abroad face declining choices of investment products for retirement goals, said Mark Christal, Old Mutual International’s head of Northeast Asia and CEO of the Hong Kong office.

The main reason is the relative complexity of the US tax system, which, among other things, limits expat access to retirement saving schemes such as the 401k and imposes capital gains on its citizens living abroad.

To go after this segment, the firm said it has developed a Malta-domiciled product, a collection of assets in an international pension wrapper. It is open architecture and can hold a number of assets including cash, equities, ETFs, direct funds and corporate bonds, which are tax efficient, according to OMI.

The targets for distribution are private banks, family offices and independent financial advisors.

“This is focused on expats and internationally-mobile expats, from affluent to high net worth and some ultra high net worth,” Christal told FSA. “It’s not targeting retail-type business.”

Banks vs Americans

International pensions are not new, but the firm believes its wrapped product is the first to focus specifically on tax liabilities faced by US expats.

Few US clients in Hong Kong have an advisor relationship, added Ian Kloss, the firm’s area sales manager in Hong Kong, who is a US citizen in a UK company.

“Distribution in Hong Kong is dominated by UK advisors. British advisors know the UK tax impact on British expats, but not many are comfortable navigating the US tax system, which is an entirely different regime.”

Hong Kong is home to an estimated 85,000 US expatriates, Kloss said, citing US State Department figures. However, the firm’s wrapped product is aimed at US expats worldwide. Non-military US expats globally number 8.7 million.

The Foreign Account Tax Compliance Act (FATCA) has also had a negative impact on US expats, even though the law is aimed at financial institutions. The new regulations have changed the way foreign banks deal with US citizens, Kloss said.

Some banks may reduce or even decline wealth management services to US passport holders due to the extra administrative work required to comply with FATCA.

“Banks push away US nationals because they don’t want to deal with them. Financial institutions may decide it is easier and more cost efficient to get rid of US clients than it is to declare them and do the paperwork,” he said.

Part of the Mark Allen Group.