Is your financial adviser qualified?
Taking action after your 14-week financial review, part 2. Know your financial environment and your representative.
You've organised your financial matters, now you want to move forward — to fill in the gaps in your financial plan.
Where do you start?
First, understand yourself within the Bermuda financial environment. The financial industry, even in Bermuda, is broad and complicated, so if you are determined to become a self-motivated do-it-yourselfer financial manager for your family, you will be challenged.
Who are you? Where are you going in your career? What is your residence and /or domicile? What are your future mobility plans (ie travel, residence elsewhere)? What kind of an insurance, investment, or planning service should you have? How will it work? What will it do for you? Where should you get it? Should you consult with a financial representative? How did they qualify to give advice? Will it benefit you in the long term?
Why do you need to care? After all, these appear to be basic questions that any resident in Bermuda needs to take financial action, locally.
But, are you sure that your personal situation is clear? Readers have often insisted that I stop writing about US and other country taxes, regulations, stating that “they just want Bermuda financial information”.
Well, readers, I understand your annoyance, but our financial world is in constant change. The old Bermuda model of living off local rents, interest on term deposits, and dividends from the small group of Bermuda public companies was shattered more than a decade ago.
Now, individuals' increased mobility and money flows across borders means that our domestic insurance, investments, retirement pensions, annuities, cash management, estate and trust wishes, business planning, and tax structures may be impacted by continuing upgrades of international financial regulations applied by larger nations and global organisations to citizens in home countries and those living offshore.
Consider these composite scenarios — for further illumination.
1. We are Bermudians who formed a US company that bought a rental condo in the US. Now we find out that we have to pay US taxes on the income and when we sell, plus the management firm thinks that we may have to disclose our Bermuda bank accounts.
2. We've got to do something about our estate planning — with three growing children, all that stress. We just need simple Bermuda wills to take care of things. I'm US / Bermudian, she is French / Bermudian. Here we have three different financial and tax regime jurisdictions, plus common law and civil law estate planning. How will that work?
3. I'm originally from the UK, born there (domicile of origin). Lived here for ages, but go back and forth often to see relatives and may retire there. Need to buy life insurance. Should it be Bermuda insurance or should I just make it easy and get it in the UK?
4. My husband is Bermudian / Canadian. What happens to our Bermuda mutual funds if we emigrate to Canada?
5. My financial friend lives in the United States. I'm a Bermudian, live in Bermuda — just bought a US annuity from him because it pays a great rate, better than rates offered here.
These cases seem easy, don't they? Do you think there just might be some real complications?
Second. Understand the qualifications of the individual finance person you choose to work with.
You may decide that your personal situation is too complicated to go it alone. Then, you should consider working with a financial representative who adheres to fiduciary standards of care; who fully discloses all fees, conflicts of interest, and who will take responsibility to put your interests above his/her own, by ensuring that all products and advice are appropriate for you and your family.
A certificate is not certified. CFA, CPA, CFP, ChFC. These are the top industry designations / licenses, the gold standards of finance professionals, on a global basis. These gold standard financial certifications require arduous, significant study time of 200-300 hours, four-year college / university degrees (US CPAs must have a Master's degree), full-time work experience from one to four years, adherence to ethical and fiduciary standards, incredibly stressful two-day 10-14 hour marathon examinations and 20-40 hours of continuing education on certification, each year.
The average passing rates for all components of these exams in one go for 2014: CFA average 42 per cent, CPA, less than 50 per cent, CFP, 66 per cent, and ChFC — no two-day exam, but college-graded courses.
Find a certified Member
CFA — Chartered Financial Analyst — the global mark. The CFA Institute. Look up our esteemed fellow finance columnists for The Royal Gazette, along with many other Bermuda CFAs.
CPA — US Certified Public Accountant. Research the CPA US state accountancy boards holding the licence, ie New Hampshire or other state.
CPA Canada — Chartered Professional Accountant banner. Research by Province where Canadians in Bermuda came from. http://www.cpaontario.ca/public/apps/MemDirectory/MemDirectory.aspx
May also be listed under Bermuda registry. http://www.cpabermuda.bm/ICAB/APPS/CADirectory/CADirectory.aspx
CFP — Certified Financial Planner professional — United States.
Disclosure. My name is currently listed at CFP US as not certified. In October 2015, I gave up my licence of 15 years due to duplication of skills (and cost) with my US CPA licence and Master of Law in International Taxation and Financial Services. http://www.cfp.net/utility/verify-an-individual-s-cfp-certification-and-background/results/?LastName=myron&Page=1
CFP — Canada. The Financial Planning Standards Council (FPSC), where you will find actual Certified Financial Planner professionals listed, eg Diane Blais, CFP, Barringtons Investments Bermuda. Please also note that Canada has a FPSC Level 1 Certificant category. Level 1 Canadian individuals are not permitted to hold out or advertise that they are CFP professionals because they still have two additional examination levels to pass successfully. http://www.fpsc.ca/find-a-planner-certificant
ChFC — Chartered Financial Consultant. Supported by the American College.
UK licence registration lists are still being researched.
There are now hundreds of varying financial certificates, designations, and the like in the global financial world. Many of these initials (called alphabet soup) can be attained after a few hours of study, or a short weekly course while the individuals may not be subject to regulatory standards board or continuing education.
See full description of more than 100 types of designations on the United States Financial Industry Regulatory Authority (Finra) http://www.finra.org/investors/professional-designations
And unfortunately, there are individuals in the finance world who misrepresent their credentials or have no credentials.
Trust and verify. Always research credentials because if your financial representative is misrepresenting his/her credentials, how can you trust anything else that he / she says.
Is your adviser pumping up his credentials?
Next: part 3, Understanding the financial product.
Readers: write to me if you don't understand or cannot find an answer on an insurance company, investment product, a financial representative, a pension or annuity plan, estate planning problems, real estate / mortgage issues. I will help you find objective independent answers.
Martha Harris Myron CPA PFS JSM Masters of Law: International Tax and Financial Services, appointed to the Professional Tax Advisory Council, American Citizens Abroad. https://americansabroad.org/ Principal: The Pondstraddler Life™ Consultancy providing international financial planning for Bermuda residents, their multinational families and connections. Contact: firstname.lastname@example.org