World of opportunity

Australia has long been known as the world’s largest exporter of beef, but we are increasingly being globally recognised for our brains. According to research by Austrade, our services sector, including fields as diverse as engineering, IT, education and marketing, makes up more than 20 per cent of Australia’s export earnings, and is now a significant source of jobs in regional areas.

But despite the increasing demand for our intellectual property, it is only in recent years that the financial planning profession has looked to export its expertise offshore. With around 50,000 Australian expatriates currently living and working in Hong Kong, many who would easily fit into that much-targeted ‘high-net-worth’ category, it’s probably a good place to start. In fact, a few planning groups have already made the foray across the seas, including the National Australia Bank, ING and Ipac.

But for individual practices, it can be a much more daunting, and expensive, exercise to try your hand in an offshore market. However, a new study program, launched by David Thomas of Think Global Consulting, now gives financial planners the opportunity to spend a week in Hong Kong and gain a better understanding of how to tap into this potentially lucrative market.

Field studies

Thomas explains his rationale for setting up the program: “I used to be a financial planner in Hong Kong. But I came here really because I couldn’t understand why there weren’t more Australian financial planners operating in Asia. And I was determined to do something about that.”

He adds: “It’s taken me a bit of time, because the market has been very strong here for the last 10 years, so it was difficult to get people thinking about going offshore. But that has now started to change — mainly because I think the market is going to get tougher, and the more successful planners are starting to wonder where their future high-net-worth clients are going to come from.”

The study tour, the first of which took place in May, allows delegates to meet up with product providers, planners working in Hong Kong, the Australian Chamber of Commerce based in the city, and other associations, as well their target market — Australian expats. But Thomas adds: “I am not expecting anyone to do any business, because they won’t have a Hong Kong licence. We are not going there with the intention of pitching business in any way.”

For those planners interested in developing the idea further, Thomas plans to run an educational week in Hong Kong later this year, which will involve running educational seminars aimed at the Australian expat community.

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Mark O’Toole, practice principal at Godfrey Pembroke, already has some expatriate clients, but hopes to create “a regular stream of referrals back to Australia”. He explains: “We just want to increase the number of expats that we can provide advice to — in particular, the ones who at some point in the future will be returning to Australia. I think there is a bit of anecdotal evidence to show that Australians like to retire back in Australia.”

George Gulczynski, principal consultant at the Berkley Group, agrees: “One of the startling revelations we picked up by talking to all nature of expats over there [in Hong Kong] is that only about 40 per cent of English expats go back to the UK. The rest go to the south of France, Spain, Florida in the US, and some come to Australia.

“Whereas in stark contract, most Australians will come back to Australia.”

Gulczynski says the study tour gave him a good opportunity to talk to the players in the Hong Kong market — both on the supply and demand side. “We had a function with about 130 people, mostly Australians, and just talking to them gave you an idea of what they were looking for.”

However, Gulczynski says he is yet to make concrete plans to target this market. “I’m still not convinced, but I was encouraged by some of the institutions and associations there. There was enough feedback from that first visit to suggest it may be worthwhile to pursue a little bit further until such time that you get a signal that it’s too hard. And I think it is a bit heroic on our part to think that we can export our skills offshore and find a ready market.”

He adds: “It all requires time, effort and commitment, and nothing happens overnight.”

Benefits for expats

Many expatriate Australians still suffer from the misconception that as non-residents, they are unable to invest in the Australian market, mainly for tax reasons. Thomas says: “Most of the Australian products will accept non-residents now. I would be arguing that most Australians, unless they are going to live overseas forever, should be building up their assets here, and taking advantage of their non-resident status from a tax point of view.”

Gulczynski adds: “Australia is a high tax country. You and I know it because we live in it. However, as an expat under certain circumstances, the heavy tax regime can work for you because you’re a non-resident for tax purposes.”

Using Hong Kong financial planners over Australian advisers will also have an impact on the wallet of expats. Gulczynski explains: “It is really a commission agent market, where basically what they are selling are insurance policies based in the Isle of Man, set up for the tax advantage of English expats going back home to UK tax laws.

“So it doesn’t suit the Americans, or the Australians. And that realisation is slowly dawning.”

O’Toole also believes Australian expats could do worse than use advisers based here. “Despite the recent media comments, it’s world best practice here. If you compare the quality and standards of advice in Australia to other parts of the world, whether it’s Asia, the US or UK, our standards are extremely high.”

New frontiers

Austrade research shows most Australian companies export to the Asia-Pacific, with that region accounting for 14 out of 20 of our top exporter destinations. But Thomas believes there is an opportunity for financial planning expertise to be shipped to various parts of the globe. “The demand for financial advice, wealth management, and holistic planning is on the increase everywhere.

“And I think that Australia stands pretty well alongside the UK and the US as one of the more sophisticated financial planning markets in the world. We have to get better at exporting that elsewhere,” he says.

Gulczynski concurs: “Australia is doing a very good job in exporting its expertise. Financial planning is an expertise, and we are ahead of some markets and can offer a superior service.”

Mandated superannuation asset growth is currently encouraging overseas players to set up shop in Australia, so Thomas believes Australian planners also need to look further afield for business. He adds: “If we don’t get better at exporting our services then other countries will come in and start competing with us here — we are already seeing that with the launch of Virgin Super. We have to get better at the way we position our industry worldwide, particularly in Asia, which is on our doorstop.”