During the state capture era, there was understandably a noticeable increase in the number of South Africans leaving the country. Fortunately, with most of our clients either approaching or already in retirement, and either not willing or able to leave, the impact on our business was far less significant than it was for many firms with a younger client base.
Nonetheless, we received (and still do) a significant number of queries from clients and their children about the process, with many also being settlors or beneficiaries of South African and/or offshore trusts. Most of our clients who have left South Africa settled in the UK, and although they wanted to retain the relationship with us, we knew that this would not have been in their best interests. In the past, we reluctantly referred them to another independent UK financial planning firm to ensure that they received proper advice in the UK.
This got us thinking about the possibility of starting up our own UK financial planning business. After doing the research, it was clear that the regulatory environment and related costs of setting up in the UK were prohibitive. Seeking an alternative, we have spent the last few years building a relationship with an established UK independent advice firm like our own.
As our goal was to retain our existing client relationships, we started the long process of registering one of our advisors to give advice in the UK, who will soon be working under the licence of the UK firm. After completing the necessary qualifications and UK CFP™ accreditation, undergoing the obligatory period of supervision and meeting all the compliance and professional indemnity cover requirements in the UK, this process is almost complete. We have started growing our UK client base, and while there are ongoing challenges, we are grateful for this opportunity.
We have learnt many valuable lessons, but one of the most important of these has been our realisation that there are South African advisors who are advising UK tax residents without the authorisation to do so. They are potentially putting their clients at risk.
There are many cases of South Africans having moved to the UK without receiving the correct advice regarding their tax residency in either jurisdiction. Most have simply retained the investments they held while living in South Africa, with no understanding of the implications. The funds, investment vehicles and structures which are appropriate for South African tax residents are not suitable for UK tax residents and can have punitive tax consequences in the UK. Where a South African or offshore trust is involved, this adds further complexity.
Clients in the UK working with an authorised UK advisor do so with the protection offered by the UK Financial Conduct Authority (FCA), Ombud and Financial Services Compensation Scheme. They will have no recourse to the South African regulatory authorities for bad advice given to them by an advisor in South Africa on their UK planning.
UK tax legislation is complex (and is changing constantly), and the rules around UK tax residency are stringent. We also work closely with a small UK tax firm which specialises in cross-border planning, while we do the necessary planning to mitigate the adverse tax and financial consequences of leaving South Africa. This may involve bringing in specialists in South Africa for complex structures or entities.
Local financial planners should not continue giving advice to their UK clients unless they are authorised to do so by the FCA. UK residents need proper lifestyle financial planning advice in their new jurisdiction – retirement and tax planning, risk cover, inheritance tax planning, tax-efficient savings and investment vehicles all require extensive knowledge of the UK environment, as well as access to UK cashflow modelling software and paraplanner support.
A two-dimensional approach has resulted in peace of mind and better financial outcomes for our clients in the UK, from the pre-planning stage to implementing the best advice. It has also proved invaluable for our South African clients with family in the UK.
