Working with clients who have no home base

Digital nomads present a challenge and an opportunity for financial professionals

Not long ago a person’s job determined where they lived. If you worked in an office, your employer told you where and when to show up, and that was that. And those operating their own businesses located themselves where they could easily visit their primary customers and suppliers.

Today, of course, we’ve changed how we think about work. High-speed internet connections and powerful microprocessors have made it possible to have productive employee teams based remotely or on hybrid schedules where they meet in the office occasionally. It’s also allowed people to maintain a career from the proverbial beach chair in Hawaii or virtually anywhere in the world that has Wi-Fi. Many workers are taking advantage of this new advancement.

Referred to as digital nomads, these globetrotting workers set up shop wherever they can open a laptop and connect. Many U.S. cities, such as Rochester, New York, Montpelier, Vermont, and Newton, Iowa, that have problems retaining residents and industry, have picked up on this trend and offer cash stipends and other incentives to domestic nomads looking for inexpensive homes and a quieter lifestyle.

But perhaps the most interesting group of nomads are those who have moved past U.S. borders. There are around 35 million digital nomads around the world and more than 50% of them are American. And of those American expatriate nomads, 44% are part of the millennial generation, a demographic that’s proven difficult for financial professionals to reach.

Many countries offer digital nomad visas to expatriates, providing a temporary residency permit to people working remotely that can be extended for several years. However, many make the move using a simple tourist visa, which can be easier to obtain.

Digital nomads present a challenge for financial professionals since not only are they five, seven, 12, or more time zones away, which makes meetings difficult, but expatriates also face unique issues with regard to investments, insurance, and taxation.

Living the dream

Moving abroad requires a wide range of considerations, from the logistical to the psychological. Of paramount importance, however, is preparing for the financial implications.

New digital nomads have to consider the cost of living in their new home, as well as their tax liabilities there and in their home country. In addition, they need to think about retirement planning, whether they see themselves making a permanent move or plan to return to the U.S., and even calculating college costs for children.

Figuring out the finances of expatriate life hasn’t been too hard for Samuel Eisenberg, a New York City native, who is currently based in Budapest, Hungary, where he operates a business designing pitch decks for presentations and also consults with other companies. His journey as a digital nomad began in Israel where he married and started a family before migrating to Budapest so his wife could attend medical school.

“I haven’t used a financial planner, but I’ve done a lot of research on my own and consulted with my accountant,” says Eisenberg. “Overall, living in Hungary has been cheaper than in the U.S. with a higher standard of living.”

Having status with three countries has presented some tax challenges for Eisenberg. He remains a citizen of the U.S. and a resident of Israel and is working out his possible tax liabilities while living in Hungary. One of the biggest issues for him is managing the fees charged with changing currencies.

Veronica Hanson, who runs an online coaching business and manages her Airbnb properties while her husband works remotely as an auditor, has lived outside the U.S. since late 2020 in locations that range from the Dominican Republic to Cairo, Bangkok, and, currently, Tokyo. Hanson has also found her family’s financial needs shifted when they moved abroad.

“Our healthcare costs dropped by 90%, and we’ve saved a great deal of money by not buying, maintaining, or insuring vehicles. Our two children [ages 9 and 11] do work for our business, and the money we pay them funds their own Roth IRAs.”

Hanson and her family became digital nomads rather quickly. “It was two months from the time we made the decision to do this to making the actual move,” she says. “If given the choice between leaving later and being more prepared or leaving earlier and needing to downgrade my lifestyle, there is no doubt that I should have just left earlier. Life is so much less stressful abroad and my family is happier and safer as a result.”

Where do financial professionals fit in?

Finding nomad clients can be difficult since they live abroad and may not be aware of the services a financial professional can provide. Positioning yourself as someone who can help them and those looking into moving ensure their financial stability is probably a good beginning. Participation in forums of this nature is generally not allowed by certain broker-dealers. Additionally there are insurance/securities licensing that are tied to the state of the Agent and where the client is located. Reddit and Facebook can give you a sense of nomad needs and wishes.

How should you approach your first meeting with that client living (or planning to live) abroad? “The most important thing to know, of course, is where they’re planning to go,” says Hossein Salehi, Ph.D., CFP® and deputy director of the financial planning program at California Lutheran University in Thousand Oaks, California.

“One needs to know how that particular country taxes income earned abroad. There should also be an understanding of U.S. foreign tax credits and double-taxation treaties with other countries,” Salehi says.

Additionally, educating clients about risk management is critical since living in a foreign country may require additional strategies to protect both financial and non-financial assets.

It can be difficult for any client to project what they want their future to look like. This can be even more complicated for digital nomads who may be thinking of becoming a “digital immigrant” in their new home if they like it enough or their life circumstances change. They could also want to keep their options open to repatriate to the U.S. and need advice on how they can do that and maintain their standard of living.

“Many people are attracted to the adventurous lifestyle of working abroad, but they may not be thinking ahead to the financial complications that can bring,” says Salehi. “As with any client, it’s productive to learn how they’re thinking now about life goals such as buying property and providing for their family and how they see their retirement, and then help them develop financial goals to meet those plans.”

Since many people begin the nomad lifestyle to take advantage of a lower cost of living and make their salary and/or profits go farther, and the common advice to clients is one that a financial professional might tell anyone: save more. Putting money into reserves as opposed to increasing your everyday budget helps overcome unplanned expenses that can radically change your digital nomad plans.

The Digital Nomad: A Snapshot

• How many are there: 15.5 million in 2021, up from 4.8 million in 2018

• Where are the from: 51% are American

• Where do they work: 46% are self-employed; a large percentage work in software and web development as well as marketing; many are startup founders

• How old are they: 47% are between 30 and 40 while 35% are between 40 and 60

• Where are they heading: Top 10 Countries Are:

  1. Mexico

  2. Thailand

  3. Indonesia

  4. Colombia

  5. Vietnam

  6. Portugal

  7. Turkey

  8. Costa Rica

  9. Brazil

  10. Philippines

• Why do they return home: Missing family and friends