For individuals and families who live, work, or invest on both sides of the US/Canada border, managing wealth is not as simple asking Artificial Intelligence, performing a Google search, asking a friend, or relying on a single Canadian or US investment advisor or financial planner. Differences in tax systems, retirement account structures, estate laws, and investment regulations make cross-border planning uniquely complex and takes years of unique training and special licencing. It really takes a team of highly specialized individuals.
Without a cross-border specialized team, a common overlooked issue is working with professionals who are only licensed in one country. Being authorized to provide financial and investment advice in both the U.S. and Canada, is not just a regulatory checkbox, it is critical for effective, integrated financial advice.
Here are some cross-border issues that may pop up when you do not have a dual license:
Taxation: Without coordinated planning, dual tax residents can be subject to double taxation or lose out on important tax treaty benefits. Canadian residents who are US citizens often do not follow the Passive Foreign Investment Company (PFIC) rules for non-registered accounts or contribute to a TFSA without realizing U.S. tax consequences. You need to work with a dedicated cross-border wealth advisor who understands the cross-border tax implications..
Retirement Planning: Trying to coordinate withdrawals from both countries during retirement can be difficult. Retirement planning considerations do not usually consider the tax treaties and tax implications from both countries. Retaining a financial planner with cross-border experience is key.
Estate Planning: U.S. and Canadian estate laws differ significantly, especially around probate, taxation, trust planning and inheritance. Understanding estate planning issues in both jurisdictions can help avoid legal or tax complications. It is imperative that your Canadian and U.S. situs assets are coordinated with your cross-border estate planning.
Investment Regulations: Managing accounts like IRAs in the U.S. alongside RRSPs in Canada requires careful alignment to avoid penalties and minimize taxes. A Canadian advisor may attempt to move an IRA across the border into an RRSP, negating any advantages the IRA has over the RRSP from an estate planning perspective and bring in complicated tax implications.
Cross-border clients may find that their non-registered accounts are restricted depending on where they live, which can impact portfolio performance and access.
Only a dually licensed firm has access to and ability to advise on accounts in both Canada and the U.S. This ability is restricted for single licensed individuals due to Canadian Provincial regulators and the U.S. Securities and Exchange Commission.
Compliance Reporting: Compliance with cross-border tax reporting requirements is critical to avoid costly penalties. In the United States, the Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions and US taxpayers to report their foreign assets to the IRS. Similarly, Canadian taxpayers must adhere to reporting obligations under the CRA, including disclosing foreign property exceeding specific thresholds (e.g., the Form T1135 for foreign income verification). Failure to accurately report these holdings or comply with deadlines can result in substantial fines and legal consequences in both jurisdictions.
The Importance of Dual Licensing
Financial professionals who are only licensed in one country may have to refer parts of your financial plan to others as they do not fully understand the ramifications of the cross-border planning issues. This can lead to incomplete or inaccurate advice and misaligned strategies.
These are not hypothetical concerns, they can affect your family’s ability to invest and retire with confidence, and how effectively your estate is preserved according to your legacy aspirations.
In contrast, working with a dual-licensed advisor means:
- You receive consistent advice that integrates both tax and investment considerations from the start.
- When your entire financial picture and investment plan is managed by a single team that includes experienced cross-border tax experts, financial planners, and dually licensed portfolio managers, it reduces the chance of oversights while providing you with a tax efficient wealth accumulation and distribution strategy.
- You are more likely to benefit from tailored, tax-efficient planning strategies that account for the interaction between systems in both countries.
- Finding advice that is compliant across borders, giving you peace of mind and reduces potential legal or financial risk.
Staying Ahead in a Shifting Regulatory Landscape
Laws, taxes, and regulations in both countries continue to evolve and change. Whether it is new disclosure requirements, tax treaty updates, or investment restrictions, staying compliant is not enough, staying on top of your requirements needs proactive monitoring and advice.
Professionals with dual licensing are often better positioned to stay informed about changes from both the U.S. Securities and Exchange Commission (SEC) and Canadian Provincial Securities Regulators. This allows for more responsive and future-focused planning, rather than simply reacting to issues after they arise.
The Value of Unified, Dual-Licensed Service
Many firms advertise cross-border expertise, but few have the regulatory foundation built over years of experience to deliver it seamlessly. Without the proper licensing, clients often encounter fragmented service, inconsistent communication, and unknown risks.
Comprehensive Cross-Border Financial Planning
A knowledgeable cross-border team can help you optimize your tax efficiency, manage distributions effectively, and navigate the complexities of both U.S. and Canadian tax regulations.
That is the Cardinal Point difference: a seamless, sophisticated advisory experience built for those living across borders.
Dual licensing reflects more than our compliance requirements, it demonstrates our commitment to unwavering professional standards, integrity, and transparency in both countries.
Disclosure
This article is for informational purposes only. Please do not use it as financial or tax advice, as your situation could lead to different advice. It is essential to remember to consult with a qualified cross-border professional before making any decisions regarding your retirement.
Ready to take the next step?
Contact Cardinal Point Focus Partners Canada today to discuss your cross-border financial needs.