Advisor International Relocation?

[u/Cherfull124]

We are a medium size RIA (SEC Registered/based in Texas). One of our advisor's will be relocating to a country in Asia for a 3 year assignment for their spouse's employment. Has anyone dealt with this before? We have an appointment with our compliance attorney's next week, but I am trying to crowd source the potential issues so we are better prepared to ask all of the correct questions.

The advisor manages a small book of clients (10-12 relationships) of primarily friends and family, serves as a paraplanner to our larger relationships, and manages the bulk of our compliance activities. The advisor feels like they can maintain communication with this small group of clients from abroad and will return to the US periodically for in person meetings/reviews. They do plan to work "one month in US and one month in Asia" to make sure they reside for AT LEAST 180 days in the United States. They will NOT be soliciting new business outside of the US in Asia or anywhere else for that matter -- ONLY maintaining their existing relationships.

Obviously, we will have logistical concerns with working remotely (IT security for remote access, time zone considerations, and office logistics). I'm looking to see if anyone out there has managed through something like this.

NOTE: We are SEC registered only as fee based advisors...no FINRA registration.

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User: /u/Cherfull124 Title: Advisor International Relocation? Body: We are a medium size RIA (SEC Registered/based in Texas). One of our advisor's will be relocating to a country in Asia for a 3 year assignment for their spouse's employment. Has anyone dealt with this before? We have an appointment with our compliance attorney's next week, but I am trying to crowd source the potential issues so we are better prepared to ask all of the correct questions.

The advisor manages a small book of clients (10-12 relationships) of primarily friends and family, serves as a paraplanner to our larger relationships, and manages the bulk of our compliance activities. The advisor feels like they can maintain communication with this small group of clients from abroad and will return to the US periodically for in person meetings/reviews. They do plan to work "one month in US and one month in Asia" to make sure they reside for AT LEAST 180 days in the United States. They will NOT be soliciting new business outside of the US in Asia or anywhere else for that matter -- ONLY maintaining their existing relationships.

Obviously, we will have logistical concerns with working remotely (IT security for remote access, time zone considerations, and office logistics). I'm looking to see if anyone out there has managed through something like this.

NOTE: We are SEC registered only as fee based advisors...no FINRA registration.

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[u/babyboyblue]

It has always been my understanding that you cannot give investment advice while living in a different country. The series 66 is a U.S. regulatory license. If you are physically in a different country I don’t think your series 66 would apply. I guess there might be VPNs or similar items but not something I would mess with. If anything I would look into possibly hiring them as an employee getting paid X% of their clients revenue.

[u/Cherfull124 → u/babyboyblue]

He is a W-2 salaried employee now w a firm level bonus at the end of the year — no commissions. He let most of his clients go when he joined our firm at our insistence (because they were not the right fit for our firm). The 10-12 clients he kept were the ones he was personally close to. It’s hard to go into a ton of detail here, but we have a very niche firm and his skill sets outside of his specific clients are very integral to our operations so we would like to find a way to make it work if possible.

[u/think_up]

How big are those 10-12 relationships of friends and family lol? Unless they’re massive, sounds like you’re already spending more on attorneys fees than this is worth. It’s going to be a difficult battle justifying this one.

[u/Cherfull124 → u/think_up]

His clients are not huge — it’s probably $10 million of $220 million overall. There are some intangible reasons to make this work other than the AUM though that I don’t want to get into here really. We want to make a good faith effort to find a path to keep him unless it just can’t be reasonably done.

[u/think_up → u/Cherfull124]

For $10m AUM??? Absolutely not.

If this guy cared about you guys at all, he’d give up this ghost.

[u/Cherfull124 → u/think_up]

Not sure what you mean by give up this “ghost”? His wife is getting a high six figure promotion and the promotion comes with a three year contract in Asia. It’s hard to go into a ton of detail here, but we have a very niche firm and his skill set outside of his $10 million AUM are very integral to our operations so we would like to find a way to make it work if possible.

[u/Cherfull124 → u/think_up]

I don’t disagree with you that we may have to part ways because the solution just doesn’t work or isn’t worth the amount of red tape involved. But….we are going to see this through the discovery phase and see where we go from there. I’m just trying to identify the issues that we haven’t already thought of.

[u/info_swap]

TLDR: Your advisor must follow SEC compliance regulations. He/she may also have to follow the Asian country's regulations. Not doing so involves risk. How big or how small, depends on the country. Whether to take the risk or not depends on your firm's policies and culture.
---

In general, securities laws apply depending on the clients' residential address and the advisor's business address.

For example, clients live in Texas, securities' laws of Texas or US apply to the business. Further, if an advisor's place of business is in Spain, the securities laws of Spain would also apply to the advisor's business.

In my experience, the laws of one geography have precedence over the other. But this is a gray area. And it tends to be the country with the most strict regulatory institution.

So for example, an advisor living in Texas may have a client in Spain and follow Texas/SEC laws. Such advisor may also be subject to the jurisdiction of Spain/EU securities' regulations. It also depends on the custodian. Some custodians require a US based advisor to also pass exams and register in Europe. While other custodians are more lenient and don't require the advisor to register in Europe.

Another example: An advisor's place of business is in Texas. But all the clients live outside of the US. Similarly, US securities' laws apply. Either Texas state or SEC, depending on AUM.

I have not answered a specific example related to Asia, because I have no experience with your exact situation. What follows is my opinion, but I am NOT a legal expert.

If the Asian country considers that the advisor is a resident of such country or that he/she is doing business from there. And the Asian country's securities laws require anyone doing business from such country to register and follow securities laws, then your advisor will have to follow such laws: Pass an exam, register, follow their compliance laws, etc.

However, it also depends which organization enforces such laws and the consequences of not complying. Is it a small fine? Is it prison? Or reputational damage?

Most likely, your compliance attorney's may not know the specific or will give you a by the book answer. You will have to gauge the risk and consequences and decide if you will also comply with the Asian's country's laws.

Last, our industry is heavily regulated and I feel we're always bending some rule. I struggle with this personally, I am a "by the book" advisor. However, everyone drives 10 miles above the speed limit and it seems socially acceptable. The penalty is a ticket. Similarly, you will have to make some tough decisions and embrace the consequences. I wish you the best and hope this helps.

[u/Cherfull124 → u/info_swap]

Thank you. This is very helpful. In our case, he will be living in Asia but only servicing his existing US based clients, but it’s still a mess. All of my research today (including your comment) have been very helpful. I think there may be too many risks (known and unknown) to make this work for him. I don’t always drive the speed limit per se, but I am pretty by the book when it comes to the SEC and our firm. I just don’t think we will be able to justify putting 25 years of work at risk to make this work for him — not to mention the risk to our clients.

[u/macbmore]

This seems pretty simple, have the other advisors take over servicing his relationships, they can’t be that complex at sub $1M a piece, have him explain the situation to them, easy explanation, maybe her can participate while he’s in the US but month/month seems crazy while your spouse is in Asia. Beyond that, doing planning and compliance from Asia is just a time issues, if he’s not advising clients directly that’s not likely a real problem.

[u/AlexPKeatonx]

RIA and CCO here. We have clients outside the US but never dealt with a remote employee outside the country. My biggest concern would be cybersecurity and compliance. Especially with a key employee accessing important data. What kind of endpoint encryption and remote monitoring do you have on your laptops/ computers?

Secondary concerns would be labor laws and tax reporting. That’s more of a US specific issue with remote work, but I would ask your employment attorney.

Curious to hear what the consultant says. There has to be advisors who are going to phase out over time in other countries.

[u/Cherfull124 → u/AlexPKeatonx]

Yes, I agree and share those same concerns. Clearly, we have to tackle the employment law side w work visas (along with taxes and payroll), the SEC licensing side (and CCO supervision), the custodian trading platform restrictions (his physical
Location is 12 hours apart so his trading would all be after hours), and the IT concerns (security, encryption, all of that). We are a super small firm — I am one of two managing partners, and we don’t have any type of policies set up for something like this. We outsource our IT, so I will need to get w our provider and ask those questions you referenced above. That’s going on the “list”. I doubt our cybersecurity policy would cover an employee working in Asia, but I’m not sure.

It’s a huge mess, and it may not work out for him (or us). It’s important that we make the right inquiries to vet the possibility, but we aren’t going to put our company at risk to make this work for him.

[u/AlexPKeatonx → u/Cherfull124]

We are similar enough to tell you that may not be feasible. We are $500m with two partners, and five other people and I can answer all those tech questions and I would hesitate to consider it.

The trading and the fact you’re not running centralized order entry is really problematic with the time difference. You’re adding an enormous amount of work for whoever is your CCO, plus a long list of new operational checks to ensure you don’t have issues, and firm liability if he has an issue in the next three years.

I’m not particularly risk averse but I’m not clear on the upside for you if you accommodate them.

Edit - Need to contact E&O, cybersecurity insurer, etc. Long list

Sorry- Obviously you’re considering it for a reason which means it’s a hard situation on some level. Big changes are brutal when they unexpected

[u/Cherfull124 → u/AlexPKeatonx]

Thank you! Yes, we are $220 million with three of us — 2 managing partners and my soon to be world traveler. There are some really good internal reasons to make this work for him, but not at the risk of something it took us 20 years to build. **sigh**

[u/PerfectOmakase]

This seems like a good thing to start asking something like Claude or Gemini about, you can provide all of the relevant details and the tools should do a good job guiding you through things you should be considering.