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Considering emigration and don’t know where to start? That’s understandable, as packing up to live abroad can be a complex, time-consuming process. It can be an equally tricky process if you decide to emigrate after you have been living and working overseas. Niel Pretorius of Sable International shares his top tips on what to think about when planning how, where and when to emigrate. – Jarryd Neves
I’m Jackie Cameron for BizNews. With me now is Niel Pretorius, a cross-border wealth advisor with Sable International. Welcome, Niel.
Thank you very much for having me.
Before we get into the nitty gritty of how to find the best advice, tell us briefly what Sable International offers. Where do you fit into the international financial services space?
Okay, so to give you a bit of history. Sable was founded in 1995, in London. That is still our head office. Sable is effectively a cross-border financial and immigration services company. What that entails is various different business units.
So we’ve got the nationality team, which deals primarily with UK nationality claims. We got the visa and immigration team, both based in the UK and Australia. We run various citizenship by investment programmes. We’ve heard about the Portugal Golden Visa, the USA EB-5 programmes.
Equally, we’ve got business units dealing with forex both in South Africa – sending money out of South Africa – as well as a global forex team based in London and in Melbourne, Australia. Along with that, we got a tax planning business both in South Africa as well as the UK.
The team where I sit is the wealth planning, in the financial planning team itself. What that team does at the end of the day, is really looking at people who are moving either their funds, themselves or both. Outside of your normal onshore financial services planning, we specialise in this cross-border financial planning space.
So that includes the tax, estate and investment planning issues when people do look to move either themselves or their funds. We provide these services in various jurisdictions. So we’re licensed in South Africa as well as the UK, various countries in Europe, as well as the USA.
What is demand like at the moment for your services? Are you seeing an uptick in people wanting to emigrate from South Africa?
These past 18 months, we have really seen a big uptick there. Prior to that, there’s always been interest and it’s been quite busy. But given what’s what has been going on – not just globally, but equally South Africa with its own particular issues – we’ve kind of seen a speeding up effect, where people were looking to move in a couple of years time and just brought those plans forward.
So it’s not just the young people. It’s the older people who are settled, who thought about moving a bit later on in life. A lot of them have actually bought those plans forward. So a lot of increase, both in terms of execution as well as interest and new leads coming in.
Immigration is obviously a very complex business. So where do you advise people to start with the process?
The first thing you need to decide is where you want to go and live. You sometimes get a query asking, ‘what are the tax effects of living here or there?’ I kind of take a different approach – a lifestyle approach – I ask, ‘where is it that you want to live?’ and plan around that. When it comes from the immigration side, there are a number of things you need to consider. We’ve got the tax migration side of things.
How do you become a non-resident from the South African tax perspective? What are those implications in South Africa? As well as the tax implications in the future country of residence? Where do you need to restructure assets and income streams? To be able to streamline that, the first thing I say is, look to where you want to go and live and then start planning around that. But plan ahead. This is not something you’re going to do in a couple of weeks. Absolutely not.
How long does it take, would you say?
It depends on the complexity of the client’s situation. Anywhere from three months, six months. I’ve had cases which took a year to 18 months to finalise before the clients were actually in position to move across.
One of the most difficult questions for people is to find a reliable adviser. Where do we actually begin with that process? Do we need a whole army of advisers? How do you narrow that choice?
It’s a question that is often asked and it’s a very valid question – especially these days. It’s all about relationship building at the end of the day. Given the complexity of this actual move – there’s tax, financial and structural planning involved – there’s so many aspects involved that if you have to deal with a different company in each of those particular situations, it becomes quite a difficult universe to traverse.
I’m of the view that if I can have all this covered in the same space, it just makes life so much easier. You might be dealing with different people and different aspects within the same organisation. But at least they all talk to each other and understand your position. It’s just much easier dealing with a central contact point – and as needs be – the units can plug in and provide the necessary advice, where their specific skills are required.
How much does all of this cost? How do the fees work?
It depends on the complexity. What is needed at the end of the day. So most services are done on either a time basis or a flat fee basis. So if you look at a golden visa, there’s a standard fee model as far as that is concerned. You know what you’re in for, for the property.
There’s legal costs involved, etc. So that can be packaged together. On the financial side, it’s a bit harder because it’s dependent on what all is required. You can have issues ranging from, ‘do I need to do a formal immigration?’ – as we still know that this point – through to the tax side, ‘how do I plan those exits from South Africa? Is there a capital gains tax I’m going to have to pay when I leave?
Setting up foreign structures. Again, they different vastly in terms of what works for the future country. So it’s very much a bespoke service. But the way we do it is – before any work is actually done – is give the client a decent indication of what they can expect. Before any work is done, they will actually be quoted and they know what they’re in for on the planning side.
Do you do plans for specific countries or can you help people invest or move anywhere?
From the investment migration side – so the citizenship by investment programmes – there are various countries we deal with. From Australia, the US, Portugal and a couple of other countries in Europe. But I’ve helped people through from New Zealand to Canada. So there’s lots of similarities that one faces, especially on the exit from South Africa. The more complex issues come into play in dealing with a future country of residence.
So you generally find it’s the more popular destinations – Australia, Europe, UK and US – and we’ve been dealing with those kinds of clients for quite a number of years. So we understand and we know what to look out for, what is in play, what are the likely solutions that one needs to look at. But, no country is necessarily excluded. If somebody wants to move to Kazakhstan, do I know anything about the tax regime in Kazakhstan? Absolutely not.
The people that you work with. Do they have to have a minimum net worth? Is it only viable to use services like this if you have a minimum amount of money to move?
I wouldn’t say that necessarily. To do this kind of move, you typically need funds, unless you go across on a working visa or something like that. But for people who are actually upping and moving. You’ve got to do the calculation in terms of, ‘where am I now – from a South African perspective – and what’s going to happen to me when I move?’ The costs of things are vastly different across the world. So take property, for example. The cost of a property in London is completely different to the cost of property in Cape Town or Johannesburg.
So it’s kind of a cash flow plan that you need to go and work out and see whether you can actually afford to do this. I might want to do it, but I might not have the necessary funds. Again, it’s dependent on where you’re going. Cost of living differs dramatically – even across Europe. If you’re living in London or somewhere in Portugal, it’s a different lifestyle and a different cost. So those are the kind of things that you actually need to go and weigh up when dealing with a client. Can you actually do this?
Many South Africans move away to work or gain some experience internationally. They don’t actually plan to emigrate. Before they know it, they’ve got a new life somewhere else or circumstances change, and they’ve left a bit of a mess behind in South Africa.
Maybe some retirement annuities that are going to hit a date where they might be able to move the money or not. Various investments sitting in South Africa and perhaps haven’t quite tied up their affairs. Do you get a lot of people like that in your books?
It is surprising how often that happens. It’s the typical thing. I’m going abroad for two-three years and 10 years later, I’m still here. As you say, there’s things left behind in SA from RA’s, tax-free savings accounts, endowments and the like. Then, it’s a question of, ‘okay, let’s tidy all this up.
Are you going back at some point or not?’ Because they might have different solutions in the overall planning. It’s always best to get a start. Get it all sorted out, especially from a tax point of view. We all know the changes that are coming in next year.
So what are the new rules coming into place next year?
From the financial immigration side – as we’ve known until this date has been through the Reserve Bank – that is being abolished and that’s going to be replaced by a new system that can be dealt with through SARS. So people with retirement funds in SA are going to face the situation where they can’t access those funds unless they can prove to SARS that they’ve been non-resident for tax purposes for at least three consecutive years.
If you haven’t done that, you can kind of shoot yourself in the foot. So the sooner you do it, the better. Those are very specific rules that are changing, specifically on the financial immigration side. The foreign employment income exemption? That changed this year. Prior to this year, your foreign earnings from employment were excluded in full.
As of this year, only the first 1,25-million is excluded. That is if you are a South African tax resident. So, again, it’s important in that respect to actually show SARS, ‘I’ve moved. I’m not living there. I’m a tax resident somewhere else.’ Be it by way of a treaty or some other matter. But you have to show non-residence, otherwise you can run into trouble.
What kind of trouble have you seen people run into?
To give a recent example, somebody came to see me trying to sort out some tax affairs in South Africa. I asked her, ‘how are you reporting this foreign income? And it came back as, ‘no, I’m planning on the foreign employment income exemption.’ After a bit of questioning, it came up that this lady wasn’t actually employed by a particular company. She’s self-employed.
I said to her, ‘this exemption doesn’t apply to you. It Never has. So you’re actually filing your taxes incorrectly. If you were a tax resident of South Africa, SARS has got the full taxing rights on that.’ So then it’s a case of what has she done in terms of returns? Are there exemptions that she can claim or are their taxes due? It was just an absolute mess.
So we ended up referring her to our tax team in South Africa and said, ‘just go through all these past returns, look and see what’s going on and assess, try and sort this out.’ Avoid penalties and all that. Rather come to the party and stick your hand up. Say, ‘I’ve made a mistake. I assumed this was done correctly’ as opposed to SARS coming around, doing an audit, going back a number of years and start claiming penalties and interest from you as well.
You wrote a very interesting story, which we published on BizNews about robo-advisors. Perhaps you could just tell us a bit about this trend in the world, where we are relying on computers for financial advice?
It’s not just for financial advice. We’ve gotten so used to using an app for everything. We get onto Netflix and it suggests what we would like to watch next. We get on Uber and order our next ride. So it’s become pretty much second nature to use these kinds of programmes. It’s not a massive leap to move from there to actually start doing investments by using computers and computer algorithms.
Especially the younger people, who are very more trusting of computers and technology than perhaps the older generation. We have cars these days that drive themselves. I don’t think everybody trusts them. Would you jump into a car and expected to drive itself from Cape Town to Joburg without your input? I don’t think everybody is going to be too comfortable with that. But it’s certainly a trend that’s been growing.
But at the end of the day if you break it down, it’s an investment management tool. It runs on algorithms. There’s very little human input and it will typically look at a risk profile. If you’ve got a specific target you want to reach, it can break that down to you and it can deal with that goal. The downside to all of this is that doesn’t look at everything else. It can’t do that entire balance sheet planning. It hasn’t got that human touch.
Life happens. There’s divorce, there’s children. When you get into these kind balance sheet planning, there are often competing goals that you need to deal with. I need to retire, so I need to save for that. I’ve got mortgages. How do I pay this off? Education costs, estate planning issues, assets in multiple jurisdictions. You need to take all of this again and look at it on the other side as well.
A computer can’t do that. It’s just never going to be possible. So it’s got its place. It’s cheap and cheerful. It does what it says in the tin, but it’s got its downsides as well. I think I mentioned it in the article. If we looked at the depth of the Covid crisis, I wouldn’t have been very comfortable sitting there and the only advice I can get is by looking at a screen – or maybe a toll free number or something.
As opposed to picking up the phone, calling an adviser and saying ‘I’m scared. What do I do?’ Unfortunately, I’ve seen some people that – in the midst of this crisis – lost their nerve, sold out everything to cash.
They got out right at the bottom of the cycle and were too scared to get back into the market, even through the recovery. So there’s a big opportunity cost that they had there. Some people lost a lot of money on that. So, yeah, it’s got it’s space. Is it perfect? No. So there’s always space for financial advice. Absolutely.
So the flip side is, in your article, you also mentioned that there are salespeople who masquerade as financial advisors. How do we know if we’re in the hands of the right person?
I think at the end of the day, it’s a question of getting the advice as opposed to what we call product bushing. If you speak to an adviser and the first thing they say is, ‘okay well, you’ve got to look at ‘A’ and that’s the product.’
I’d be wary of that, because there’s not always just one option. You’ve got to look at the alternatives and get to your decision on why a specific option is the best in your particular circumstances. That needs to be reasoned. Just pushing products just doesn’t work anymore. That’s not advice.
So if you were going to point an adviser in the direction of your grandmother, what kind of questions would you suggest your grandmother asks?
Firstly, qualifications. Secondly, regulatory status. Are you regulated or not? What does the firm do? A bit of history about the firm. What type of products that they are able to advise. But certainly, are they qualified to give you the advice first and foremost? You have to have a look at that. Track records. You can even ask for contacts of other clients if necessary, if you want to speak to somebody.
So those are your five top tips?
You’ve got comfortable with the person that you’re dealing with. I think humans in general aren’t stupid. So, you need to get to the bottom of it to make sure that you can trust this person with your money. Right at the top is, ‘what are your qualifications in order to assist me? And if you do assist me, are you regulated?’ If anything goes wrong, who do I go to?
Is there anything else you’d like to add?
I always say to people, if you make decisions – especially big lifestyle decisions about moving or money – think about it, take your time and don’t rush into things. Make sure you get advice. If necessary, ask for second opinions from different advisers. But make sure you actually go through it and that you are comfortable with something. If you’re not comfortable with it. Don’t do it.
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