Cross-Border Portfolio Transition Process

In prior blog entries, I have discussed some of the regulatory issues associated with managing cross-border portfolios, as well as different approaches to cross-border portfolio management. While these topics are certainly important, a portfolio transition, or the act of moving assets from one legacy manager or strategy to a new target manager or strategy, is “where the rubber meets the road”, as it involves much planning, coordination, paperwork, discussions, and time. In this entry, I will outline MCA’s general portfolio transition process for clients considering a move between Canada and the US as well as the approximate timelines of each stage.

1) Cross-Border Financial Plan (2-3 months)

Client engagements typically start with a comprehensive, multi-faceted, cross-border financial plan that encompasses tax strategizing; healthcare, immigration, trust and estate planning; and investment planning. The investment planning process involves evaluating a client’s current portfolio and making recommendations to restructure it, if necessary, to accommodate the client’s cross-border objectives.

2) Manager Interviews (1-2 days)

In general, a client’s existing portfolio manager(s) or strategy typically does not meet cross-border compliance requirements, so new managers and strategies often need to be identified and selected. When necessary, we construct and recommend a new target portfolio and facilitate interviews with managers across various asset classes for a client’s consideration.

Managers are invited to discuss their investment process and to explain how they build their portfolios, manage risk, and review historical risk and performance metrics.

3) Manager Selection (1-2 months)

Following the interviews, clients generally prefer to spend some time considering their various manager options. Once clients select new portfolio managers, we commence the client onboarding process. This process typically involves coordinating account opening documentation, custodian documentation, and tax and account transfer forms. This step, unfortunately, can sometimes take longer than clients anticipate.

An investment strategy may have multiple vehicles/share classes/fund codes through which it can be accessed; we work with managers to identify the most appropriate one for our clients at this stage as well.

4) Portfolio Funding/Asset Transfer (1-2 months)

The final transition step is coordinating between the legacy manager and the new target manager to either liquidate or transfer assets in-kind. For taxable accounts, this involves incorporating and assessing the client’s tax situation.

If the legacy portfolio is in cash, the new portfolio can be quickly funded with a wire transfer. If funding is conducted through a cheque, and because it crosses international borders, we confirm that the receiving custodian will accept funds drawn from a foreign bank, and we clarify the length of the holding/clearing period (generally 3-4 weeks).

Once the portfolio is funded, our recommendation is for the manager to stage into the investment (typically over a three-month period) to mitigate market risk.

5) Manager/Portfolio Monitoring (ongoing)

Once the portfolio is up and running, we provide independent reporting and monitoring of the strategy and the total portfolio on a periodic basis.

MCA’s clients operate in a multi-jurisdictional space that requires consideration of complex cross–border tax and other financial planning matters. We strongly believe that a properly structured portfolio transition between borders is an important component of mitigating a client’s investment, compliance, tax, and trust and estate planning risk.