Raymond James’ Darren Coleman: How I Serve Cross-Border U.S.-Canada Clients

In an interview with Barron’s Advisor, Coleman, a Certified Financial Planner who leads a Toronto-based team of seven, details the pitfalls that can trip up Americans in Canada—from frozen IRAs to having to “Canadianize” brokerage statements to getting hit with tax bills on municipal bonds and Roth IRAs. 

You’ve worked in wealth management for three decades but joined Raymond James 10 years ago. What attracted you to the firm and how has it helped you develop your focus on cross-border advice? I liked that they took a client- and planning-first approach to what they did. They don’t make any products, which is kind of a belief system the company has. So I liked that we were not in the manufacturing business. 

And really importantly, they had this cross-border platform that they really weren’t sure how to make work. But to me, it was like, “That’s a solution to a problem no one else has.” And I would regularly trip over people who had money or family on both sides of the [U.S.-Canada] border and got tangled up with legal, compliance, and tax issues that no one had a resolution for. 

So when I found out that


Raymond James

had built this fairly unique platform, I said, “I think I can make that work.” It took about a year to get all the U.S. stuff figured out and begin going up the learning curve. Over the last decade, we’ve really become the pioneers of how to run a cross-border practice and get clarity on what the issues are, and then solve enough problems to really have insight into how to resolve them, and then also build partnerships with the other cross-border professionals in legal and tax and immigration. We curated a network of who the other top people are, and they share their clients with us. And we share our clients with them.

It’s interesting that so many people had these cross-border issues, and nobody seemed to have solutions. I think part of the problem was, for a long time, everybody just looked the other way on some of these things. But the web of compliance just kept getting tighter. And why? We’re trying to find money launderers and terrorists. My terrible joke is that it kind of winds up catching dolphins in the nets. Like, they didn’t mean to catch these people with some of these rules, but they did. 

People have these normal realities of “I moved,” or “My child is over here,” or “Grandma’s over there.” And the financial institutions say, “We can’t help you.” And people are like, “Well, wait a minute, why? My phone works in both countries. We watch the same movies.” So that surprises people. Like, “Why is this so hard?”

And the answer is because it’s complicated as hell. You’ve got two very different tax, legal, compliance [regimes]. Solving for that is expensive, and it is hard. So not a lot of [professionals] are willing to take on all that complexity just to solve these problems. 

So who winds up facing these issues? The people we normally encounter are usually in a couple of different categories. One I’ll call the global mobility client; you’ve moved countries in either direction. The next group of clients are the ones where no one knew there was a cross-border issue till someone passed away. So we get a lot of estate situations where families don’t realize that the systems are very different. 

Then I’d say the third category is what I call, “So I married an American.” You don’t even have to move to cause some of these issues—you just have to get married. And that stems from the fact that Americans are taxed on citizenship, Canadians are taxed on residency. When a Canadian marries an American, they’re not just marrying a loved one, they’re also marrying a tax regime, and that creates entanglements that no one often is aware of, and we often have children that grew up being Canadian, but because they were either born in the U.S. or they got citizenship passed down through their parents, they may not perceive themselves to be American, but they are. 

Tell us about your practice today. We run two separate brands. We run Coleman Wealth, which is our more traditional domestic brand, which is focused on longevity and retirement. Our second brand, which was a little more on the nose for cross-border issues, we call Portage Wealth Management. “Portage” is a fairly uniquely Canadian word. And it means to carry your canoe and all of its belongings from one river to another over an obstacle. And it’s a lot of hard work. Some Americans don’t know what it is, but as soon as they find it is Canadian, it’s very charming, like discovering a Tim Hortons doughnut. 

About a third of the practice is specifically cross border, but I would say something like 80% of our clients probably have a cross-border entanglement in one way, shape, or form. But because we’re licensed in both countries, we discretely have assets in Canada, and we discretely have assets domiciled in the U.S. We look after about 350 families. In Canada, we manage C$310 million [about US$240 million], and in the U.S. we manage $125 million.

A lot of Americans might imagine that moving to Canada is easy from a financial planning standpoint. You have to remember we’re two different countries. We have two very different tax regimes. We have two very different compliance regimes. And what often surprises people is just how different they are. One of the complexities that I’ll give that’s very common is people move to Canada, and the retirement accounts don’t travel. So your IRA doesn’t just move to Canada. We don’t have those in Canada. We have RRSPs, or Registered Retirement Savings Plans. They’re similar but not the same thing. There is actually a mechanism where someone can move their IRA to an RRSP, but it’s terrible. It usually costs them money when they do it. 

One of the challenges behind this is that your U.S. financial advisor cannot talk to you when you’re in Canada, because the general rule is that advisors—whether they’re accountants, lawyers, or financial advisors—have to be licensed and registered where the client is domiciled. 

One of the things we frequently encounter is someone has moved, and they change their address on their IRA. A little while later, they get a notification from their financial institution saying, “Sorry, your account is frozen. We can’t take instructions from you.” We also sometimes see them getting a letter saying, “We will no longer do business with you. You have 90 days to move this to another institution or we will send you a check less taxes and penalties.” And then they scramble, and they try to open the account somewhere else. And they go to another financial institution that says, “We’d love to have your IRA. Oh, you live in Montreal? We can’t open one.” Now, what do you do? We can resolve it, because my team is licensed and operational in both Canada in the U.S. 

What are some other pitfalls? Nonregistered accounts [taxable brokerage accounts] are a huge problem, because once the client’s on the other country’s soil, the advisor is not allowed to take a trade instruction. 

What about taxes on those accounts? The American client, once they’re in Canada, they want their account to move to Canada so that they get the correct tax reporting, because Canada and the U.S. don’t do their tax accounting the same way. One example that really surprises people is capital gains: The mathematics are different for Canada than the U.S. For the U.S., when you bought the security and how long you held it really matters. Canada couldn’t care less. Canada uses an average cost system to determine your capital gain or capital loss. And the way you report the math and track the math is very different from one country to the other.

So an American who moves to Canada, they can’t really leave their account in the U.S., because their advisor’s not allowed to touch it, and all their tax reporting is messed up. We’ve seen people try to do this. And we say, “Now you’ve got to pay a Canadian accountant to figure out how to Canadianize all the data. Oh, and by the way, everything has to be reported in the respective currencies.” Our system automatically gives the client both sets of tax reports for both tax returns so all the math is already figured out for them, and it saves a ton of time. ​​The accountants love it generally, because they don’t want to do that work. It’s grunt work.

Let’s say a client holds various U.S. securities in a taxable brokerage account. Can they transfer them to Canada? There are securities that are portable to Canada. For example, I’ll use


Microsoft

; if you own a share that trades on the New York Stock Exchange, you can bring that to Canada. But if you own a mutual fund, no you can’t. When we have someone who’s moving, we do a little bit of a triage. We go through their account list and say, “Well, what’s easily portable? We can just move it in kind.” With other things, we say, “Sorry, that doesn’t come to Canada, that doesn’t work.” There are other things like municipal bonds, which have tax-free status in certain jurisdictions in the U.S.; those don’t exist up here. That might be tax free in the U.S; it’s not tax free up here. 

What about Roth IRAs? Those require special handling in the first year you move to Canada. Now, I don’t give tax advice, but we know the people that do, and I know what the right answers ought to be. If someone moves up here with a Roth IRA, it may no longer have the tax status they assumed it did, so they need to take action on that. And we’ve actually seen some cases where people didn’t do a few things and it’s three and four years later. And we’re like, “Well, you may as well get rid of it at this point.”

Sounds like you help clients navigate complex and stressful situations. What do you do to unwind? I’m a big fan of my kids and what they do, so I’m a good spectator. My son plays baseball in North Carolina and has been playing at the Division I level for the last two years. My daughter finished her black belt in karate when she was 16. She’s actually pretty scary. And now she enjoys the sport of reining, which, if anybody’s watched Yellowstone, they’ve seen some of that. I think in another life she must have been a cowgirl. 

My big passion I discovered kind of late in life is motorcycles. Oh, dear God, they’re fun. So I’ve got a couple of bikes, and if I can get five hours together, I’m going for a ride. That’s my zen.

Thanks, Darren.

Write to Ross Snel at [email protected]