‘I prefer to fight to change the system’

Betty Shilman

With one foot in Switzerland and the other in the US, Jonathan Lachowitz is a cross-border financial planner and advocate for residency-based taxation. His story is the fifth in our series on US expats in Switzerland.

As many Americans overseas know, you see your country in a different way – both for better and worse – when you’re overseas. I definitely feel like I’m a bridge between the two countries. I’m part of American groups in Switzerland and Swiss groups in America. I have great contacts all over Switzerland as well as in the US.

I’m a Certified Financial Planner (CFP®) professional in both the US and Switzerland, and I’ve lived in both countries as an adult. I’m back and forth over the Atlantic probably eight to 10 times a year, for business and personal reasons. I’m a dual national – American and Swiss – a taxpayer in both countries, and in terms of financial planning, these are the two countries I know best.

This is my life, and my family’s life as well. My wife and I have four little children, and we like to spend time in both the US and Europe, giving the kids the opportunity to experience cultures on both sides of the Atlantic. My wife is Dutch, so our triangle is Lausanne, The Netherlands and Boston. Our four kids all have two or three nationalities and speak multiple languages. So our lives are relatively similar to many of my clients’ lives.

The road to global finance

The CFP® training has enabled me to build the business I have, and very easily compete against global financial institutions. First of all, the code of ethics is very comprehensive and helps advisors to treat clients with the respect they deserve. And next, it’s a very holistic approach to working with individuals and families. You’re not just trained to be a money manager or a relationship manager or an analyst. You’re actually approaching finance from the human side.

Most of our clients start with us in Switzerland, but they move all over the world, so we have a lot of Americans with connections to Switzerland or Swiss with connections to America. I set up my business to be able to work from anywhere, but Lausanne remains the heart of it.

There’s a very high demand for what we do, and there aren’t a lot of people specialized in cross-border work, especially ones with comprehensive knowledge of the US tax system. 

Citizenship-based taxation

The United States is one of the few major countries in the world to have citizenship-based taxation, and so cross-border issues tend to affect Americans overseas, or people entering the US from overseas, in a very different way than citizens and residents of most other countries. At big Swiss financial institutions you might get a 25-year-old trainee as your relationship manager – someone who really doesn’t have a clue about cross-border issues and just knows that there’s a special department of the bank that deals with Americans – if they even work with Americans.

I think you have to be extremely good at what you do in one or two countries to be good at cross-border work. You have to understand how the rules and regulations in the two countries interact or conflict with each other. And you also need to have a really, really good network of other professionals – accounting, insurance, estate planning, other legal services – because nobody can know everything.

A major issue facing Americans in Switzerland today is tax compliance. The situation has improved dramatically over the last decade, but we still find a tremendous number of mistakes in the tax returns of the clients we take on, made by tax preparers based both in Europe and the US.

Banking backlash

Living through FATCA and the UBS scandal and the financial crisis, Americans in Switzerland have become very frustrated. It’s hard to find accurate information about what you should do in certain circumstances. There’s a ton of misinformation, either online from tax ‘professionals’, or from people’s social or professional networks, or on some of the online forums. I could probably work 24 hours a day, seven days a week, advising people, but I value my family time.

Certainly, US citizens today are much more aware of their tax-reporting obligations, because they can’t open a bank account unless they’re compliant. And it’s unfortunate, but the way the US tax code works, the cost of compliance for people with lower incomes is often considerably higher than the actual taxes owed. Americans find out very quickly that you don’t have to have a lot or be earning a lot for your situation to get very complex.

‘Educate, advocate and inform’

I prefer to fight to change the system. Since 2006 I’ve been a volunteer for American Citizens AbroadExternal link, a nonpartisan, nonprofit organization founded in 1978 in Geneva and now based in Washington, DC. I’m part of the executive team there. Our mission is very clear: “educate, advocate and inform”. Our main purpose is not only to educate Americans overseas, but also to meet with US government officials in Washington to try and improve policy as it affects Americans overseas. Our most well-known project is advocacy for residency-based taxation. Our proposal has gotten a lot of traction in the Senate Finance Committee and the Joint Committee on Taxation for its professionalism and even-keeled approach.

We tend to get pretty big crowds for the events we organize in SwitzerlandExternal link. We get a good sense there of the challenges Americans are facing. Our main goal at those presentations is to educate, and we choose panelists who are really good at what they do. We’re not there to try to sell to the audience – we’re content if they’ve learned something. Or a lot of things.

The typical client?

Financial planning covers a number of areas. There’s retirement planning, tax planning, helping make education funding decisions, career advice, looking at the financial impacts of contracts. Cross-border moves. Our number one job is to help people make good choices.

Our client base tends to be extremely well-educated and professionally successful people. I would guess that more than 50% are Ivy League graduates or the equivalent. They ask great questions, but they’re prone to not making the best decisions on their own. They’re busy concentrating on other aspects of their lives. I think most of them like the fact that we’re rather direct with our advice.

I don’t think most of my clients would say they have a lot of money. Most feel they can’t afford to stop working and still maintain their current level of expenditures. But the financial services industry is relatively spoiled in Switzerland. So a typical client advisor at a bank might have the attitude: “Oh jeez, you only have a million dollars. That’s not very much,” whereas for us, what’s most important is to work with nice people; the balance of their accounts is not our primary focus.

As the head of my own company I’m not beholden to any big business or big agenda. I’m not concerned about being fired for saying the wrong thing. And my job is not to agree with my clients on every issue. My job is really about looking for practical approaches to people’s problems. Helping clients is extremely rewarding. Sometimes it takes persistence, but I’ve never had a situation where we couldn’t find a solution.

About Jonathan Lachowitz

Jonathan Lachowitz is the founder of Lausanne-based White Lighthouse Investment Management and a member of the US-based Financial Planning AssociationExternal link. In addition to volunteering for American Citizens Abroad he writes articles on personal finance and related topics for the Wall Street Journal and L’Agefi. Many of the articles are available to the public at https://www.white-lighthouse.com/ch-articlesExternal link.