What exactly does offshore investing entail and is it the right choice for your circumstances? Here, Brandon S. Ure from Blacktower Financial Management (International) Limited sheds some light on the matter.
Offshore Investing
What is offshore investing? Why does it make sense to most investors? Is offshore investing right for you? Though these questions may seem straightforward, the answers are actually a little more intricate. Offshore investing is multifaceted and becoming comfortable with the processes will be crucial to helping you decide whether it is the right choice for you. With that in mind, this article aims to provide a clear picture of what offshore investing is and its benefits.
Offshore Investing
So, What is Offshore Investing?
One definition of offshore investing is as follows: “investing or holding assets in custody outside of the jurisdiction the beneficial owner currently resides.” For example, if an individual or entity resides in the United Kingdom (UK) and has assets in a bank account in the Isle of Man, the individual or entity would be considered to have assets offshore. Another example is someone using a brokerage firm for investment purposes based in the Cayman Islands while residing in Canada. These are two straightforward examples of investing offshore. This brings us to the more complex question – “Why is this a good idea?”
The Benefits of Offshore Investing
An individual or entity could benefit in a number of ways from domiciling assets offshore. Mainly, moving assets offshore increases flexibility, diversification and personal protection.
For example, a professional British expatriate living abroad could benefit by moving their former retirement scheme offshore if their intention is to reside permanently outside of the UK. This would allow much more control over how the assets are invested. By using this structure, the retirement funds are open to significantly more investment options. In addition, this could provide an enhanced death benefit to the expatriate’s spouse, which could be 50% higher than what the UK currently allows.
This is great news for UK expatriates, but what about everyone else? A great point to raise as most global expatriates would benefit from the diversification opportunities associated with moving assets offshore. For example, an American individual who has their entire life savings, property, business and investment portfolio within the United States (US) is vulnerable to US legislation. Moving retirement funds into an Offshore Individual Retirement Account (IRA) allows for diversification of retirement assets across international jurisdictions. This opens those retirement funds to many other investment options unavailable in a standard IRA.
When assets are in custody outside of the jurisdiction an individual resides in, there are immediate benefits. First, those assets are not subject to local litigation, as lawyers are required to seek representation in the jurisdiction where those assets are held. This is often very costly and complicated to implement. Second, many jurisdictions have taxation treaties with other territories, therefore providing significant tax efficiencies. Third, some jurisdictions offer Consumer Protection Acts, helping to protect their assets in the unfortunate event that the custodian becomes insolvent. Families of large wealth will often use multiple jurisdictions to prevent exposing their entire net worth to undesired sources. This type of diversification can help to protect against kidnapping, bribery or blackmail.
Grand Cayman, Cayman Islands
Is Offshore Investing Right for You?
Now that you understand the benefits of offshore investing, the next step is to research jurisdictions that could have relevance to you. This will play a large role in influencing how you proceed. Some areas to have in mind when considering the right jurisdiction for you include:
- Tax treaties in place or beneficial taxation
- Where you may be residing in the future or where you frequently vacation
- The political and financial stability of the jurisdiction
- Strength of the local infrastructure
- The primary language spoken (ease of communication is essential)
- Any Consumer Protection Acts in effect
- Time zone differences between your primary residence and the jurisdiction domiciling your assets
While not an exhaustive list, this is a good start. Not all jurisdictions are created equal and through research, you will discover where you find comfort and where to avoid.
Developing a relationship with a trusted institution is crucial to your experience. It is vitally important to feel comfortable with the group you proceed with. Carefully consider the investment products that are available through the firm, the regulators they are observed by, the size of the organization and the length of time that the group has been operational. All of these are important factors and will help you to gain confidence in your decision.
It is also important that you are comfortable with the direct relationship you will have with the “face” of the organization. That person is the Financial Advisor that you partner with. A few things you may wish to enquire about: Does the Advisor have a specific focus that aligns with your needs? Are lines of communication open for you to source throughout the relationship? How much experience do you feel is enough for your needs? What type of expectations should be set in order for the relationship to succeed? This line of questioning will continue to evolve as the relationship develops and a level of comfort is met. At that point, you should have confidence in your decision to move assets offshore.
So, What Next?
If this has sparked some interest and you think that offshore investing may be the next best step to expand your wealth planning strategy, then please allow us to be of service to you. Our institution has 17 offices throughout Europe, the UK and the Caribbean. Collectively, our network of trained advisors have over 150 years of financial industry experience. We look forward to assisting with your needs and are committed to providing quality service in every client relationship.
Brandon S Ure is Regional Manager for Blacktower Financial Management (International) Limited in the Grand Cayman. For more information, please contact Tel: +1 345 943 0015 E-mail: brandon.ure@blacktowerfm.com or visit www.blacktowerfm.com
Blacktower Financial Management (International) Limited in the Grand Cayman is regulated by the Cayman Monetary Authority Licence No 896523
This article was originally published in Issue 7 of The Caribbean Property Investor magazine. To read the full issue, click here.