Smart, Low-Cost Investing for Expatriates

05/29/2020

Expatriates can often realise substantial tax benefits from investing in offshore markets. 

Expatriates are typically not taxed by their country of citizenship on income and assets held outside their home country. Additionally, many countries do not tax expatriates on their investments and income earned beyond their borders. This creates a substantial benefit and a huge incentive for expats to move their investments to one of the offshore centers. Doing so allows them to save tax and to potentially access a greater array of investment opportunities than exist in either their home country or the country where they work.


The Problem of "Cowboy" IFAs
Until relatively recently, the only way expatriates could gain access to the offshore markets was through armies of lightly regulated or unregulated independent (British) financial advisors (IFAs). These IFAs, who had varying degrees of experience and professionalism, acted as a direct sales force for the various product providers located in the offshore markets. Unfortunately, what expatriates saved on home country tax, they typically more than paid away in fees on high-cost, complicated, non-transparent, opaque investment products. In some cases, they were subject to outright fraud and embezzlement by "cowboy" IFA outfits.

Fortunately, expatriates now have better options. The rise of investment platforms afford expatriates the opportunity to build low-cost, globally diversified investment portfolios in a highly regulated environment. Expatriates retain the tax benefits of investing outside their home countries without incurring excessive fees or enduring poorly regulated (British) financial salespeople masquerading as advisors.


Five Advantages of our Investment Platform
Here are some of the key benefits of using our platform:

1. Lower product fees

The typical offshore mutual fund has high annual expenses running up to 2% and more. Additionally, there can be front-end fees of between 3% and 7%. Insurance-linked investment products can even be more expensive, with several layers of fees that can total 4% or 5% annually, not including front-end fees, which are often hidden in the bid-offer spread.

By using our investment platform, expatriates can build diversified portfolios with exchange-traded funds (ETFs) and lower-cost mutual funds for fees that range from 0.15% to 0.25% on the lower end. This savings on product and portfolio fees goes directly into your pocket.

2. Greater product choice

We provide an integrated platform that makes it easy to trade global investment products on multiple exchanges and assets denominated in multiple currencies from a single account. For example, our platform allows you to trade on over 120 exchanges around the world, providing direct market access to stocks, options, futures, forex, bonds, and ETFs from a single account that can be funded in multiple currencies.

In contrast, most IFAs provide access to the same high-cost funds and insurance-linked products from a relatively small number of offshore fund and insurance firms. It's unlikely that you'll ever see one of these product salespeople recommending a diversified portfolio allocated among low-cost ETFs.

3. No lock-in or surrender fees

Many insurance-linked investment products sold in the offshore market impose a surrender fee that can last five to twenty five (!) years in the worst cases. Lengthy lock-in periods are designed to ensure the product provider is reimbursed for the commission it paid to the IFA who sold you the product. This locks you into a high-cost product, and since the IFA has already been paid, there is little incentive for ongoing advice.

There are typically no surrender fees or lock-in periods with investments or portfolios designed with ETFs on our investment platform.

4. Low trading/switching costs

With many offshore product providers, and particularly with insurance-linked products, there can be substantial costs or limitations on switching funds. This can be a significant impediment to rebalancing an investment portfolio. With our investment platform, investments can be bought and sold cheaply with no restrictions, which greatly reduces portfolio management costs.

5. Easy to integrate with a true advisory service

The traditional IFA financial service model is really a sales-driven model where IFAs act as a direct sales force for a relatively limited number of product providers located in the offshore markets. Products are sold on a commission basis, which incentivises the sale of high-commission products and provides little incentive for proper ongoing investment management and advice. The more high-commission products sold, the more commission earned by the IFA.


Our investment platform provides an effective, low-cost alternative for those who want to build a successful portfolio and it also provides a good alternative for those who don't really have the time, knowledge, or inclination to do it themselves.

Rather than paying high fees to access products, you can focus on getting proper investment and financial advice geared to your long-term financial well-being. Portfolios can be built on an investment platform for a fraction of the cost of portfolios constructed from the typical investment products sold in the offshore markets. This low-cost access to products can be coupled with an advisory service that helps you devise and manage a globally diversified investment portfolio. The benefits of this approach are much lower fees and ongoing advice aligned with your long-term interests.

Consider Your Options
The next time you receive a cold call or email from someone pitching an offshore product or financial service, consider us: info@expatwealthatwork.com