As an expat concerned about your money’s wellbeing, one of your considerations may be whether to commit a certain portion of your portfolio to offshore investments.
You may have heard good things and bad things about the offshore world of finance, but which so-called ‘facts’ are actually relevant to you, or even true for that matter?
The one fact that is true is that as an expat, non-resident in your old home nation, you have a real opportunity to explore the international financial landscape. That broad landscape represents almost limitless potential in terms of choice for your wealth.
Obviously such extensive potential represents its own challenges when it comes to determining the right path for your personal portfolio.
In this article we’re going to present a succinct look at the main pros and cons you will need to weigh up when thinking about whether you should invest offshore or not. With the help of a qualified and regulated international financial adviser you will be able to make the best choices for your money – but it quite literally pays to be in a personally informed position, therefore we hope this information helps you.
Pros Of Investing Offshore
Diversification – the offshore financial marketplace is almost limitless in terms of choice. Choice of investment structure, fund type, market, currency, fund manager, jurisdiction and so on…
This means you can diversify your holdings to match your ambitions and risk profile.
Diversification has to be the number one benefit of investing offshore.
Taxation – close behind are the potential tax saving benefits available offshore.
Depending on the jurisdiction you choose, the product you select and your own tax status, you may be able to structure your holdings tax-free or tax efficiently.
You may also be able to utilise certain structures to offset future inheritance tax liabilities on your estate.
Enjoying available tax benefits will depend on many elements, including your nation of tax residence. Expert advice has to be sought to ensure your approach is appropriate and legal.
Asset Protection – it may be possible to restructure ownership of assets to achieve their protection through various offshore strategies for example.
Privacy – depending on the way you structure your investments and the jurisdictions you choose, you may be able to add layers of confidentiality to your assets.
In so doing you can protect your confidentiality and privacy. Some jurisdictions are more focused on ensuring confidentiality and have specific secrecy legislation in place to protect you.
Appropriateness – because of the massive choice in terms of how and where you can invest offshore, it is more likely you will be able to create an absolutely appropriate portfolio to exactly meet your personal objectives if you go offshore.
Cons Of Investing Offshore
Information Sharing – many nations have signed up to information
sharing agreements, which have eroded many of the previously available privacy and confidentiality benefits of going offshore.
However, depending on which jurisdiction you choose and which products you select, you can still achieve these benefits…it is just harder to do!
Having said that, most expats aren’t interested in these benefits, they simply want the financial and diversification advantages available offshore. Information sharing has no impact on these.
International Tax Laws – as above, many nations now have cross border tax information sharing agreements in place as well. This limits the number of jurisdictions offering tax enhanced offshore investment offerings…but they are still available.
Also, for many expats, saving tax is still a legitimate benefit depending on your own nation of tax residence.
Changing laws are to crack down on illegal tax evasion, they do not hamper those legitimately able to save tax.
Cost – some offshore structures can be very expensive such as corporations and trust structures. However, the average expat isn’t seeking such a complex holding for their offshore investments.
Straightforward offshore funds and accounts can charge similar costs to onshore equivalents.
It’s critical you look at the bottom line in terms of upfront and ongoing fees however, whenever you consider an investment path for your own wealth.
Levels of Protection – in the UK there is an investor protection scheme in place called The Financial Services Compensation Scheme. In the event a regulated financial services firm is in default or ceases
trading, this scheme may pay compensation to its customers.
This gives investors a certain level of peace of mind when investing onshore in the UK. However, such schemes are limited in terms of what they will pay out and to whom.
Internationally, certain jurisdictions offer similar schemes, however not all offshore investors qualify.
If in doubt, do your due diligence on a jurisdiction carefully, and whether you could qualify for any schemes in place.
In most cases, those who invest offshore do so without any such investor protection.