Whether you’re living, working or retired abroad, thinking about making a move overseas, or you just want to be more internationally minded when it comes to the management of your money, it may make sense to think about offshore investment.1
Offshore in this sense simply means investing your money in a location other than the one in which you live. It can make sense for any number of reasons for any number of people, however, as there is such broad choice in terms of how and where to invest, getting the best offshore investment advice you can, can quite literally pay!
In this report I’m going to give you an overview of why some people consider offshore investment, the potential advantages open to you if you go offshore, and how to source the right advice so that you can make informed decisions about whether investing internationally is the right thing to do for your personal circumstances.
Why do people invest offshore?
There are many reasons why it may or may not make sense for you personally to invest offshore: these can only be properly understood on an individual and personalised basis with the help of a financial advisor.
But in general terms, here are the main reasons some people choose to invest offshore…
Depending on your nation of tax residence and personal tax status, it can be possible to structure investments in a tax efficient manner by utilising offshore jurisdictions and products.
This benefit is certainly not guaranteed for all – but it is a legitimate benefit that many expats can legally leverage.
An international financial advisor expert in managing expatriate wealth will understand any opportunities available for the tax efficient investment of your money and make recommendations accordingly.
By choosing to take an international approach to the investment of your money you have significant opportunity to diversify your portfolio.
You can diversify across nations, markets, sectors, assets, currencies…when you think internationally the opportunities for diversification are vast.
Through diversification you can offset risk, and as explained above, offshore investing by its very nature opens you up to extensive opportunities for diversification.
Additionally, it may be the case that it is safer for you personally to keep your money out of your current country of tax residence.
The currency locally, or even the political environment, may not be stable. Or it may be the case you’re concerned about the economic environment in your new nation. These could be risks you choose to manage by keeping you money offshore.
You might not think you need confidentiality when it comes to your invested assets, but as an additional advantage often achievable through offshore products and jurisdictions it can prove to be of benefit to many.
In these increasingly litigious times it certainly can’t hurt to put a legitimate layer of confidentiality between your investments and your personal details.
Offshore services and solutions offered by international providers and companies are expat-centric. I.e., they are structured with an international client base in mind in terms of both accessibility and communication.
These facts can make life a lot easier when it comes to managing and accessing your wealth while you’re living overseas.
Which offshore jurisdictions are the best?
Technically any jurisdiction other than your own is an offshore jurisdiction.
But in the financial world, offshore jurisdictions are considered to be those that are typically low or no tax nations, where there is a dedicated international financial sector.
Offshore jurisdictions may also be referred to as international financial centres or tax havens.
Choosing the best place to save, invest or bank your money will come down to your own personal situation and requirements.
Besides being tax friendly, each nation to choose from has its own unique legal system, reporting requirements, regulations and investor protection policies.
Therefore, choosing the best offshore jurisdiction for you will come down to your personal requirements and preferences.
An international financial advisor will be able to talk through the best options you have and help you make an informed choice. But you should always do your own due diligence on any recommendation.
You should check to see whether there are any investor protection schemes in place, and whether you as a non-resident are eligible for their benefits for example.
Which offshore investment products are best?
Examples of offshore investment solutions include investment funds, portfolio bonds, QROPS and QNUPS; and you can find many of the same sorts of investment solutions offshore that you can access onshore.
Many elements such as your financial goals, risk profile, tax status, age and wealth status will guide an adviser’s recommendations about the products you might like to consider for your own money’s investment.
The choice of investment products is broad. For example you could choose to invest via funds or bonds or pension schemes, you may choose to bundle your investments within a tax-efficient wrapper, or you might choose to invest utilising a company or trust structure.
Qualified and expert guidance is recommended to help you understand the options you have and identify the most appropriate ones to match your requirements.
Is it safe to invest offshore?
The first most important thing to know is that if you use an adviser to guide your decisions and inform your choices you must never save, invest or bank directly through them or their company.
I.e., you never invest any money directly via a financial adviser.
If you choose a fee-charging adviser the only money you will pay to them is their fee. If you choose a commission based advisor you will never make any direct payment to them.
Once an adviser has helped you to decide how and where to save and invest, any money you save and invest will be directly transferred to your new account/s with the relevant financial institution/s chosen.
Secondly, reputable advisers only ever recommend reputable offshore jurisdictions that have, for example, investor protection schemes in place, robust legal environments, and whose reputations are internationally respected.
It will be important to discuss jurisdiction choice with your adviser, and for them to demonstrate to you the safety of a given location for your money. In addition it is recommended that you do your own due diligence on any recommended jurisdiction, financial company and investment solution to ensure they are appropriate for you.
It will be critical to examine investor protection policies and whether you will be eligible for protection considering you’re investing as a non-resident, and taking into account the amount of money you will be investing.
Can you invest offshore even if you’re going to repatriate?
Your financial adviser will explore this consideration: advice will be tailored depending on various options including whether you have firm plans to repatriate, and where your country of domicile is.
Accepting that the best laid plans can always be subject to alteration, even if you never foresee moving back home, you may one day decide to…
If that reality should happen it may still be appropriate for you to retain currently invested assets offshore.
Your tax reporting requirements will likely change, and the tax efficiency of any offshore investment plans you have in place may change.
Furthermore, depending on your personal position, taxation may only apply on growth made after the date you repatriate, unless you are from a country that taxes you on your worldwide income.
Tax liability may only arise when you cash in your investment.
Ultimately your adviser will be able to explain all the potential possibilities to you.
How to get the best offshore investment advice
In an earlier article I wrote what you need to know about offshore IFAs. This should be your starting point when thinking about how to get the best offshore investment advice possible.
Having reviewed this article you should hopefully be more confident about finding a decent, qualified, regulated and experienced independent financial adviser to guide your choices.
However, there is a lot you can do for yourself to prepare yourself for investing.
You can make sure you understand your own appetite for risk. Are you comfortable committing the majority of your funds to an investment that is not guaranteed? Are you prepared to only expose some – or none – of your wealth to such a risky scheme?
How much do you need to have close at hand in an emergency fund to cover outgoings in the event of illness or loss of employment?
Do you have the essential insurances in place – health, life, critical illness etc. And if not, these might be a better place to start, rather than rushing in and committing everything you have to investment solutions.
You might like to think about your short, medium and long-term plans and ambitions too. Your financial plan can then be structured to hopefully enable you to fulfil these ambitions.
The more work you can do to understand yourself and your wealth needs and ambitions, the easier you will find it to work effectively with an IFA. You will be able to clearly communicate your expectations, and understand whether recommendations made match your requirements in terms of your offshore investment path.