How Smart Investors Bank Offshore
The offshore private banking business is in the midst of a big boom since 2002. Over the last five years, an influx of foreign capital coupled with soaring markets has flooded cash into private banks in Europe and Asia.
Switzerland, of course, continues to lead the asset parade with an estimated one-third of all global deposits. Most of this Swiss wealth is based in Zurich, Geneva and Lugano. Other popular centers include Austria, Liechtenstein, Monaco, Luxembourg, Gibraltar and increasingly, Singapore.
What about the Caribbean? Although the Caribbean is a wonderful place to vacation, it’s not a good place to deposit your money. The region harbors poor or ineffective banking and securities laws, offers no deposit protection schemes and personal service is virtually nonexistent or horribly slow.
If you’re considering opening an offshore account, my first choice remains Europe.
Remember, you must report an offshore account (or any foreign account) to the tax authorities where you’re domiciled. That applies to Americans and Canadians with assets on deposits greater than US$10,000. Failure to report an offshore account is deemed a federal crime.
I know what you’re thinking…why bother opening an account if the world knows it exists? The reason is you should prudently diversify their assets away from their home domicile, especially if they’re in a high-risk profession. It’s also simply a smart asset protection strategy.
Leaving all of your assets under the legal auspices of one government, under the influence and control of a single monetary authority, is a bad idea. Many investors forget or don’t realize that in the early 1970s, Great Britain imposed foreign exchange controls. Britain, a modern democracy, only permitted its citizens to move a maximum £50 pounds out of the country. In this world, anything is possible.
Since 9/11, many prospective offshore investors have grown increasingly confused by the new rules imposed by banks, the IRS and how investments are taxed. For Americans, my advice is to avoid buying any U.S. domestic securities from your offshore account and instead, use British investment trusts or German-listed index funds to track American shares.
Offshore funds are off-limits to U.S. investors because of potentially onerous tax implications, so the best way to avoid that deficient regime is to tuck offshore funds in your IRA or invest in these funds with your offshore variable annuity.
Fees are not cheap offshore. European private banks don’t come at a bargain and that’s why they continue to earn big profits. Consider becoming a long-term investor offshore. Be sure to select your investments carefully and buy quality securities that don’t require you to trade frequently.
Private banks charge at least 1% to buy and sell securities, including stocks and mutual funds. Some banks can charge an investor as much as 5% to purchase funds – highway robbery, in my opinion.
If your goal is to trade stocks from your offshore bank account, then fees will eventually cut deeply into your total return. Instead, use domestic discount brokers at home where trading commissions are cheap. Offshore, stick to a long-term investment plan and keep your trading costs to a minimum.
Private banking is a smart way to diversify and shield your assets from potential creditors. It’s also a great way to tap into superb investment products, gain currency diversification and most of all, gain peace of mind if you structure your account properly.
The offshore private banking business is in the midst of a big boom since 2002. Over the last five years, an influx of foreign capital coupled with soaring markets has flooded cash into private banks in Europe and Asia.
Switzerland, of course, continues to lead the asset parade with an estimated one-third of all global deposits. Most of this Swiss wealth is based in Zurich, Geneva and Lugano. Other popular centers include Austria, Liechtenstein, Monaco, Luxembourg, Gibraltar and increasingly, Singapore.
What about the Caribbean? Although the Caribbean is a wonderful place to vacation, it’s not a good place to deposit your money. The region harbors poor or ineffective banking and securities laws, offers no deposit protection schemes and personal service is virtually nonexistent or horribly slow.
If you’re considering opening an offshore account, my first choice remains Europe.
Remember, you must report an offshore account (or any foreign account) to the tax authorities where you’re domiciled. That applies to Americans and Canadians with assets on deposits greater than US$10,000. Failure to report an offshore account is deemed a federal crime.
I know what you’re thinking…why bother opening an account if the world knows it exists? The reason is you should prudently diversify their assets away from their home domicile, especially if they’re in a high-risk profession. It’s also simply a smart asset protection strategy.
Leaving all of your assets under the legal auspices of one government, under the influence and control of a single monetary authority, is a bad idea. Many investors forget or don’t realize that in the early 1970s, Great Britain imposed foreign exchange controls. Britain, a modern democracy, only permitted its citizens to move a maximum £50 pounds out of the country. In this world, anything is possible.
Since 9/11, many prospective offshore investors have grown increasingly confused by the new rules imposed by banks, the IRS and how investments are taxed. For Americans, my advice is to avoid buying any U.S. domestic securities from your offshore account and instead, use British investment trusts or German-listed index funds to track American shares.
Offshore funds are off-limits to U.S. investors because of potentially onerous tax implications, so the best way to avoid that deficient regime is to tuck offshore funds in your IRA or invest in these funds with your offshore variable annuity.
Fees are not cheap offshore. European private banks don’t come at a bargain and that’s why they continue to earn big profits. Consider becoming a long-term investor offshore. Be sure to select your investments carefully and buy quality securities that don’t require you to trade frequently.
Private banks charge at least 1% to buy and sell securities, including stocks and mutual funds. Some banks can charge an investor as much as 5% to purchase funds – highway robbery, in my opinion.
If your goal is to trade stocks from your offshore bank account, then fees will eventually cut deeply into your total return. Instead, use domestic discount brokers at home where trading commissions are cheap. Offshore, stick to a long-term investment plan and keep your trading costs to a minimum.
Private banking is a smart way to diversify and shield your assets from potential creditors. It’s also a great way to tap into superb investment products, gain currency diversification and most of all, gain peace of mind if you structure your account properly.
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