Where International Citizens Hold Their Investments

Cross border professionals tend to have assets scattered around the world. Managing their financial investments located in different countries is increasingly complicated. In this video, we discuss the main options available to cross border families.


Primary investment solutions used and their pitfalls:
• International retail banks
• Swiss banks
• Offshore accounts
• U.S. Brokerage System



Hello in this video I’d like to discuss where we find international citizens are holding their investments; essentially what other people are doing. There’s always a big question about where to hold one’s investments when you may be from one country and then have lived in several other countries since. I’m just going to talk a little bit about where we see people holding investments.


One of the biggest places is in international retail banks, like Deutsche Bank or Barclays or some of the HSBC, perhaps, in Hong Kong. Often these banks have a premier banking service at more or less $250,000 or more. Then there’s a private banker level often at $1M or $2M and higher. These retail banks, their investment products often have fairly high fees very often we see proprietary funds which means the investment products offered tend to be from within their own company, or their fund options that pay a kickback or a placement fee back to the bank to be made available on their investment platform. They also tend to have a lot of insurance based investments and the financial advice received tends to be very bank branch specific, so you’re not always getting the highest level talent in terms of the advisers that you have work with you.


Just a quick example; we have a client who is an Italian executive at a large German company. When we met him he had over $4M Euros invested with the big German bank for over a decade. It was really amazing, they almost had no gains over the entire period, it really was surprising.


Now another place where we see people holding money is in Swiss banks. Of course Swiss banks tend to be very fancy, their offices have beautiful décor, and very often you’re drinking tea out of fine china during your meeting. But obviously, the Swiss bank environment is known for its very high fees, extremely conservative culture and investments, and obviously their reputation for secrecy and tax avoidance.


The Swiss are really known for their protection of wealth, not necessarily their growth of wealth. And really, the traditional strengths of the Swiss model, and really offshore models, are under attack around the world. We’ve seen different foreign governments purchasing client lists from banks in Liechtenstein and UBS, and really most major countries in the world are really attacking this traditional sense of hidden offshore wealth. So the Swiss method is really one that’s under a microscope right now.


The third approach that we often see are international pensions, international offshore pensions. Now these tend to be insurance based products that are sold by a global network of very well-dressed salesman, generally selling through the global expatriate community. And the main selling point is that you have your own pension, that’s independent of any country and very often undisclosed to any other countries, and ideally tax-free – that’s the selling point. I would say that I’ve looked at dozens and dozens of these policies and I would say they’re an extremely bad choice as an investment. Probably one of the worst investments I’ve ever seen. They have extremely high fees, very little transparency, and little to no regulation within their home jurisdictions which are often small island nations. If you’re a US legal resident they are especially bad. Now often they may not be reported to the US, which again is a “no no”, but when they are they really don’t provide any tax benefits to a US resident and in fact, they can be quite a big cost. There’s a tax penalty really to using these types of investment products.


I’ll give you one example. We work with a lady who is a British woman, who bought one of these policies while living in France; she lives in the US now. She paid approximately $1,000 Euros a month, that’s typically how they’re structured with a monthly payment, for about forty five months during a period of time when the market doubled, basically if between 2002 and 2005. And after those forty five months of contributions the value didn’t move, it was still around $45,000 Euros and when she went to withdraw the money, to surrender the policy, she ended up netting $9,000 euros in the end. So it was really sad.


The last alternative that we see is this investing your investment dollars into the US system. And that’s what we prefer. We think it’s a terrific choice, or location, of where to build a globally portable investment portfolio. And really, keeping your investment dollars in the US works no matter where you live in the world. While you’re doing that you get the benefit from the very, very low cost nature of the US system, quite a lot more investment choice, and a far more transparent and better regulated system, although not perfect.


In the last couple years we’re now able to offer a, what used to be not available, multi-currency accounts here in the US. Now we’re able to own foreign securities, hold local currencies, convert and do international non-dollar wires, making it very, very easy for cross-border families to access their funds when they need them, add more savings to their investment program or draw it out. Additionally, keeping your investment funds in the US is extremely good for nonresident aliens, people maybe who have lived in the US and then moved back home and given up their US residency. There’s no filing requirement if you leave your investments in the US, you don’t have to file a US tax return, there’s almost no taxes and really you get the benefit from all the advantages of the US systems. That’s all, thank you very much for your attention.