Rich Snail

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ne of the first offshore step many people undertake is to open an offshore bank account. You have a few options and choices to chose from. Starting with choosing between a corporate or individual account.

In any case, you should be careful when choosing your overseas bank to ensure your money is safe.

Your Offshore Bank

The first step is to select the bank which will best suit your needs. Your choice will depend on a few factors:

• Entry Fee?
  I like to work by elimination. The first check you should do is ask yourself how much you’d like to allocate to your offshore bank account. This will make sure you don’t lose time considering banks which would not consider you.
• Where is it located?
  The location in itself is not that important. What is important is whether this location is politically and economically safe. It also is good to check whether you understand the language spoken in this location, and if they have sufficient English speaker to assist you should you not. You should be be able to reach your bank easily, and preferably be able to go there should the need arise
• Does it offer internet banking?
  Internet banking is bliss. It alows you to easily manage your money from abroad and you escape the time-lag usually suffered when dealing internationally. A must have in my opinion.
• What charging structure?
  Of course, do check the bank charges associated with your offshore account. We would not want you to loose your monies over crazy banking fees, isn’t it.
  

Your Bank Credentials and Legislation

You should always check your bank’s credential befor signing up with them. How long have they been around? Do they have a parent company? Do they have a history you can refer back to? With banks such as HSBC or Lloyd’s it is quite easy to do your due diligence. It sometimes is more difficult with smaller Caribbean ones.

Following your bank’s location, different laws and regulations are in place. You should quickly check

• Privacy Regulations
  Ensuring that your selecting offshore entity has no obligation to release your personal or business information, can allow you to enjoy great deal of privacy & confidentiality. Of course, you never are 100% safe. But unless suitable evidence can be shown to prove that you have been involved in criminal activities, such as money laundering or drug trafficking, you should be good to go.
• Double Taxation Agreement or Treaties?
  One of the many advantage of offshore banking is that once your assets are held offshore, they are unreachable by domestic courts. You should check though whether your offshore jurisdiction has any double tax or tax exchange treaties. Many offshore jurisdiction are trying to clean up their branding. Hence they have passed agreement and treaties with onshore authorities to exchange information with each other. This does not work when you are still residing outside of your home-country. But should you reside in your home-country and wish to keep your information private, you always have the choice of paying a with-holding tax on your profit (such agreement is in place between the Isle of Man and the European Union).

Account Opening Process & Security

Opening your account offshore may not be as straight forward a process as entering a counter and signing a few documents. Every serious bank will try to define the real owner of the funds on the account, and will due-diligence a few things before it can accept your application. They need to make sure your funds are genuine, and it ensures your bank accounts for your monies along the way, starting from the moment you open your bank account.

Most banks will request for the following documents:

• Certified Copies of passport and ID
• Proof of address (employment contract, utility bill, bank statement etc.)
• Description of your business / job and source of the funds

Should you open a corporate account, it may also ask for the following

• Letters of reference from lawyers, auditors, accountants etc.

My preferred banking institution

I personally like to work with two institutions

Lloyds TSB Offshore offers a great account with a very reasonable entry fees (USD100). Their facilities are not optimal, but the service is very decent. And at such a low entry fee, you can start enjoying all the benefits of a reputable offshore banking structure.

Close Private Banking is more exclusive. The entry fees are not as reasonable as Lloyds (£20,000), but you get what you pay for. Great services and extensive banking facilities.

Seth Godin, one of the most followed and revered blogger world-wide, just wrote a very insightful post: probably not stupid. As always with Seth, it is thought provoking and it sticks in your mind for a while. The following few lines really resonate with me:

Every person makes decisions based on their worldview and the data at hand. [...] So, there are plenty of times where a lack of information leads to a bad decision. Plenty of times where an out of sync worldview leads to an out of sync decision.

How true ! I spend most of my day trying to synchronize with expatriates - my clients. It is a painful process to go through, especially in this industry. Each of us has a different dream, expectation and objective. Some are afraid of investing, they prefer to wait for the markets to stabilize, others were burnt in the past and prefer to do everything themselves, and the remaining simply don’t know what they want - they did not think about it before.

At the end of the day, I usually provide the data at hand. People come with their world-view and my job is to adapt so that I find solutions which suit them, to achieve the right decision, a synchronized decision.

Not an easy task. But when, after contacting dozens, sometimes hundreds, of contacts by phone, meeting or networking I synchronize with one expat and help help him/her with the right solution for him/her - I feel right.

Synchronization is bliss

This week is historical for sure. So many things happening it is difficult to keep track. Sometimes, it is better to just sit back, take a news-break and wait for the end of the week to have a summary / analysis of the situation.

Economics

As often, I found one of the best analysis of the past few days  to be in The Economist. Their financial crisis - What next? article is a great summary, and take a step back and try to assess the situation. Its intro is particularly punchy

Finance houses set out to be monuments of stone and steel. In the widening gyre the greatest of them have splintered into matchwood. Ten short days saw the nationalisation, failure or rescue of what was once the world’s biggest insurer, with assets of $1 trillion, two of the world’s biggest investment banks, with combined assets of another $1.5 trillion, and two giants of America’s mortgage markets, with assets of $1.8 trillion. The government of the world’s leading capitalist nation has been sucked deep into the maelstrom of its most capitalist industry. And it looks overwhelmed.

I also invite you to read their 9 page special report on the financial crisis - Wall Street Bad Dreams.

Markets

Markets are hit. They are bearish, moody and keep don’t really know on which feet to dance. A lot of my clients are calling me to check how the latest events affect their portfolio. It doesn’t for 90% of them. The reason is that we use a long term, strategic approach to investing. We are not in for the quick buck. The Lessons from the Lost Decade in Stocks article from Morningstar summarize pretty well the way we work.

Lesson One: The long haul may be longer than you think.
Lesson Two: Diversification is your friend.
Lesson Three: Dollar-cost averaging is your other friend.
Lesson Four: Save more.
Lesson Five: Minimize expenses and taxes.
Lesson Six: The past isn’t always prologue.

But there is one thing I feel is dangerous in the current market, Shooting The Messenger - in this instance, Shorting (Maybe Fred should have titled his post “Shorting the Messenger” - eheh). Shorting is seen as one of the reason for the spiraling financial situation today. But it only is viable as long as a purge is needed. Their business is to warn others, to shed light on potential areas of financial crimes. They make money cleaning up the markets. And we do have a need for a clean-up. 

Malaysia

Finally, a few words on the current Malaysia situation. Over the past few months, the government and oposition have been at each others throat. The governing coalition is facing the very real possibility of losing its grip on power to the opposition leader, Anwar Ibrahim. This change would be possible thanks to Democratic rules being enforced. A good thing. But now, both sides are playing a silly game of Bluff and counter-bluff. Let’s hope this things get sorted out before Raya (end of the Ramaddan). Raya is the most important celebration for Muslims and is a great opportunity to tighten bonds and invite everyone to share - Muslims and non-Muslims.

As of 1st of September 2008, William Russell introduced a new moratorium option on their policies. In simple english, this means WR has swept away the need for new applicants to declare their previous medical history when filling their applications. Two thumbs up here.

First, it greatly simplify the application process process.

Second, it is great for applicants with pre-existing conditions. They will be able to enjoy a great insurance, and escape the hassle of having to provide their medical record. Sound great doesn’t it? And the best is still coming: should they remain healthy for two continuous years (and a WR client of course) then their pre-existing condition will be fully covered!

Don’t take my word for it, take William Russell’s one.

“Pre-existing conditions become eligible for cover when the member has had a continuous two year period of cover during which there have been no symptoms, and no treatment or check-ups have been necessary. ”

“If it is generally accepted medical advice that one should attend a regular medical consultation or check-up, or take drugs, or follow a special diet, then that medical condition will be permanently excluded, together with any related conditions. This will include conditions such as diabetes, raised blood pressure, raised cholesterol levels, heart disease, some forms of cancer, and other conditions where regular monitoring is advisable.”

James Cooper
Sales Director, William Russell

Only tiny little draw-back, applicants who chose the moratorium approach will pay a 4% premium. Very worthwhile IMHO.

Yesterday, I posted a warning on the AlloExpat Forum. After sleeping on it I asked myself why i did not post it here first… Hence my posting hereunder which is a cut and paste from the AlloExpat topic. Error corrected

———————–

I meet with many expats on a weekly basis. Some need help, and realize it, some don’t realize it, and others simply don’t need help. It always is good to hear from expats who are well taken care of and can count on decent adviser to help them achieve their goals and objectives.

Yet, after meeting with one too many guy who has been recommended “2year” savings plan on the understanding that it allows you to stop saving after 2 years, I wanted to post a warning here.

Some expats are attracted by the nice sweet speech given by their “adviser” while other fall for the big bonuses offered by some of the companies over the first few months and tend to forget that there are no free lunches…

Just wanted to put the record straight.

2 YEAR SAVINGS/RETIREMENT PLANS DO NOT EXIST.
If your contract is for 10/15/25 years, then it effectively is for that term, and fees are ongoing through the life of your plan. Those fees are based on the original premium invested - and decreasing your period after some time will not decrease your fees.

20 YEARS SAVING/RETIREMENT PLAN DO
Don’t get me wrong - those plans are great when explained properly. If you know what you are getting into and have enough discipline to follow your plan and strategy through its term, they really help you achieve your goals.

AND ARE GREAT WHEN EXPLAINED PROPERLY
In short,at the end of the day, if sold and explained properly, they are a good product for those that can discipline themselves to maintain the plan over the agreed term.

HOMEWORK / PAPERWORK
As always, do your homework. Read the paperwork.
Ask questions, do some research, and if needed, ask your adviser to sign a explain the fees in writing and sign this document. Should anything go wrong, you at least have something to fall back upon and argue your case.

COOLING OFF PERIOD
Also - all those plans have a cooling off period. If you don’t receive your documents within 2 weeks of the first payment - ask them from your adviser. He should provide them to you ASAP - otherwise he may be hiding something from you - usually the cooling off period.

Good luck

Many people are afraid of investing in stocks, particularly when the markets are bearish - like now. Yet everybody recognize that the best time to buy markets is when they are cheap. Unfortunately, unless you follow the markets on a daily basis - and even so - you never know when to buy a stock. The simple thought of bad-timing scares many off investing in stocks.

Yet, a smart investors have a few techniques and strategies in their arsenal to protect themselves against market-timing and enjoy a more aggressive investment strategy with relatively low-risk: Dollar Cost Averaging and Crystallization.

Dollar Cost Averaging (DCA)

DCA is a strategy where you buy a fixed amount of the same share on a regular basis, usually monthly. It enables you to not be subject to bad market timing, helping you reduce your risk exposure. After all, you are sure to not buy a market at the wrong time as you will balance your investment the following period with the same amount of dollar. When your share’s price is going down, your dollars will buy you more shares. Of course, the contrary is also true. You buy less share when their value goes up. You end up with a slightly lower average cost, assuming the fund fluctuates up and down.

It is a very sensible approach, especially when you are starting to build up your wealth. As an example, it work great when you want to prepare yourself for retirement and decide to commit yourself to investing a fixed amount of your salary every month. It shouldn’t come as a surprise that it is a very popular strategy among investors, brokerage firms and mutual funds.

Yet, as with every strategy, it does not work every time. Some studies and analysis (here and here) have proved it to be no better than single investment when considering a single fund or investment. True enough enough, this strategy is not a panacea. But if you counter-balance its draw back with a Diversification / Crystallization Strategy, it can work wonders.

Diversification / Crystallization

The Diversification / Crystallization Strategy is pretty simple in its concept and work in two steps.

The first is to diversify your investment across a few companies, markets and sectors. You need to consider multiple companies in multiple sections across multiple markets so as to manage your risk along the way. The old fashioned “don’t have all your eggs in the same basket” advice.

The second is to review your portfolio on a regular basis and make adjustments. After a few months, you will realize that some of your position will be reaching for the sky, other have stagnated (or gone up slightly), when others started digging themselves nice little holes. The Crystallization part kicks in when you realize your profit on the ones you think have peaked. You then can re-invest this money in a new position or strengthen an existing promising one. Most of your other positions will remain the same, waiting for their time. You somtimes will have to cut your losses on a bad position. But thanks to cost averaging, your losses would not be as bad as they could have This help you optimize your profit as you sell when the market is up and minimize your bad luck thanks to cost averaging.

Pretty straight forward concept isn’t it? And the great part is that once nicely set-up, it work on its own. Select the right platform to invest with. Choose a few markets / funds that you like. Arrange for a direct transfer to buy your shares / funds once you receive your monthly income. Sit back in your chair, and simply wait a few months before reviewing your positions. No magical tricks, simply a nicely set up strategy which you stick to.

N.B. 1 - These strategies will bail you out of a declining market, you will still lose money. Nor will it get you fully invested in the earliest stage of a rising market. But you don’t have to ask yourself when to start. Tomorrow is as good a time as ever. It even is better than the day after as you can rip the benefits of your commitment earlier!

N.B. 2 - My crystallization strategy is quite different from the common one. To read more on the common meaning of crystallization in finance I invite you to check the following Investopedia article.