Taking your money offshore is easier than you think
Holding an offshore account comes with the benefits of diversifying your investment portfolio, managing risk, as well as potential tax breaks. If you live in an emerging market like South Africa, you need to weigh up the cost vs benefit of taking your money offshore.
If you are interested in diversifying your current investment portfolio and managing your risk profile, it may be worth exploring an offshore structure that is tailored to meet your future financial goals.
How much of your wealth should you move offshore?
My rule of thumb is to ensure that any domestic liabilities, you may have, are covered by funds retained in the currency of the liability. For example, if you have a bond in South Africa, make sure that you keep sufficient funds in your South African bank account to be able to service the monthly bond payments. You want to avoid having to transfer money out of your foreign bank account and thus avoiding being subject to transfer costs and exchange rate fluctuations.
What are your offshore investment options?
Of the numerous ways of which to invest offshore, in my opinion, there are two possibilities at the top of my list:
Invest through a local institution that has an offshore fund division. An example of this would be a local financial institution who, through their local products, allow exposure to offshore investments. A benefit of this option would be that it facilitates international exposure for a smaller investor and is a cost-effective strategy for diversifying your local assets.
Invest through an offshore institution for example an international bank or a professional investment service provider like Cannon, where you can utilise your Reserve Bank allowance system. The benefit of partnering with an offshore institution is the level of expertise and the ongoing exposure to global portfolios. Dedicated investment institutions also have access to a network of turnkey service providers to ensure all your offshore financial investment needs are addressed.
What can your offshore portfolio look like?
Your portfolio will be structured depending on your risk profile, preferences and financial goals which can be either a widely diversified or a concentrated portfolio. For example, your portfolio can be structured for only geographical or sector-specific exposure etc.
Depending on your objectives, there is also the opportunity to arrange your investments through structuring, such as an offshore trust. As everyone’s requirements are specific and personal them, a decision in setting up such a structure requires an individual suitability analysis. As this is an important consideration, I will be exploring this in more detail in an upcoming article. The article will be addressing important factors to consider such as your family profile and the opportunity to manage certain tax implications.
Over the years and with changes to legislation, there has been a demystification of the investment and tax implications of having an offshore trust. Therefore, depending on your personal circumstances, your tax advisor or an advisor which we can recommend will be able to indicate whether an offshore trust as an investment vehicle would be advantageous in terms of your own and family circumstances.