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Shanghai Expat Forum Index » Hot Topics Forums » Visas, Taxes, and Legalities

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M4Succubus

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Joined: July 29, 2004
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Posted: Apr 20, 2005 - 04:56 AM
Post subject: Offshore investment advice

I've engaged one of those offshore investment firms. This one is www.offshore2online.com. I need to get my money out of my bank account and earning something and they are recommending that I open an account with Zurich International Life and use that to invest in an AIM fund, which is a consensus managed fund.

Anybody have any comments on these guys and whether this is just a scam? Is there a better option? Anyone have any good/bad experiences?

Thanks.

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 20, 2005 - 07:34 AM

I wouldn't be too concerned about that. I took a couple of products out with the same company about a year ago and the returns so far have far exceeded what I would have got in the bank. What made me go with these was that they actually listen to what my situation was as recommended products accordingly. I was originally going to go with my bank (HSBC) but they gave me bad advice and only recommended the product which gave their guy the highest commission.

And of course your money will be with Zurich which are a big company.

mgn44

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Posted: Apr 21, 2005 - 01:12 PM

Let me declare an interest at the outset: I am an independent financial adviser based here in Shanghai. I'm not associated with this company but it won't be a scam. People are often surprised by the potential returns available from offshore products and services largely because they have become accustomed to the dire returns offered by their bank or the lack of choice and sophistication of onshore products and services. As a rule of thumb, if you don't understand what you are investing in ask some more questions until you do understand. If you still don't understand or are not entirely comfortable look at alternatives. There are a number of options you can look at but I would not presume to offer any suggestions simply because I have no knowledge of your personal situation. If you would like to have a chat, feel free to contact me. The whole industry is predicated on reward by commission and with the exception of a few products it's a fairly even playing field in terms of commission. The adviser who recommends on the basis of his own self-interest will enjoy a very short career.

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 21, 2005 - 01:40 PM

I think you are right in what you say. Everyones situation is different and I wanted an advisor who showed that they understood my particular situation. I think a lot of people just consider that these types of offshore investments are either too complicated, for a few very highly paid individuals or else they are dodgy and not to be touched. I am only a mere engineer but after a lot of research this seemed to be the way for me to go in the medium term.

mgn44 wrote:

The adviser who recommends on the basis of his own self-interest will enjoy a very short career.

There were a lot of self-interested advisors around in the nineties however and this has scared investors away a little IMO.

mgn44

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Posted: Apr 21, 2005 - 04:44 PM

Cowboys can be found in any industry but you will see from my graphic that I'm an honest Indian!

timwin

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Joined: Apr 21, 2005
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Posted: Apr 21, 2005 - 05:50 PM

I have to say that I learned from bitter experience to be wary of "managed funds". I mean, it gives quite a cosy feeling, the idea that you have expert fund managers working on your behalf somewhere to invest your money for you. But you may need to consider that there are limits to what they do. For example, if you buy into an equities fund, then your money will be pretty much fully invested in shares. The fund manager will just adjust the composition of those shares from time to time. But if the stock markets as a whole are in a downward cycle, you're still going to be fully invested in shares. If you're lucky, the fund manager might shift you into shares which are falling less quickly than others.
I say this because I moronically invested quite a bit in managed funds at the top of the market. I just assumed that since the fund managers were smart guys with phone-number salaries, they'd know enough to get out of stocks when they started falling. So it came as quite a shock to find that I was fully invested in equities all through the market collapsed. I reckon I'll probably be retired by the time my funds get back to the price I bought them at.
The other thing to remember is that financial advisors generally only advise you to buy investments that they can sell to you. They wouldn't, for example, tell you to buy a house or gold or commodities, even though these have performed far better than equities in recent years.

So my advice would be:
1) Ask your financial advisor if he/she can suggest to you a fund that is structured with enough flexibility to let the fund managers use their common sense. They need to be able to shift out of something that's falling into something that's rising. If you have a pure equity fund or a pure bond fund, that may not be possible.
2) Think carefully about the timing of your investment. People are already warning about bursting property bubbles, declining consumption and higher interest rates. Is this really the right stage in the cycle for the investment you're looking at? eg. have a look at this article from the economist:
http://www.economist.com/agenda/displayStory.cfm?story_id=3886356

I'm not going to tell you how much it cost me to learn this advice.

Good luck,
Tim

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 21, 2005 - 06:26 PM

Tim, I agree with a lot of what you say. I really don't like managed funds but that is mainly because of the charges. As returns are relatively lower these days then an extra 1 or 2% on top for the "managed" part can really eat into any profits over time. I read somewhere that simple index trackers beat around 80% of managed funds. After all someone has to pay for those phone number salaries you mention.

With regards to your last point about interest rates and property bubbles etc I tend to look at it the other way. If people are gloomy about equities then the prices are likely to be comparatively cheap now. Look how many people went into the market at the end of the 90's when prices by most counts were expensive.

Sorry to hear about your losses anyway. I've learnt some similar things the hard way too.

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 21, 2005 - 06:28 PM

mgn44 wrote:

Cowboys can be found in any industry but you will see from my graphic that I'm an honest Indian!

My comment was in no way directed at you by the way!

mgn44

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Posted: Apr 21, 2005 - 06:34 PM

Investing, as opposed to speculating is very simple indeed: you have to be in for the long term and you have to be diversified. This will iron out the peaks and troughs and spread the risk. Falling markets in the short term look scary but in a medium to long term context they are no more than blips. There are excellent reasons for being in equities and although property and commodities like gold can look attractive periodically, you can still lose out without a proper investment strategy. As one who lived through the UK property boom and subsequent bust of the late 1980's and early 1990's I can only reflect that people have very short memories. By all means invest in property but be in equities as well - diversity is key and forget doing anything that relies on, anticipates or requires a short term gain or return - it 'aint going to happen.

Chairman

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Joined: Apr 23, 2005
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Posted: Apr 24, 2005 - 12:31 AM

I use offshore2online also. Definitely not a scam. Their AIM fund is actually a fund switching service that follows a panel of experts rather than an individual opinion. Their advice has been good, they obviously know what they're talking about, and very low pressure. I also got a Zurich plan, a nice bonus to kick it off with, and I can check the value online through their website which is pretty good. Great returns so far. Highly recommended.

M4Succubus

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Posted: Apr 24, 2005 - 09:53 AM

I guess by scam I meant commision scam, not that they were going to run away with my money.

The Zurich fees and AIM fees add up to about 2% annually, which is rather high and probably discounts any offshore tax advantages (if the fund earns 10% annually, that's a 20% tax).

I didn't see anything about a "bonus" to kick of the Zurich plan. Perhaps you work for offshore2online and got a commission refund?

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 24, 2005 - 10:11 AM

Yeah he does sound like he works for the company doesn't he? In which case he should state so.

However I also get a good bonus with my Zurich plan (assuming we are talkiing about the same product). The bonus level depends on the amount you invest. As long as you look at the overall package, fees and bonuses together, then it's a good product in my humble uninformed opinion.

M4Succubus

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Posted: Apr 24, 2005 - 10:31 AM

Yeah, first time poster with one other post, plugging a different product from the same company....

Fine to post, but yes he should state it.

The product is International Wealth Account (IWA). No bonuses that I could find.

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 24, 2005 - 11:27 AM

OK sorry I thought it was another one (Vista). On the website it looks as though the 2% charges include the establishment charge which will last for 5 years or so? So after that it will reduce. Yes you need to add the AIM fees to but I think they are around $100 a year. I don't have the figures with me but I understand that the AIM system has produced returns of something like 13%, 55% and 20% return over the last 3 years (I'm sure our man "Chairman" above can confirm or deny that). Not to say that gives any indication of what is going to happen in the future as they say. Longer time period to invest then the more chance of making money I guess.

mgn44

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Posted: Apr 24, 2005 - 12:10 PM

IWA is a good product and you are paying for it's flexibility, choice of funds, comparative sophistication etc. There are cheaper products with fewer bells and whistles and no establishment charges that are more than adequate to meet most needs. The commission a broker receives on this type of policy is not as high and for that reason they may not be in as much favour as other products. That said, you can make a case for opting for what appears at first blush to be a more expensive product if (but only if) there are tangible benefits to the client. Ultimately, the client needs to be the judge of that, I think. Before you guys shoot me down in flames, I declared an interest earlier!

Chairman

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Joined: Apr 23, 2005
Posts: 3

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Posted: Apr 24, 2005 - 12:18 PM

Don't work for the company but am happy with them and happy to say so. They've made money for me. I'm also happy with my accountant and travel agent and not happy with my bank. If I do an internet search on something related to them and come across a relevant post then I will say so. Paranoid lot aren't you? You should get out more. Finally, it may well be a scam and someone representing themselves as offshore2online as I have never paid them any commission. Its covered by the product charges. I've copied my guy in on this and maybe he'll respond to you. Mayber not as I believe he has a life. Now where's the stamp collectors forum?

hammerforlife
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Joined: May 24, 2004
Posts: 2743

Posted: Apr 24, 2005 - 12:31 PM

Chairman wrote:

OK full apology offered Wink

Newbie

Joined: Dec 04, 2004
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Posted: Apr 25, 2005 - 09:19 AM

Gentlemen

The 'Chairman', who is indeed a client and not an employee, suggested I contribute and clarify the points mentioned above.

The IWA is a portfolio bond that offers numerous benefits. These include:
- Zurich International Life is a tax-exempt institution meaning that the growth is free of tax and will provide a better return than an equivalent investment held onshore.
- The investment is held in the AAA-rated Isle of Man which provides worldwide investor protection.
- You can diversify between numerous funds within one investment.
- It is easier to track and value funds when under one umbrella.
- There are no (or low) switching charges when moving between funds.

This last point is very important as the effect of the cost of switching should not be underestimated. If you wanted to move from Fidelity to Jardine Fleming to Merrill Lynch and so on; the typical initial charge when independently entering these funds is around 5%, each and every time. If you had a lump sum investment growing by 10% per annum, and switched all of the funds just once every two years at a cost of 5% per switch, the cost of switching would reduce your return (against an investment that didn’t charge for switching) by around 10% after 5 years. That may not sound like much, but the loss gets larger over time. Were you to keep an investment going for 25 years, a 5% switching charge just once every two years would nearly halve the final return against that provided by an investment without any switching charges.

Now there may well be cheaper products with less bells and whistles but, to use an analogy, if you buy a Skoda then don't expect Jaguar performance. There are also a great many more expensive products. As for portfolio bonds being available with no establishment charges? I don't think so, unless there is a hefty management charge instead. Nothing in life is for free, you get what you pay for.

AIM stands for Active Investment Management and is a fund-switching service, not a fund. It follows the consensus forward view of 25 leading fund managers with a combined 2,000 years experience and US$5 trillion dollars under management. It automatically switches funds for you in line with expert opinion, and is an optional service that costs 1% per annum. The alternatives are following the strategy of a single fund manager, listening to a financial adviser with little or no experience in this area, or doing it yourself. To continue with the motoring analogy, selecting the right vehicle is simply the starting point for, if it's not getting the correct attention and service, then it's not going to get you very far.

AIM has been extremely popular for two reasons. First, it is a proven multi-manager approach that makes good sense. Second, it has returned 92% in a little over two years and has outperformed the FTSE, S&P500, Hang Seng and World Index in both 2003 and 2004. Whilst that is not a guarantee for future performance, AIM displays both an excellent résumé and the tools and logic required to continue to outperform its peers. I should also point out that we provide an online valuation service that allows you to check on the holdings and value of your investment at any time, night or day.

Finally, the Zurich product with a bonus referred to earlier is indeed the Vista. Depending on the amount saved and the term selected, this award-winning product provides a bonus of up to 62½% in the first year.

I hope that answers any concerns. If you would like any more details then feel free to contact me directly at alex.dewit@offshore2online.com

Alex de Wit - Director - Offshore2online - http://www.offshore2online.com

mgn44

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Posted: Apr 27, 2005 - 07:42 AM

Quote:

As for portfolio bonds being available with no establishment charges? I don't think so, unless there is a hefty management charge instead. Nothing in life is for free, you get what you pay for.

Such a beast does exist: no establishment charge, no bid/offer spread, no account fees and an administration charge of 1.2% p.a. which, I think you would agree, is pretty reasonable. When you speak of AIM, I take it you are referring to the Zurich Automatic Investment Strategy? I think AIM has been used earlier in this thread in the context of the Alternative Investment Market - a completely different creature of course (to labour the wildlife analogy)

mgn44

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Posted: Apr 27, 2005 - 07:50 AM

Or maybe it is referred to as AIM in the context of the IWA (7i management) and AIS in Vista - I don't have any brochures to hand. Talk about a can of worms!

Newbie

Joined: Dec 04, 2004
Posts: 4

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Posted: Apr 27, 2005 - 03:13 PM

Administration charge, establishment charge, call it what you will - they are all charges.

So a product with a 7% establishment charge over five years plus ½% management charge for 10 years versus 1.2% administration charge for ten years. There’s no difference.

Add policy management charge, investment dealing charge, currency dealing charge, additional internal mirror fund charges and so forth that a number of companies tack on in the small print and the final picture usually changes somewhat.

Perhaps you’d care to name the product? Always prepared to stand corrected.

That said, it's not just the charges that are important. One must also consider the company offering the product, the quality and competence of their administration, the speed with which they action switches, how they respond to queries, and the systems and reporting structure they have in place. As I mentioned before, we're after best value rather than cheapest. It's our job to perform this due diligence for our clients and another reason for our being recognised as one of the top offshore financial advisories and invited to contribute to leading publications such as this month's Investment International (sorry, it just hit my desk and I couldn't resist).

When we talk about AIM, it stands for Active Investment Management. It’s a fund-switching service performed by and exclusive to Offshore2online, and which has outperformed both of the respected strategies you mention.

Quote:

AIM stands for Active Investment Management and is a fund-switching service, not a fund. It follows the consensus forward view of 25 leading fund managers with a combined 2,000 years experience and US$5 trillion dollars under management. It automatically switches funds for you in line with expert opinion, and is an optional service that costs 1% per annum. The alternatives are following the strategy of a single fund manager, listening to a financial adviser with little or no experience in this area, or doing it yourself. To continue with the motoring analogy, selecting the right vehicle is simply the starting point for, if it's not getting the correct attention and service, then it's not going to get you very far.

AIM has been extremely popular for two reasons. First, it is a proven multi-manager approach that makes good sense. Second, it has returned 92% in a little over two years and has outperformed the FTSE, S&P500, Hang Seng and World Index in both 2003 and 2004. Whilst that is not a guarantee for future performance, AIM displays both an excellent résumé and the tools and logic required to continue to outperform its peers. I should also point out that we provide an online valuation service that allows you to check on the holdings and value of your investment at any time, night or day.

fpihkshanghai

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Location: Nan Jing West Road
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Posted: May 15, 2005 - 07:53 AM
Post subject: Offshore Fund Providers

I have read the replies above with interest and this being a Forum, I wanted to impart a little of my wisdom to share with both the financial professionals on this page and also others that visit in order to gain further knowledge.

There are many Offshore Bonds offered by Offshore Life Insurance Companies and in all honesty, they are all much-of-a-muchness, similar products underneath with different wrappings.

Life Companies cannot offer 'charge-free' bonds because of costs to buy into most Funds - even though it is correct, Life Companies get heavily discounted Fund entry fees, these fees are charged externally to the actual Bond charges.

There is not an Offshore Bond on the market today that allows for no bid/offer spread, no annual management charge and no exit charges together - because once again, where would the Life Companies make their money and still be able to pay IFA's Commission who recommend their products, they couldn't!

You will almost always now in Bonds have no bid/offer spread, annual management charges are similar and exit charges will only apply in the main, to a proportion of your investment if you have to encash it within a given period - usually 5, 8 or 10 years: these figures will differ from product to product.

Bonds should not be viewed as a short-term vehicle which can be used as a trading platform but rather as a longer-term wrapper to encompass different aspects of an overall portfolio (in the main funds) but can also include stocks/shares, unit trusts and other assets.

Zurich and their products have been around years and you will get people who like them, and people who do not. There will be an equal number I am guessing who have made money and an equal number who have not. This usually has nothing whatsoever to do with an annual management charge of 0.8%, 1.2%, 2.5% or 3% - nor does it have much to do with External Fund charges. It has, in the main, everything to do with the Financial Advisor who recommended the product to you in the first place and how "hands-on" that person is in managing your portfolio.

Some Advisors will tell you at the outset that they are not Fund Guru's and will not be managing that portfolio for you. Some Advisors will recommend as form of Discretionary Fund Management (as mentioned) and some Advisors will tell you they are Warren Buffet in disguise and pretend that they will manage your portfolio on a daily basis. Whichever category your Advisor falls into is more than likely to have a very high impact on whether your portfolio makes money or not - as opposed to a percentage-point difference in Annual Management Charges or external Fund charges.

I will close by saying that there are huge benefits to expatriates in using the offshore Life Companies' vehicles, not least being that Life Insurance linked products do not come under the new European Union Directives for disclosure and taxation. Zurich's bonds are fine, as are almost all other Life Insurance Bonds being touted in and around Shanghai - and the rest of the world.

If you want to make a sound investment decision from the outset, forget studying the bonds, the funds and the products first, leave that to second. First, we always suggest that people conduct due diligence on the Independent Financial Advisor that is offering their advice and the products. Ask them how long they have been in Shanghai as an Advisor, and how long the company has been here itself. Ask to see the licence of that company and when translated, check that they are licensed to conduct Financial Services Business here in Shanghai and China.

Ask for 3 references from satisfied clients here in Shanghai, of your own nationality - and check those references out because any legitimate Financial Advisor here would not object to that and would fully understand your reasons for asking.

And finally, before you sign on any dotted line with any Financial Company - not just here in Shanghai but throughout your time as an expatriate and even when you return home - remember that if anything sounds "too good to be true", that is usually because it is either a scam or you are not being explained the product and charges correctly.

There are many good companies in the IFA world and there are an equal number of great products with companies like, and including, Zurich International. These will never let you down on their own. It is the initial advice, explanation of the charging structure and the ongoing servicing of that advice that is of paramount importance and this will be the determining factor that makes/breaks your investment. If you understand what you have, are happy with the goals for your bond and above all understand how that bond will achieve your target goals and have a structure mapped out by your Advisor to do this, then this is the key.

It is such a shame that so many people get 'sold' an investment and then never see or hear from their Advisors again.

I am certain Mr de Wit and other IFA's would back me up on that.