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How to Choose an Offshore Broker

By Don Freeman
As an expatriate, there will be a number of important considerations to consider before choosing an offshore broker or a custodian to hold your investment assets. At the same time, you will need to keep in mind that not every offshore broker will be able to offer a perfect solution for all of your needs - especially if your financial situation is overly complex or unique. However, these considerations are the most important ones:
Regulatory Oversight. Offshore jurisdictions offer varying levels of protection for expat clients of offshore brokers and this level of protection can be different for someone who is a local verses a foreigner. Moreover, don’t take any offshore broker’s word for it that they have all the proper licenses in their respected jurisdiction to do business. Instead, check with the appropriate regulatory authorities yourself to confirm they are in good legal standing and don’t have any serious complaints filed against them.
24/7 Access and Support. Given that there could be significant time differences between your physical location and the broker’s location, you need to make sure they can offer 24/7 online access (baring reasonable amounts of system “downtime”) and telephone support. And if 24 hour phone support with a live human being is an unrealistic expectation, then you need to make sure that they can offer you voice support at a reasonable hour given you location or potential locations (e.g. when you are visiting your home country and when you are abroad).
Financial Product Availability. At the very least, your offshore broker should be able to offer you stocks that trade on major global stock exchanges (e.g. NYSE and the NASDAQ), individual fixed income investments, low cost ETF fund products (as opposed to just managed fund products which tend to have higher fees) and money market type of funds. You should also be able to buy and sell these products online and by yourself without having to call someone to place a trade.
Account Transparency. You will need to make sure that your offshore broker provides quarterly or monthly statements and account balances and positions can be accessed online daily. Statements and online accounts (at a minimum) should detail any transactions, distributions and any and all fees, commissions or foreign taxes paid as you will likely need all of this information to prepare your income taxes. Finally, you need to know the procedures, any fees and how long it will take to transfer funds in and out of your account. Most importantly there should be no restrictions or lock-in periods to redeem your funds.
Account Maintenance Fees and Commissions. In addition to the usual trading commissions generated when investments are bought or sold, your offshore broker may charge fees for opening, transferring or closing accounts; for accounts that fall below a certain minimum values; for accounts that have no trading activity; or for any number of other reasons that should be clearly disclosed in a fee schedule.
Special Considerations. If you are an American citizen, there will be some special considerations as the offshore broker may not even want you as a client while using a broker based in some jurisdictions known to be tax havens or so-called “money laundering” centers may invite extra scrutiny from US regulatory authorities. Moreover and if your financial accounts in foreign jurisdictions are worth more than $10,000, you will need to complete a Foreign Bank and Financial Accounts (FBAR) report to report those accounts to US financial regulators. In other words, you will need to check with a tax accountant or financial advisor who understands expat tax and financial reporting issues for American citizens.
Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket and Chiang Mai, Thailand. He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: [email protected]

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How to Choose an Offshore Broker