10 things I wish I had known 15 years ago

We live in a changing world. What do I wish I had known 15 years ago, that would have helped my income and wealth?

1.Anybody can get rich investing

It only requires a middle-income or better, decent spending habits and excellent investment discipline – market timing and most forms of stock picking don’t work.

2. People won’t steal and implement ideas

Many people are paranoid about sharing ideas. They assume that the world is full of proactive types, who will suddenly steal their lunch. It isn’t true.

The world is actually full of procrastinators and people who are resistant to change. Most people will just appreciate that you are giving, rather than just focusing on taking.

3. Forget about industry norms

Norms mean normal. Normal actions will lead to normal results. Extraordinary results require breaking norms.

4. Older people in an industry won’t always outperform

Wisdom comes with age, right? Well yes, but as Buffett has said many times, lifelong learning is key. What was relevant in 1970 didn’t always work in 2012. What works in 2019 might not work so well in 2020, or 2030.

And besides, many older workers struggle to adapt to changing times or are obsessed with industry norms.

A small percentage break this mould. They are worth their weight in gold as mentors. They are experienced and have adapted themselves.

5. Business is not best done face-to-face

Everybody knows that business online is cheaper for the consumer. Faster. More efficient.

Safer in fact, because an online business is less likely to go bust. Despite these facts, many people in countless industries, still preach that business is best done face to face.

We live in unprecedented times. The internet has been around for decades now, but most people only used the computer for word and excel documents in 1999-2000.

Even in 2003-2007, many people had slow internet connections. People who bought online only tended to use big brands like eBay.

I remember even as late as 2009, a family member commented to me that she wouldn’t trust an online bank!

Seems like a generation ago, but it was only 10 years ago. The fact is, that in the last 5-10 years, people are doing more and more online.

The first thing that most people do is Google now, and look for online recommendations.

People want credibility, safety, speed and traceability. They don’t want loads of wasted time.

6. Anything can work and this leads to confirmation bias

Many experienced people in all industries, have struggled to adapt to the last point. They still cling to the idea that business is best done face-to-face.

They go to the same events, and use the same business tactics. One reason for this is confirmation bias.

What do I mean by that? Everything can, and does work, from time to time. Even techniques that are clearly not efficient or sensible, like mass emailing and spamming people, may occasionally work.

It is very true that some people still prefer face-to-face in business. That is irrelevant. What is relevant is, what are the net results?

Let me give you a simple example. A real estate agent who is making $200,000 a year, makes some changes.

They save time by doing business online. They eventually generate $400,000, and give the client cheaper services, due to the lower costs.

So business has doubled. Does that mean that 100% of people are happy with the new approach, and they haven’t lost one sale from the new approach? Of course not, but in net terms, business is better.

Conversely, what happens with many experienced people who are resistant to change, is they think about a specific client.

Oh George, he would never do business remotely! Some clients, like George, will always want face-to-face!

But again, that is irrelevant. Just because you miss out on some pieces of business, does not mean that the net results are bad.

7. Credibility isn’t always related to size

We live in changing times. People are more cynical about big companies, and big business.

I, for one, would much prefer to deal with an individual or a boutique firm with specialist knowledge, than a big corporation.

I don’t want to feel like customer number 10,240. I want to feel I am important, as a customer, to the business I am dealing with.

I also don’t want to deal with anybody who uses business cards, wears ties or has a corporate act. Many people feel the same.

8. You don’t have to be all things to all people

As I pointed out in a previous blog, defining the ideal client is key. For me, the ideal client sees the benefits of efficient and online communication.

They are trustworthy, trusting and want to invest for the long-term, as opposed to the short-term.

9. Nobody cares

People out there don’t care about your qualifications, or how you are dressed. Or anything else. Nor do they care about me.

They are just thinking, what’s in it for me? Most of my clients want good and safe long-term returns. They want speed and convenience. They want regular communication. They don’t want loads of paperwork.

I want the same things when I am the consumer. I wouldn’t even notice if the waiter at the hotel has holes in their shoes…..and nor would you.

And yet so many people are worried about putting on an act for others in business, going through pointless rituals.

10. Ideas don’t matter

Execution matters. Everybody has millionaire ideas. Making them happen is what counts.

Ideas, moreover, don’t sell themselves. Nor do great products or services. Does Apple create the best laptops?

No, but they make the process easy for the customer. They know how to market, brand and sell.

Structured notes; pros and cons

Structured notes are complicated, but widely sold, investments in the expat market. This article will example these investments in more detail.

What are structured notes?

A structured note is a financial derivative that tracks certain assets. They claim to be able to protect investors from the downside of markets.

They typically track numerous asset classes for a period of time and have something called a protection barrier and coupon trigger or investment yield.

For example, a structured note could track 4 indexes. In this case let’s give an example of the UK FTSE 100, the US S&P 500 Index, the Japanese Nikkei and the Shanghai Composite Exchange.

The note may last for 5 years, from 2019, until 2024. The notes pay out 2% quarterly (this is the coupon trigger or the investment yield), so 8% per year.

However, the investor only gets this quarterly payment, if the investments don’t fall below 20% of their original value.

If any of the investments within the note fall below 20% during the 3 month period, the investor doesn’t get the payment, even if the other 3-4 assets have risen in value!

The note is also protected, up to a point. So, in this case, the client gets their money back, at the end of the 5 years, provided the markets don’t fall by more than 35%.

In many cases, if even 1 of the 4 or 5 underlying investments falls below the 35% barrier at matruity, the investor can lose a lot of money.

The above is one example (in this case based on indexes) of how structured notes are used. Many other notes track individual stocks, commodities and other assets.

They are all based on the same principles though. Downside protection and the chance to make yields.

What’s not to like? Provided markets don’t fall more than 35%, you don’t lose money AND you will get many 2% quarterly payments?

Well it isn’t that simple. This article will explain this in more detail.

What are some of the negatives of structured notes?

The above example shows how complicated structured notes are. You should also be wary of complexity, as opposed to simplicity.

Many structured notes may have a 35% protection barrier, but remember that still has a significant currency risk, especially as it only requires 1 asset to fall significantly.

Take the last 5 years as an example. The FTSE stock market didn’t fall by 30% after Brexit in British Pound terms, but did in US Dollar terms.

In fact, many currencies have fallen by 20%-30% in USD terms in the last 5 years . So all of a sudden, that 35% protection barrier doesn’t seem safe.

All you need is a 15%-20% devaluation + a 15%-20% falls in the stock market to breach the barrier, or indeed a 35.1% currency depreciation and 0% stock market growth.

In addition to that, structured notes have the following negatives;

  1. They don’t pay dividends. This is huge. As per the chart below, dividends have historically accounted for a huge part of the S&P’s historical performance:

2. Liquidity. It isn’t easy to sell structured notes early, unlike liquid funds.

3. Hidden costs. A lot of structured notes have hidden costs, and indeed, hidden risks.

4. They can completely fail. If the issuing bank fails, an investor could lose all of their money. A guarantee is only as good as the guarantor’s ability to keep to their promises.

Let us not forget that Lehman Brothers produced a lot of guaranteed products and notes.

So in the same way that a debt promise made by the US Government is worth more than the Zimbabwean Government, which is why US Treasury Bills pay so little interest compared to emerging market debt, this risk level varies.

A structured note issued by Goldman Sachs or HSBC, is worth more than one offered by a tiny boutique bank in a developing country, without proper regulation.

In comparison, an investment like an index fund can’t completely fail, unless there is a nuclear war and stock markets no longer exist……

5. The assets that are typically picked, within this note, can cause losses. To give the structured notes their price, 1 of the assets from the 4-5 assets, tends to be riskier. This significantly increases the chances of missing coupon triggers and maturity payments.

Remember if your note is based on the aforementioned 4 assets, you could lose money even if 3 of the markets have increased in price by 50%, by one has fallen by 35.1%.

6. Markets like the US S&P have historically given 10% returns. Granted, this is merely a long-term average.

Between 1985 and 1999, and 2009-2017, markets have exceeded those averages. Likewise, from 2000 until 2009, markets didn’t meet these averages.

Nevertheless, you have to remember that getting 7%-8% sounds good, but in reality is below market returns.

If you miss some of the quarterly payments, you could end up with 5% or less, for taking huge risk.

I am not suggesting that 100% of structured notes are awful. Some are riskier than others.

Some very sophisticated investors have used them well. If they are 5% of your total wealth, you probably aren’t going to have many products.

In general, however, there are more sensible ways to manage your risk than this. Being long-term (time in the market as opposed to timing the market) and having a greater government bond exposure, are all tried and tested ways to manage market risk.

So why are structured notes popular?

There are two reasons. The banks and some other financial institutions can make a lot of money from these notes.

They are, therefore, aggressively sold by some institutions. Secondly, they have a captive audience with some investors.

Because losses are more painful than gains are pleasurable, many investors don’t want to invest in the stock markets at all.

This isn’t sensible, because long-term, stocks have always gone up in a big way. Many new and inexperienced investors, are sold the idea that they can have their cake and eat it.

Get 70%-80% of the potential market gain, whilst having downside protection. In reality, there is no such thing as a free lunch.

Where are structured notes typically sold?

They are widely sold in the expat markets, within lump sum products, as the article below explains in more depth. They are also sold in other onshore markets, focused on the local populations.

Conclusion: are structured notes a good investment?

In general, no they aren’t. Those that have them in their portfolio, should consider an alternative investment, once the investment has ended.

What are portfolio bonds for expats + what are th​e positives and negatives of these investments?

The following article will introduce the subject of portfolio bonds and the positive and negatives associated with them.  I will touch on whether they are good investments or not, and what you should do if you have one, and are unhappy.

What are portfolio bonds?

Portfolio bonds aren’t linked to `bonds` in the typical sense of the word – they are not government or corporate bonds. They are umbrella products, that can hold almost any investment asset, and proportion to be tax efficient investment wrappers.

Portfolio bonds are typically offered by insurance companies in the expat market.  Many of these life insurance firms are usually domiciled in the Isle of Man, Guernsey, Jersey, Luxembourg, Dublin, Bermuda, Cayman Island and other tax efficient locations for expats.

Portfolio bonds are available in a wide range of currencies.  USD, Euros, British Pounds, Swiss francs and Japanese Yen are just some of the currencies on offer.

Where are portfolio bonds typically sold?
Worldwide.  However, they are sold more extensively in cities with many expats. Dubai, Amsterdam, Qatar, Singapore, Shanghai, Bangkok, Switzerland and Hong Kong are just a few examples of cities where portfolio bonds are typically sold.

What investments can be held within portfolio bonds?
Each provider has their own investment rule.  Numerous providers can accept almost any asset class, including;

Individual shares 
Index funds 
Mutual funds 
Corporate bonds 
Unregulated investments 
Structured notes 
REITS and other property related investments 

How are portfolio bonds set up?
Typically clients need to produce anti-money laundering documents such as proof of address (dated in the last 3 months – such as bank statement or utility bill) and ID, alongside an online or paper application form. 

After getting accepted and funding the case, you are a client of the life insurance firm.  The broker is just advising you, for a fee, and isn’t holding your money.

What are the advantages of portfolio bonds? 
For expats from numerous countries, there are some tax advantages. This is especially the case for British expats.

Portfolio bonds are usually tax-deferred, meaning that you can time your withdrawals to be tax efficient.
Often times, investors can take out 5% of a portfolio bond every year, without incurring tax penalty with the UK tax authorities, HMRC, up to a maximum of 20 years.

Many expats also use trusts to pass on their nest eggs to the next generation, in a tax efficient manner.  
So portfolio bonds can be used as a legal way to minimize, or completely avoid, UK inheritance tax.

Furthermore, if you move back to the UK, the income on your investments are taxed according to your income.  So if you have moved into a lower tax band by this stage (in retirement) you may minimize your tax bills.

Australians investing in portfolio bonds also have some tax advantages.  

What are some of the problems with portfolio bonds?
Whilst portfolio bonds can be excellent cost and tax efficient investments, they can have the following issues;

Costs– Some of the older and more well-established life insurance firms, tend to sell expensive solutions.  If you add in the management fee from the broker and fund fees, this all adds to cost.

Risky investments – structured notes, and some other risky investments, can destroy a portfolio, if not managed correctly 

Because costs vary fantastically between brokers, life insurance firms, and funds within the bond, expat client A can be paying more than expat client B.  
Let’s look at two examples;

Glenn, living in Dubai, invests $100,000 with a newer, cheaper, life company using the tax efficient wrapper.  He pays 1.2% per year costs + 0.1% for index funds.

He could be paying 3x-4x less, than David in Singapore, who is being charged 2% by a more traditional and expensive life insurance firm, 1% management fee from the broker + `hidden fees` from the investment funds.  

Can expats move with their investments?
Yes, they can.  Usually, expats can move their investment with them.  Exceptions exist, and independent tax advice is sometimes needed.  As a generalization, expats moving to America should be particularly careful about continuing to contribute to investments, due to tax laws bought in since 2014.

Should Americans invest in portfolios bonds?
As a generalization, the answer is no.  In the last 4-6 years, the laws have become more and more restrictive for American expats.

This also applies to joint passport holders, Green Card holders and American taxpayers.  

Portfolio bonds and SIPPS/Qrops 
People that have worked in the UK, even if they aren’t British, have often been advised to transfer their pension overseas.  Often called QROPS and SIPPS, this allows the formerly UK-based expat to transfer their pension overseas.

Whilst this does have numerous benefits, especially for bigger pension pots that would be subject to UK inheritance tax, some of the same issues exist here. 

In particular, adding pension trustees to the equation adds an extra layer of fees; the trustee fees.  So investors now have the life insurance fee, broker charge, fund charges and trustee fees.

This can amount to up to 4%-5% a year in some cases.  Therefore, to make this structure worthwhile, investors usually need to:

– Invest with cheaper funds and indeed life insurance firms to minimize costs 
– Have an investment pot worth 150,000GBP or more to make the fees worthwhile.  As some of the fees are flat fixed fees, the charges are too expenses on smaller accounts.  Ultimately, a 1,000GBP trustee yearly fee is 2% of a 50,000GBP account, but 0.1% on a 1million account.  

Are there usually charges for getting out of a portfolio bond?
Yes.  When a portfolio bond is set up, an establishment fee is typically applied.  This establishment fee is gradually applied against the policy.

So for example, if an establishment fee of 7%-8% is applied against the policy, you may be charged 1.2% over 10 years.

If you want to withdraw, you can usually take out 70% or more of your policy, free of charges, assuming that you keep the minimum balance in the account.

So on a $100,000 account, you may be able to withdraw $70,000 or more, on day 1.  A charge will apply on the remaining balance, of $30,000 in this case.

This charge will apply on a sliding scale.  In year 1, a 10% charge on the $30,000 may apply ($3,000), and the charge will gradually be reduced over the 10 years.  This is merely an example, as each provider has different rules and regulations.  

Beyond that, some funds within the bonds have minimum investment periods and lock in, whilst other funds have no charges for getting out.

Is there a maximum amount I can withdraw from the policy?
Yes.  Some providers have a $20,000 minimum, whilst others have a higher minimum.

If I am unhappy with my offshore portfolio bond, what can I do?
There are a number of options.  You can either exit the bond entirely, change the investments and/or transfer to another broker, who will hopefully manage your portfolio in a better way.

Have you ever taken over people’s portfolio bond investments?
Yes frequently.  In fact, as per the article at the bottom of the page, many people approach me with underperforming existing investments.

Can I invest directly, without a broker?
Some portfolio bond providers allow you to self-invest. Others do not. It depends on the provider and its rules.

If I decide to top-up my existing policy, can the charging structure for the additional premium be different to the initial premium?
Most providers allow different charging structures for top-ups. So if a 7% establishment charge was implemented on day 1, as an example you can pick a lower charge for top-ups.  

Will the policy become cheaper over time?
Yes.  After the establishment charges are all paid for (after year 5, 8, 10 or 14 typically – again depending on the provider and the charging structure chosen) you no longer have to pay the yearly fee associated with the establishment charge.

That doesn’t mean it has become a free policy, of course.  It has merely become cheaper.  Fund and broker fees still apply, which can cost from 1%, all the way up to 5% a year, if you include hidden fees.

When are the charges taken out? 
Some fees are taken monthly, and others quarterly and yearly. Most are quarterly or yearly.

Are portfolio bonds good investments?
It depends on many factors, including your tax situation and how you are invested. As per the article below, some of the old-school providers offer products which are expensive.

This tends to eat into the benefits, including tax benefits, of the product.  In comparison, a small percentage of portfolio bonds are good value, especially if you are invested in low-cost funds, such as index trackers.

As a generalization, some of the newer providers are cheaper, as they can’t rely on brand names to sell expensive products.

What are the best offshore bond providers?

That depends on how much money you have, your country of residence, and many other factors.

Offshore bonds and Brexit – what will be the effect?

Nobody knows for sure.  Some providers, however, have written to clients saying the bonds will no longer be covered by the Financial Services Compensation Scheme (fscs). 

This won’t affect clients whose money is in Bermuda, Cayman Islands or any other place that has a segregated account system.

The segregated account system negates the need for a guarantee from the British Government.  

What are the benefits of offshore bonds for Australian expats?

Like British expats, there are some taxation benefits for Australians living overseas. For Australian Citizens, it is tax efficient to hold an offshore bond for 10 years or more.

The criteria are that no withdrawals are made during this 10-year period and that further investments into the bonds do not exceed 125% of the previous year’s contributions. 

What are your contact details?

[email protected] is my personal email address.  I am also available on numerous apps, as per the contact me part of my website.

Further reading 

For those with existing portfolio bonds, and SIPPS/QROPS, you can read the review article below. The article is especially useful for those that aren’t happy with existing returns.    


Regency for Expats Review

In the UK, Canada and a few other countries, health insurance is a luxury. For many expats in developing countries, in comparison, health insurance is a necessary evil.

It is a way of protecting wealth, and avoiding losses from huge unexpected healthcare bills.

With that being said, health insurance isn’t an investment. You don’t get rewarded by investing more. Therefore, you should get the most covered, for the least possible cost.

Countless of my clients have needed to withdraw money from financial accounts, to cover unexpected medical emergencies.

Today I will review one of the most up-and-coming health insurers in the market; Regency for Expats.

Who are Regency for expats?

They are an insurance company that focuses on health and life insurance for expats in particular.

Where are Regency for Expats sold?

Worldwide, but typically in parts of the world with high concentrations of expats. Examples include Singapore, Thailand, Dubai, Qatar, Abu Dhabi, Vietnam, China, Hong Kong, Peru, Argentina, Brazil and numerous countries in Latin American.

What are the positives about Regency for Expats?

There are countless positives about the policies including;

  1. Low premiums relative to benefits
  2. They can accept people with pre-existing conditions, but they don’t cover those conditions. For instance, if you had a heart attack before, you can still get covered, but you won’t get repaid if you have a heart problem.
  3. Great record in terms of paying out claims and accepting people quickly.
  4. No need to go for medical exams for health or life insurance.
  5. The application process is easy and straightforward. Usually takes 24-72 hours.
  6. 24-hour multi-lingual support
  7. Countless packages are available. So you can get basic coverage, which includes outpatient, and the cheaper packages that just include impatient.
  8. Policies can be transferred worldwide, if you move country, with the exception of the USA

What are the negatives about Regency for Expats?

  1. You can’t get covered after 70 years old unless you are an existing client.
  2. You can’t get covered for pre-existing conditions. You will get accepted, but the coverage will exclude those conditions.
  3. You don’t need to have a medical examination for life insurance below $350,000, however, you do for larger amounts.

Do you offer insurance?

My main service is financial services, however, I do help expat clients with financial planning more generally.

Can you offer any discounts?

Yes, often times it is possible for me to provide discounts, making it cheaper than the prices you may receive online.

How can I contact you?

[email protected]

Further reading

Expat investing

The World’s Highest Interest Rates – Offshore Banks in 2019

Everybody knows that interest rates are close to 0% in most developed countries, at least in real terms.

Even in the US, which has been pushing up interest rates recently, the 2% base rate barely covers inflation.

Many expats , and indeed locals, are looking for alternatives. Most of the high-interest rate alternatives are in developing countries.

This isn’t a free lunch. In fact, you often are facing numerous risks, including;

  1. Currency risks. Interest rates have been very high in South Africa and Brazil in recent years, but the currencies have fallen hard, especially against the USD, but even against the Euro and British Pound
  2. Government/economy risk. Most developing countries can’t guarantee deposits in the event of a banking crisis.
  3. Political risk. Compared to developed offshore jurisdictions such as Isle of Man, Puerto Rico and some others, many developing countries regularly change rules about money movements, especially if there is a political backlash against hot money being moved in to buy property, using bank accounts.
  4. Institution risk. This is especially the case for small local banks, as opposed to Western banks operating subsidiaries in developing countries. The banks may collapse, with the government unable to bail them out.
  5. The relative risk of losing out. 5% may sound good, but the historical returns on the US S&P and Dow Jones have been 10% in USD terms. The volatility is just more prevalent, meaning 10% is merely a historical average. Therefore, using a deposit account for 3-6 months expenses makes sense, but not for long-term investment money (meaning those with 10, 15, 20 year + timeframes). The difference between getting 4%-5% and 10%, could be millions over a lifetime, even on relatively small amounts of money.

With that being said, what countries offer some of the best rates on bank deposits? In no particular order I have listed a few below:

  1. Cambodia

Cambodia uses two currencies, the USD and Cambodian Riel, which has been relatively stable against the USD.

Many well-known institutions, such as New Zealand’s ANZ bank, serve Cambodia. Typically, interest rates are around 4.5%-4.75% for 1 year deposit accounts, and 6.5%+ on Cambodian Riel accounts.

Those rates increase if you lock away your money for a number of years.

2. Georgia

Georgian banks offer up to 9.4% on short-term interest rates on the local currency, and it is one of the easiest places in the world to open up bank accounts.

Some Georgian banks have recently lowered their deposit rates on USD accounts, however, which is ironic given that interest rates in the US have gone up!

3. Turkey

Anybody who has been watching the news in the last few years, would have seen how volatile the situation in Turkey has become.

Turkey is a great example of the aforementioned risks; local banks offer as much as 15%+ on the local currency.

Turkish banks have also made it more difficult to fly and buy, meaning that the procedures for opening up accounts has become more difficult.

Remember, however, that depositors in Turkish Banks would have lost money in USD terms, in the last 5 years.

4. Argentina

Another country with huge inflation and currency fluctuations, Argentina offers depositors up to 20% on the local currency.

Given that inflation is currently 27%, and the currency has been in freewill against the USD, however, and this isn’t as good a deal as it first sounds.

5. Armenia

Armenian banks do not offer high interest-rates in USD-terms. They do offer good returns on the local currency – the Armenian Dram.

Opening up accounts in Armenia, like Georgia, is much easier than some countries on this list, like Turkey.

6. Mongolia

Mongolia used to be praised as a country with an easy account opening system. That appears to have changed. These days it is known as a country known for difficult bank opening processes, Mongolia offers interest rates of up to 14% on Mongolian Tugriks, and 4%-5% on USD accounts.

7. UK overseas territory

UK overseas territory doesn’t offer the best interest rates in the world. But if you are an expat, and want a safe way to earn 2%-3% on your savings, in a regulated framework, this is the best option for most people.

Many Isle of Man banks, moreover, do allow accounts openings to be done remotely, meaning you can send off the paperwork. This is a significant advantage over some of the fly and buy destinations, which requires a physical visit.

Account minimums can be as low as $4,000-$6,000, depending on the provider. Due to FATCA, most American expats cannot open accounts in these jurisdictions.

The process of opening accounts for expats, and others, can be straightforward or long, depending on many factors.

Typically, numerous documents are needed, including proof of address and identity, and even more documents if you want to open up a company account offshore.

As the above lists shows, it isn’t easy to find a country to deposit money which is safe, straightforward and convenient, and with good interest rates.

Isle of Man offers convenience, safety and convenience, whilst some of the countries with high interest rates don’t have the security and convenience – often requiring in-person visits.

There are many benefits to offshore banking, especially for expats, but it is best if banking is used for transactions and short-term cash flow, compared to low-cost investing in index funds and other investments.