(This article was last updated on January 5, 2023.)
Table of Contents
Custodian Life Background
Who is Custodian Life?
Custodian Life is a fast-growing investment company, which is becoming more popular in the expat market and beyond.
This article will review the investment. If you have a Custodian policy, or have been proposed one and want a second opinion, you can contact me via the WhatsApp function or email me – email@example.com – or apply for my services here.
Now would certainly be a good time to review your existing portfolio, and consider what to do with your spare cash, considering that stock markets are down.
Importantly, this article has been updated. I used to think Custodian was one of the best options in the expat market.
Times have changed, especially in regards to ease and speed of processes. When the facts change, I change my mind. I will explain more on this article.
Where is Custodian Life based and who do they bank with?
Custodian Life is based in Bermuda and bank with The Bank of Butterfield, which has existed for over 150 years.
What kinds of investment vehicles are made available to clients through Custodian Life?
Custodian Life is currently open to receiving a wide variety of investment options, such as securities that are listed and non-listed, commodities, derivatives, mutual funds, and even some crypto. They have a wider array compared with the general international market, which gives them an advantage over the competition.
Product and Service offered by Custodian Life
What is the Exclusive Investment Bond (EIB) Product?
The Exclusive Investment Bond is a product that gives you the ability to assemble a specialized investment portfolio that is designed specifically to meet your requirements.
You have the option of investing in businesses that have a focus in a variety of regions, such as the US, the UK, Europe, Asia, Latin America, the Gulf Cooperation Council (GCC), or the BRIC countries (Brazil, Russia, India and China). You also have the option of choosing investments that are concentrated in a particular industry, such as those in the financial sector, energy, healthcare, or telecoms.
The EIB offers policyholders a versatile method of investing their money that has the opportunity to expand within the medium to long term. It is planned in such a way that it will permit the policyholder’s capital to grow over the course of the policy, while also providing the policyholder with the choice to establish a schedule for making regular withdrawals.
The EIB is a life assurance policy, which means that it remains in effect until the passing of the last person assured. This policy can be written based on:
- Single life – This means that there is only coverage for one person’s life, and once that person passes away, the EIB policy becomes terminated.
- Joint life last death – This type of EIB policy allows for as many as six lives to be guaranteed, and it expires as soon as the last life guaranteed passes away.
Due to the fact that the Exclusive Investment Bond is framed as a life assurance policy, it may provide the policyholder with the opportunity to take advantage of a variety of tax planning perks.
Such benefits may include arrangements that can aid in easing any tax liability that may be incurred upon the passing of the life assured. A life insurance policy may have one or more lives assured, which denotes that the policy will expire upon the death of the individual(s) whose life is under the plan’s coverage.
To ensure that the bond is maintained throughout its term, the policyholder of an Exclusive Investment Bond has the option of assuring one or more lives (up to a maximum of six lives), depending on their preferences. When there is more than one person whose life is guaranteed, the bond will expire when the last person whose life is guaranteed passes away.
After receiving notification and documentation that the last life assured has passed away, Custodian Life will pay out a death benefit equal to 101% of the encashment value as a final payment.
With the Exclusive Investment Bond, the policyholder has the opportunity to enjoy more freedom on investing by diversifying their holdings across a diverse variety of funds and / or assets, in accordance with the policyholder’s preferences, financial targets, and level of comfort with risk.
Any time of the year allows for the payment of additional premiums to be made to EIB. When compared to the initial premium, additional premiums may have a different charging framework, separate agreement periods, as well as different allocation rates.
The cash account must maintain a minimum balance equivalent to three percent of the current worth of your policy in order to maintain the EIB account.
Any time there is a change in the policyholder’s address, place of residence, citizenship, or domicile, Custodian Life needs to be notified as soon as possible just after alteration. This is a necessary step for the lives covered in the policy as well.
In addition, a discretionary manager can be assigned to oversee your EIB policy if you so choose. When one is appointed, a discretionary manager is in charge of purchasing and offloading investments that are related to your EIB policy. They will implement their own fees for carrying out such services.
Who is authorized to use Custodian Life’s EIB Product?
Individuals, corporations, and trustees who do are not considered residents in the United States are eligible to apply for EIB. There are some restrictions that will also be imposed on other countries, so it’s best to get in touch with Custodian Life to double-check.
In order to submit an application for EIB, applicants must be at least 18 years old. The company is unable to accept the application if the youngest assured is 85 years old or older at the time of submission.
Can you invest in hedge funds using the EIB Product by Custodian Life?
You also have the option of investing directly in a hedge fund if you want to make an investment in one of these funds. So, rather than setting up an investment account with Custodian Life, you can choose to wire funds directly to the hedge fund.
The EIB is a financial product that a significant number of individuals utilize in order to invest in hedge funds because it allows for the purchase of certain financial instruments that aren’t available elsewhere.
One convenient location for the management of structured notes, exchange-traded funds (ETFs), stocks, bonds, and crypto is provided by the EIB. On the other hand, you can put these into the stock market by creating an online brokerage account for yourself. Perhaps, setting up an investment account with Custodian Life, which is based in a tax haven, isn’t worth the high fees you have to pay for.
But it is not possible to make investments in hedge funds just through any brokerage firms in your country. If you use the EIB provided by Custodian Life, you will have the ability to put money into superior hedge funds.
Because Custodian Life requires a smaller initial investment to open an account as apposed to other insurance providers, it is much simpler to invest in hedge funds through Custodian Life.
If the minimum investment amount is reduced, then the number of hedge funds in which you will be able to participate will increase. This will make it much simpler for you to diversify your risk and build a better investment portfolio.
Managing your funds, on the other hand, will become increasingly challenging the more money you put into them. Thankfully, you are able to monitor all of your holdings in a consolidated manner using EIB’s management interface.
In addition, Custodian Life will separate the assets into their respective categories, so it will not be possible for hedge funds to execute a discrete withdrawal of your funds. Hedge funds can only provide investment commands like acquiring and disposing stocks. As a result, your property and possessions are safeguarded and secure.
At any time, you are allowed to take money out of the account that you have set up. You are free to make use of the money whenever it is necessary for you to do so.
Can investments be transferred into your EIB policy?
Direct deposits of investments can be made into EIB policies, provided that the EIB is satisfied with the legitimacy of the transactions. Your power of attorney is required in order for Custodian Life to proceed with this transaction, though. As soon as the provider are in possession of all of the paperwork that is necessary, they will transfer in the specified investments.
In addition to the fees associated with the custodian, an administration fee in the amount of $45.00 is assessed for each investment that is transferred.
Does the EIB policy have cash accounts?
There is a cash account associated with every EIB policy, and a single EIB policy can have multiple cash accounts linked to various currencies.
Before being connected to your selected investments, any preliminary premium as well as the investment exchange value is paid into the cash account. The EIB fees are deducted from the cash account, which is also used to make withdrawals, so the cash account serves a dual purpose.
The cash proceeds from the sale of any investments that are connected to an EIB policy will be deposited into the cash account. In the same manner, whenever an EIB policy is tied to a new investment, the amount of cash that is currently available under the cash account will be utilized in order to accomplish this task.
It is essential to keep a positive cash balance in the cash account that’s equivalent to three percent of the total value of the policy at all times in order to pay for any fees and withdrawals. In the event that the cash account has a deficit, Custodian Life has the right to liquidate any such investments to which the policy is tied to in order to bring the account into a positive balance at any time.
When you have a positive balance, you may be eligible to receive credit interest payments, while when you have a negative balance, you will be charged debit interest payments.
When a beneficiary of EIB passes away, what happens to the benefits that have been offered?
Custodian Life said it will do the following upon receipt of a written notice at their office for support and administration of the passing of the last life covered on an EIB policy:
- Halt all regular withdrawals and any other transactions that were set to take place
- Dispose all of your linked investments and add the proceeds from such sale to the cash account
- Calculate the final death benefit under the EIB policy
The death benefit will only be paid out by Custodian Life after receipt of proof that:
- The last life assured under the policy has passed away
- That you, your estate, or somebody else has the legal right to the policy benefits
Custodian Life also said that it will not release the death benefit until all linked investments have been disposed of and the proceeds of those sales have been deposited into the cash account. Before the death benefit can be paid out, it is necessary for the provider’s office for support and administration to first get any additional endorsements that may be necessary.
It is important to keep in mind that despite the fact that it is an insurance company, Custodian Life does not offer particularly generous death benefits.
The EIB that is provided by Custodian Life is not a policy that is considered to be life insurance. It is nothing more than an account for investments. When you pass away, the money that is in your EIB account will be inherited by your designated beneficiaries at a value that is roughly equivalent to the current market value.
What are the charges involved for EIB?
Various fees will need to be paid, and this will be determined by how your EIB policy is structured.
It is possible to pay an establishment fee all at once, over the course of a specified amount of time (the duration of the agreement), or in some cases a combination of the two. If you selected an allocation rate that was greater than 92.25 percent, the establishment fee will be paid in whole, in part, or zero upfront all over the course of the contract.
The establishment fee that you will be required to pay over the course of the contract period will already include interest, and this interest will be amortized during the course of the term of the contract. During the same time period, a fee for early surrender could potentially be assessed.
Annual Management Cost
Custodian Life said it’s a charge that is taken over the whole duration of your policy as a percentage of the policy value in excess of your premium within the contract period and as a percentage of the policy value when the contract period is due.
In addition to the cost for setting up the policy and the ongoing fee for annual management, there is also a flat fee for the policy. This is a set amount, but it is possible that it will be adjusted at some point in the future. It is deducted from the cash account at the beginning of each quarter that marks an anniversary of the policy’s effective date.
The fee is going to be collected continuously up until the point where the policy is no longer in effect.
What factors can affect the charges that you have to pay for EIB?
As a Custodian Life customer, there are two primary factors that will affect the charging framework:
The premiums you pay will cover this time period, which you have selected. In comparison to the preliminary premium, additional premiums may be established with a variety of contract durations.
This is the total premium rate that is applied to your policy which could be lower than or equivalent to a hundred percent. You have the option of configuring the allocation rate of your EIB policy in such a way that the total establishment fee that is associated with the premium is deducted on the date that the policy first goes into effect.
You also have the option of setting an allocation rate that is anywhere from 0% to 100% and spreading out the cost of the establishment fee over the length of time that corresponds to the contract period that you have selected.
Custodian Life Service
If they so desire, each and every one of the policyholders and financial advisers of Custodian Life are given access to their own personal log in account within the so-called Client Manager.
To name a few of the many advantages associated with the Client Manager:
- Available on your desktop computer, tablet, and mobile device at all times
- Available on your desktop computer, tablet, and mobile device at all times
- Will make it possible for you to view all of the open requests pertaining to your policy
- Gives you the ability to view and download valuation statements
- Gives you access to all of your uploaded documents
- Gives you the ability to view all of the transactions that have been made on your policy
What about paying the appropriate taxes?
Custodian Life must comply with the regulations set forth by Bermuda’s tax authorities. Since Bermuda is a tax haven, the expansion of your policy or the income it generates will not result in any tax liability for you.
However, depending on the country in which the investments are located, a tax may be withheld at the source from any income that is generated by those investments. This tax cannot be reclaimed by Custodian Life.
It is possible that you are personally responsible for paying tax, depending on the tax laws of the country in which you reside as well as the particulars of your own financial situation. It is recommended that you discuss the potential tax implications with your financial adviser
What are the positives and negatives associated with Custodian Life?
- The policy is much cheaper than most expat investments. The exact charging structure will depend on several factors, but are nowhere near as expensive as some of the policies I have reviewed before.
- The speed of service is quick. You don’t need to send in physical documents. This means that setting up the policy, adding money and withdrawals is quick and easy. Or at least they used to be quick (more on that later on).
- The minimum premiums are only $30,000, 20,000GBP or 25,000 Euros. Meanwhile, the minimum investment is $3,000, which is much lower than most competitor companies.
- You can hold pretty much any asset on the Custodian Life platform. Individual stocks, funds, professional investor assets and even Bitcoin and several crypto currencies. You can also segregate your assets. For example, you have $90,000 in conventional assets and $10,000 in non-conventional assets.
- The previous point also means you can gain access to investments that are usually reserved for investors with high net worth (HNW). Whilst many private banks require people to invest more than a million dollars in such investments, it is possible to go into these assets with lower account amounts with Custodian Life.
- Custodian Life have partnered with Exante in the EU. This helps an investor gain access to “Custodian Trader” and further increase their investment opportunities.
- Security. Custodian Life have a “segregated account system” which means a client’s assets are held separately from the company’s liabilities. So even in the unlikely event of a bankruptcy, a client’s assets shouldn’t be used to pay off liabilities. This is a much better security than a government “guarantee” that only covers a specific amount of cash.
- There are not usually big penalties associated with getting out of the investment, which is unlike most of the traditional expat investments.
- It is a tax-efficient structure for most expats.
- As most of the procedures can be done without the need for physical documents, it is a portable investment. In other words, if you get a job in another location, it won’t affect your investment as much as some of the old-fashioned providers that require a lot of documents to be sent by post.
- 24/7 online access to valuations.
- Locals and expats can sign up, which is excellent for people who want international solutions, even if they aren’t an expat.
- They can take money from both cash and under-performing investments. In other words, if you have $100,000 in cash and $100,000 with an expensive investment you aren’t happy with, you can make a $200,000 investment. However, it can take 4-8 weeks for cash or assets to be sent from other investment providers.
- Like most other expat providers, Custodian Life can no longer accept American expats, or indeed American taxpayers. So, if you are British, but with an American passport, you probably can’t be accepted anymore.
- As you will go into Custodian Life with an adviser, your mileage will vary. In other words, Custodian is merely “an umbrella” to hold any investment. How that umbrella is used is key. This isn’t a negative about Custodian per see, but merely that your returns will also depend on your advisory company. For example, in the last 12 months markets have been up substantially, but your returns would have depended on the investment decisions made on your behalf.
- As time is going on, they are becoming pickier about processes and compliance. This is slowing down things for clients and advisers alike, and therefore gradually taking away some of the aforementioned positives.
- In addition to the last point, client withdrawals, top ups and admin are now taking a while to process.
- Custodian have had various issues over the years. Some, like using Reyker Securities, wasn’t there fault. Yet these issues have constrained their growth.
Frequently Asked Questions
The following section will answer some frequently asked questions (FAQs).
Is Custodian Life a life insurance company?
Custodian Life is regulated as an insurance company, but it isn’t life insurance in the traditional sense of the word.
Your beneficiaries only get 101% of your account value. So, if your policy is worth $100,000, your beneficiaries will get $101,000.
There are advantages, including tax benefits, of being regulated as a life insurance company, even if the policy is in reality an investment.
What currencies can you invest in?
You can invest in USD, British Pound Sterling, Euros, Norwegian krona (NOK) and Swedish Krona.
However, if you send money from another currency into the USD account, it will automatically be converted. In other words, sending South African Rand into the USD account would be automatically converted to USD, rather than sent back.
What are the minimum top ups?
If you want to increase your investment over time, the minimum increase is $10,000, 10,000 GBP and 10,000 Euros.
Can you invest with a partner?
You can have a joint policy with a husband or wife.
I have been proposed a Custodian Life policy – how do I know the investments held within the bond are sound?
This depends on many things. If you have been proposed a Custodian Life account and want a second opinion, please email me.
What can I do if I am not happy with my policy?
If you want me to review your policy, you can contact me at firstname.lastname@example.org. Realistically, you have three options; change the investments within your policy, surrender the policy completely or partially withdraw from the policy.
As the charging structure in Custodian Life tends to be much better than other expat investments as a generalization, it does often make sense to stay within the policy, but amend the investments inside it.
In other words, if you aren’t happy, it is more likely to be due to the investments within the bond or markets have gone down, rather than Custodian Life itself.
Custodian Life Review: Final Thoughts
Custodian Life used to be an excellent alternative in the expat market. However, for now, better alternatives exist for most people.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 669.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
I am the most viewed writer on Quora.com globally for financial matters, with over 222.2 million answer views.
In the article below I discuss:
- What are inverse ETFs in 2021? What are the best inverse ETFs in 2021 or beyond? I explain below why the answer is……none of them!
- If you invest $1,000 a month into the stock market every month, how long until you can become a millionaire? You might be shocked by the answer to this one, and the math behind it!
- Are technology stocks more volatile than normal stocks? Is this volatility a problem if you are a long-term investor? Also, should we make a clear distinction between individual technology stocks and the Nasdaq as an index, which is tech-focused?
Here is a preview of the article:
I will give you some math/statistics later on which will shock most people…..even some people who have read a lot about investing.
Before doing that, it has to be mentioned that the answer depends on the following variables:
- How the stock markets perform? You can’t control this one and nobody can predict this for sure.
- More specifically, which years market perform after you get started. More on that below.
- If you are looking at $1million in nominal terms or real terms after inflation.
Let’s take the S&P500 as an example. It has given investors about 11.1% since 1950, adjusted for dividend reinvestment.
That is over 7% per year adjusted for inflation.
Yet some periods, like the 1990s and 2010-present, are better than that, and some are much worse.
There have been some decades where it has given 0%. Other decades where it has done as much as 16%-18% adduced for dividend reinvestment.
Let’s imagine the S&p500 did exactly 11.1% every year.
It won’t happen but just let’s do this as an exercise.
It would take you about 21.5 years in that case to become a millionaire in nominal terms, 27 years to reach 2 million, 31 years to reach 3 million.
It will take you 40 years to reach 8 million and about 42.5 years to reach $10 million.
The speed in which you would accumulate wealth at the later years would accelerate due to compounding.
Of course, if inflation is running at 2% per year, it will take you longer to reach those thresholds.
However, as mentioned, that won’t happen.
So, let’s look at two different example scenarios to illustrate a point:
Example scenario 1.
You invest $1,000 a month consistently with no lump sum injections.
Years 1–5 you get 0% per year.
Years 6–10 you get 2% per year
Years 11–20 you get 17.7% adjusted for dividends reinvested.
In this case you have reached millionaire status in 20 years. 1.5 years quicker than the constant 11.1% example given above.
Example scenario 2
You invest $1,000 a month consistently with no lump sum injections.
Years 1–10 you get 17.7% adjusted for dividends reinvested.
From year 11 onwards you get 2% per year
Do you know how many years it will take you to become a millionaire in this situation……37–38 years.
Yes 37–38 years. Almost a decade longer than in example scenario one.
If you don’t believe check out this calculator – Compound Interest Calculator
Here is example scenario one:
To read more click below