Platform Securities Jersey review – that will be the title of this article.
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This section will answer some of the typical FAQs about this structure
Firstly, where is this solution typically sold?
In the expat market, this is typically sold in the UAE, Qatar, and other places where there are a lot of non-resident workers, but it can be sold globally.
In the International market, it is known as platform securities international.
Do they offer investment advice?
No. Like most investment platforms, they are merely providing custody services, and use advisors.
Will I get better returns compared to say an insurance company or a bank?
Not necessarily. People overanalyze this point. Your total returns will depend on the returns minus the fees.
Let’s give a simple example. Imagine you buy a Vanguard S&P500 ETF on this investment platform and your total fees are 1.6% per year.
Your returns will be identical to investing in the same ETF, with the same fees, on a banking or insurance company solution.
It is for that reason that the insurance company vs investment platform debate is mainly redundant for many clients.
It is true that some structures can be more tax-efficient, say for returning UK expats, but that the way the company is regulated won’t affect the total returns.
What kind of funds and ETFs are used on this investment platform?
It depends on the advisory firm. Typically it is funds such as Fundsmith, Vanguard, Dimensional Fund Advisors and others.
Do these funds typically beat the market?
As I explained on my article which compared Vanguard with Dimensional Funds, the evidence is stretchy at best.
In some time periods, Dimensional beats Vanguard and vice versa. The same is true for BlackRock ETFs and many other “smart beta” ETFs which tilt towards small caps.
What are the pros?
The main pros associated with this platform are:
- There is nothing “wrong” per se about the structure. It has the same tax benefits, for most expats, as other offshore jurisdictions such as Bermuda, Isle of Man, Puerto Rico, and Guernsey.
- Most quality investments are available on this platform.
- There are usually no fees for getting out of this structure.
- It is a safe structure, but so are 99.9% of offshore options these days. It is a misconception that a few people have that the Channel Isles are any better, as an expat offshore jurisdiction than the other options out there.
What are the cons?
Some of the drawbacks are:
- The average advisory firm using this structure is charging 2%-3% upfront for financial planning in addition to advice fees. This typically means that the total fees are 2%-3% upfront +1.5%-1.80% per year if you include the platform charges. There are alternative structures where you can gain similar tax benefits, and the same investments, whilst paying less.
- There is nothing especially unique in this structure. It isn’t uniquely good or bad. There are some other options out there where clients get access to discounted high-net-worth assets and other benefits not seen here.
- Many traditional asset management strategies are used here. For example, it is common for investors who are 25 or 30 to be advised to have 20%-30% in bonds. We are in a new era of low bond rates, which makes a lot of these “thumbs of rule” old-fashioned.
As you can see, most of the positives and negatives aren’t directly linked to the platform but are more related to the structure the advisory firm uses.
This isn’t a particularly good or bad option for expats. The main issue in this structure is the fees compared to what you get in return.
If you are being charged 2%-3% upfront, in addition to 1.5% per year, the cost: benefit analysis isn’t great.
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