Providence Life Orbit Portfolio Bond Review – that will be the title of today’s article.
If you already have this investment, or been proposed it, and are looking for better alternatives as an expat, you can contact me using this form, or via email ([email protected]).
What are the basics about Providence Life
Providence are a relatively new life assurance firm, whose main clients are expats around the world. They are domiciled in Mauritius.
They are used globally, but especially in Japan, Thailand and South East Asia and various countries in Africa.
What are the currencies available?
The main currencies available are:
- US Dollar (USD)
- British Pound (GBP)
- Euro (EUR)
- Australian Dollar (AUD)
- Japanese Yen (JPY)
- Swiss Franc (CHF)
What are the account minimums?
The account minimums are:
- 45,000 USD
- 30,000GBP
- 40,500 Euros
- 60,000 AUD
- 6,000,000 Japanese Yen
- 42,000 CFH
The minimum top up rate for additional contributions is 4,500USD, or similar in other currencies.
What are the typical fees?
The typical fees work out at between 1.5%-2.5% per year, including your advisor and Providence’s fees. The exact fees depend on how much your advisor charges you on day one.
A typical structure looks like this:
- 1% initial fee, taken out from the account, on day one
- 1% ongoing fee for the advisor
- Providence fees, which might even out at 1%+ per year,
Whilst charges differ depending on who your advisor is, we do know what Providence charge for this bond.
Firstly, there is the annual management charge. This works out as 1.25% on accounts worth $30,000-$99,900. It drops to 1% over 100,000, 0.75% above $3000,0000 and 0.50% above $500,000.
There is also a $300 a year admin fee on accounts below $300,000 and $200 on accounts worth $500,000. There is no admin fee on accounts worth over $500,000.
Are there fees for getting out?
No there are not for cashing out the investment, but this is usually because the advisor charges an initial and ongoing fee that comes out on day one.
Even if he/she doesn’t, the ongoing fees are quite high.
What are the positives associated with this offering?
- This is a flexible option in terms of the ability to withdraw money without penalty.
- The minimum investment thresholds are reasonable for an international life assurance bond
- The offshore life assurance structure is considered tax-efficient for many British, South African and Australian expats, according to countless tax experts.
- Compared to some of the old school life assurance firms, the IT system works well.
- The numerous currency options are good for expats in some locations, but the advent of cheap currency exchange services online makes this a small positive compared to years gone by.
What are the negatives?
The main negatives are
- It is a flexible product, but overpriced. Even if you are at the $500,000+ charging structure, you can get better deals elsewhere.
- There are fewer alternative assets on offer here than is desirable, even though some structured notes do exist. In a era of low interest rates and weak government bond performance, alternative assets should be a part of many investors’ portfolios.
- The biggest negative is that a lot of positives I mentioned above can be found elsewhere, but without as much of the negative aspects I mentioned above.
Conclusion
This isn’t a bad option for some expats. It is flexible, with some decent fund options.
But better alternatives exist in the market, for the vast majority of investors, as this option can be expensive and lacking in alternative investment assets, which is important when diversifying your assets.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
