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In today’s time, we all have become accustomed to doing almost everything online. For example, many of us would not be left out who are apprehensive about using credit cards online. Doing business online is a way to save time, money and headache. Investing through online brokerage accounts offers similar benefits.
However, borders still pose a significant psychological barrier when it comes to offshore investing. There is no real need anymore to have your online brokerage account in the country you live in, but it seems that investors are still reticent about opening brokerage accounts in foreign countries.
An increasing number of financial service providers are offering cross-border online investment services. The trend has caught on more in Europe than in North America, with large online brokerages such as Saxo Bank and Swissquote providing services specifically for investors outside their home countries.
Although North American investors are also becoming more adventurous, opening more and more accounts with foreign banks and brokerages. Such accounts can be opened as individual US citizens or, less commonly, through offshore corporations or trust structures designed to provide an additional level of privacy. However, the main reason for accessing these international markets is to benefit from more profitable cross-border investment opportunities, and to diversify risk by spreading your portfolio across different institutions in different base currencies.
These sophisticated investors not only have access to a wider range of investment opportunities – but also the potential for simplicity, tax savings and greater control over their portfolio. There is also an opportunity to save money by gaining access to the exchanges through the discount brokerage model, which otherwise would have to be traded by telephone through far-flung correspondent brokerages.
The current economic climate means that many investors love the idea of being able to closely track their internationally diversified portfolios. But, one concern remains. Is it Safe to Invest Through Online Offshore Brokerage Accounts?
Are Offshore Online Bank and Brokerage Accounts Safe?
In short, the answer is yes, provided you take common sense precautions. The Internet allows you to buy and sell foreign securities through foreign brokerage accounts with the same ease and security as paying your home electric bill — and in many cases, with much greater security.
The first of these precautions is to invest through a reputed firm. Do some due diligence on the company behind the service. Just like you should at home (but many people don’t) check references, make sure the broker is registered and in good standing with the relevant regulators, speak with them in person and find out if they have What an experience You should inquire about the security setup on their site, and what protection they provide in case of DDoS and other types of hack attacks. Many offshore brokerages are actually fully licensed banks, which makes them more secure and makes due diligence easier.
Once you have decided where to open your brokerage account, it is important that you do your own due diligence to ensure that no one else will be able to access your account without your permission. Make sure your security software, such as anti-virus and firewall, is properly installed, working, and up to date. Consider using an encrypted VPN solution, especially if you are willing to do your business from a laptop connected to Wi-Fi, which is extremely insecure. Also remember that like the anti-phishing warnings from online banking at home, offshore brokerages will not email you to confirm your details. If you receive any correspondence via email, please confirm it by calling the company directly before clicking on any links or taking any action. Try to find a single executive at the brokerage who will recognize your voice over the telephone.
What services do you need?
Just like at home, overseas investment services can vary wildly in terms of cost and features. Even within the same brokerage, there are often different packages available. Fees can vary greatly depending on the features, information and access you request.
If you are looking to invest in European bonds, unit trusts, ISAs or funds then you will not need access to an ‘offshore day trading’ type of account which allows you to buy and sell individual stocks in real time Is. A so-called ‘fund supermarket’ type account offered by a European bank would suit you in this case. But be sure to check which fund manager’s products are available, and whether the broker is willing to negotiate fees or waive commissions from fund managers (many will, especially with large amounts, But only if you ask them)
Other banks and brokerages will offer discretionary management of your portfolio. It is suitable for investors who do not want to check their accounts every day, and who are looking for more Swiss-style ‘private banking’ in their brokerage. Having access to quality investment advice is very important in this matter – so ask what kind of management skills the bank has. The big banks have more expertise, but they can be busy chasing the big fish. Smaller boutique private banks and investment managers often provide a higher level of personal service.
These different institutions in turn will often target different types of investors. The more questions you ask your broker or banker before getting started, the more benefits you’ll get from the account you choose. This is called KYB (“Know Your Banker”) and is as important for investors as KYC (“Know Your Customer”) is for bankers.
If you take the time to do your homework, investing offshore and online is not only safe but can be very profitable, cutting costs, diversifying risk and taking charge of your future. Are you up for the challenge?
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