Offshore Online Brokerage Accounts: Are They Safe?
Website design By BotEap.comThese days, we are all used to doing almost everything online. We cannot stay many of us who are nervous about using a credit card online, for example. Doing business online is a way to save time, money, and headaches. Investing through online brokerage accounts promises the same benefits.
Website design By BotEap.comHowever, when it comes to investing abroad, borders still represent a significant psychological barrier. There is no longer a real need to have your brokerage account online in the same country you live in, but it seems that investors are still reluctant to open brokerage accounts in foreign countries.
Website design By BotEap.comAn increasing number of financial service providers offer cross-border online investment services. This trend has become more popular in Europe than in North America, with larger online brokerages such as Saxo Bank and Swissquote offering services specifically tailored for investors from outside their home countries.
Website design By BotEap.comHowever, 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, more commonly, through offshore corporations or fiduciary structures designed to provide an additional level of privacy. However, the main reason to access these international markets is to benefit from more profitable cross-border investment opportunities and to diversify risk by distributing your portfolios between different institutions in different base currencies.
Website design By BotEap.comThese sophisticated investors have potential access not only to a broader range of investment opportunities, but also to simplicity, tax savings, and greater control over their portfolios. There is also the opportunity to save money, by gaining access through discount brokerage models to exchanges that would otherwise have to be traded over the phone through distant correspondent brokers.
Website design By BotEap.comThe current economic climate means that many investors love the idea of being able to keep a much closer eye on their internationally diversified portfolios. But there is still a concern. Is it safe to invest through online offshore brokerage accounts?
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Website design By BotEap.comAre Offshore Online Brokerage and Bank Accounts Safe?
Website design By BotEap.comIn short, the answer is yes, as long as you apply normal common sense precautions. The Internet allows you to buy and sell foreign securities through foreign brokerage accounts as easily and safely as paying your home electricity bill, and in many cases with much greater security.
Website design By BotEap.comThe first of these precautions is to invest through a reputable company. Do your due diligence on the company behind the service. Like at home (but many people don’t), check references, make sure the broker is registered and has a good reputation with the relevant regulators, speak with them in person and find out what experience they have. You should also inquire about the security provisions on their site and what protection they offer in the event of DDOS and other types of hacking attacks. Many offshore brokerage agencies are actually fully licensed banks, which makes them safer and facilitates due diligence.
Website design By BotEap.comOnce you have decided where to open your brokerage account, it is important that you take your own precautions to ensure that no one else can access your account without your permission. Make sure your security software, such as antivirus and firewall, is properly installed, working, and up-to-date. Consider using an encrypted VPN solution, especially if you like to do your business from a laptop connected via Wi-Fi, which is notoriously insecure. Also remember that like the anti-phishing warnings of online banking at home, offshore brokerage agencies will not send you emails asking you to confirm your details. If you receive any correspondence by email, please confirm it by calling the company directly before clicking any link or taking any action. Try to meet a single brokerage executive who recognizes your voice over the phone.
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Website design By BotEap.comWhat services do you need?
Website design By BotEap.comLike at home, investment services abroad can vary wildly in terms of costs and features. Even within the same brokerage, there are often different packages available. Rates can differ significantly depending on the features, information, and access you request.
Website design By BotEap.comIf you are considering investing in European bonds, participation trusts, ISAs, or funds, you probably won’t need access to the ‘foreign daily transactions’ type of account that allows you to buy and sell individual stocks in real time. In this case, a “supermarket fund” account offered by a European bank would suit you. But be sure to check what fund manager products are available and if the broker is prepared to negotiate fees or refund commissions it receives from fund managers (many will, especially in larger amounts, but only if you ask them)
Website design By BotEap.comOther banks and brokerages will offer discretionary portfolio management. This is suitable for investors who do not want to have to monitor their accounts every day and are looking for a more Swiss-style ‘private banking’ feel in their brokerage. Having access to quality investment advice is of great importance in this case, so ask what kinds of management skills the bank has access to internally. Larger schools are more experienced, but may be busy chasing bigger fish. Smaller boutique private banks and investment managers often offer a much higher level of personal service.
Website design By BotEap.comIn turn, these various institutions will often target different types of investors. The more questions you ask your broker or banker before you start, the more profit you will make from the account you ultimately choose. It’s called KYB (“Know Your Banker”) and it’s just as important to investors as KYC (“Know Your Client”) to bankers.
Website design By BotEap.comIf you take the time to do your homework, investing abroad and online is not only safe, it can be very profitable, cutting costs, diversifying risk, and taking care of your own future. Are you ready for the challenge?