What your financial adviser should be telling you about investing offshore

Offshore investing for a South African investor is all about diversification. The world is a big place and, by keeping your investments in only one jurisdiction, you're missing out on other opportunities offered by offshore investing. These include the advantages of tax and growing markets, which can significantly increase your wealth.

Your financial adviser should raise the following subjects with you:

The risks of investing offshore

It’s always important to understand the risks to which you are exposing your money when you take it offshore. There is always additional risk due to different legislations and currencies. Currency movements, for example, may result in the rand value of your investment fluctuating even though the actual investment has done well.

To counteract such risks, financial advisers should help you develop an offshore investment strategy that considers both your risk appetite and investment goals. It’s important to understand this risk dynamic before committing to any investment.

Why you need money offshore

All investors have different reasons for taking their money offshore. You may want to send your child to a foreign university, enjoy an international holiday or even retire on a tropical island. Perhaps you want to earn profits in a global currency? Offshore investing gives you the ability to invest in the international currency and market of your choice.

Your financial adviser should make a concerted effort to understand your reasons for taking money offshore and develop a strategy that is suited to your purposes.

International tax legislation

Because you’re taking your money outside South African borders, you need to understand the impact of tax legislation locally and in the country in which you'll be investing. Your adviser needs to work closely with you to ensure that you adhere to all local and international tax legislation.

There are other nuances of taking cash offshore that need to be explained. For example, if you invest more than R1-million a year offshore, you need a tax-clearance certificate.

How much can you afford to take offshore?

Individuals with a high net worth can consider direct offshore opportunities. Those who can’t afford to risk large portions of their investment capital could look at locally based offshore solutions such as rand hedge portfolios that don’t require them to go through foreign exchange processes.

A financial adviser should weigh up all your options. Liberty's Offshore Investment Plan is similar to a simple endowment, which gives you easy access to the global market through a range of portfolios. Liberty's Offshore Endowment delivers maximum benefits on the growth on your assets.

For smaller investors, many portfolio managers will have a component of offshore investing in locally offered balanced portfolios. The advantage of this strategy is that investment professionals will decide in which offshore assets to invest.

The timing of your investment

Investors move offshore at the worst possible time, particularly when the rand is weak, and then end up paying much more for their investments. The best time to buy is when things are cheap, the market is down and the rand is strong.

To gain maximum benefit from offshore investing, it’s important to take a long-term approach instead of chasing quick profits. An expert financial adviser should guide you through the entire investment process – from planning to growing your wealth on a global scale.

This article was paid for by Liberty Group SA.