… I add and must emphasize again: diversify your political risk. I truly believe that increasingly desperate states will be the greatest risk to your wealth, going forward. The swelling masses of have-nots are going to turn their increasingly hungry eyes on the haves, and the politicians are going to pander to them – and these days, if you have any net worth at all, you're a have. When the food riots start in New York, LA, London, Paris, etc., I want to be good and far away.
You do not need a crystal ball to know what to expect under the current circumstances. The details of how this will all play out are unknown. The big picture playbook, however, is not. While economic growth will be sought “at all costs” by central bankers and governments, forcing a fundamental economic healing – real and sustainable growth – purely by means of monetary and fiscal intervention, i.e. more debt, is highly unlikely. Instead, what we can all expect is a cocktail of financial repression measures and, over time, price inflation. Those are the factors, as investors, we need to plan and prepare for.
Given the dynamic and uncertainty we are currently facing today, one key learning point should stand out: reviewing and possibly upgrading your risk management and wealth protection measures should be among your first priorities today. In order to properly prepare for the future, you will need to configure your wealth protection fortress in consideration of a new era characterized by financial repression and inflation, and the societal changes that will come with it.
While it will be important to stay nimble and alert in terms of your approach to asset allocation and investing, it will be even more important to ensure that your wealth protection plan, i.e. the structures and mechanics of your strategy, will protect you from regulatory, legal and societal threats; these threats are real and imminent.
Generally, when discussing wealth management, the immediate focus turns to investing and asset allocation. We strongly recommend you consider structural asset protection measures first. The reason being that the exact investment strategy and asset allocation recommended today may well differ tomorrow, while it will also heavily depend on the precise circumstances, needs and goals of each investor.
Over the history of our company, we have worked with a large number of attorneys and planners in the US. At this point, we have access to a unique network of experts and firms that understand both the options and strategies available onshore as well as offshore.
Very often, wealth strategies that involve an element of multi-jurisdictional diversification, in other words, keeping part of your assets outside US borders, can provide a considerably increased level of asset protection and safety. Depending on your circumstances and objectives, the options available will differ. However, contrary to the general belief, reaping the benefits of jurisdictional diversification does not need to be complex or expensive.
The simple options mentioned here are a shortlist of first-step measures for building a personal “nest-egg” outside of your home country. These measures are available to most investors, even those that are not in the high net worth category.
Foreign bank account
Foreign bank accounts, established in jurisdictions like Belize, the British Virgin Islands, or the Bahamas, can be established at relatively low minimums. They do tend to come with somewhat limited services. This is the simplest and most basic of all steps toward internationalization, but it does deliver an added level of flexibility and protection that is quite important. For instance, a foreign bank account enables you to retain the capability to wire funds and transact internationally, even in the case of capital controls or asset seizures in your home country. Moreover, US banks have become highly suspicious of any international transactions, reporting and at times freezing accounts on the basis of very little.
Physical gold ownership and storage
A variety of international precious metals programs are available, some online, some not. Some offer allocated and segregated storage, some offer only the collective storage version. Depending on what you are looking for, there are very good and reliable programs available, that can afford you protection from a possible confiscation or capital controls. Some international programs also allow you to transfer your existing holdings in kind and keep them more safely in high security vaults overseas.
Most IRA custodians allow only for investments in a very limited and US-centric array of investments. There are a few custodians, however, that have gone to the effort of opening up international investment strategies and assets custodied overseas, while still retaining the tax benefits sought in such accounts. With these IRAs, you can integrate the benefits of a foreign bank, asset manager, investment, or a combination of all these tools.
Some jurisdictions, such as St.Kitts & Nevis, or the Cook Islands, allow for the rapid and cost-effective set up and maintenance of an LLC or IBC (international business corporation) that will give you the possibility of holding bank accounts and investing in the name of the legal entity. The rules and regulations of some jurisdictions, even for the simplest corporate structures, can add a valuable, albeit not bullet-proof, asset protection shield.
The are also more common planning tools that may be used individually or in combination, depending on the situation. Importantly, none of them are overly complicated, can all be done legally, and in compliance with all the rules and regulations.
If you are interested in learning more about wealth protection and jurisdictional diversification, reach out to us so our partners in Switzerland can get in touch with you.