Simplifying the world of offshore investments
Offshore investments for ordinary South Africans are a lot simpler that pre-1994. The jargon that litters the landscape is, however, still enough to confuse anyone. Rand hedging, ETFs, LifeCo wrappers, endowments, sinking funds, asset swaps, LISPs… Let’s simplify it.
Offshore investment for ordinary South Africans were downright tricky prior to 1994. It is only after the transition between regimes in that year that the government gradually started phasing out the controls. Today, you can sit on your couch and, using an app, remit up to R1 million without even getting up or obtaining any sort of regulatory approval.
“There are no more barriers to entry,” says Michael Summerton, head of proposition and marketing at INN8, an investment platform built with advisers in mind. “It is so simple and a lot more transparent these days.”
Your options are quite extensive: offshore share trading accounts, apps like Shyft from Standard Bank that allow you to keep foreign currency in e-wallets, endowments that simplify tax reporting – all of these are available not just for the highest of net worth individuals, but for anyone who has identified offshore exposure as part of their financial plan.
However, the jargon is still enough to confuse anyone: Rand hedging, ETFs, LifeCo wrappers, endowments, sinking funds, asset swaps, LISPs…
Summerton hopes that the minefield of jargon does not deter investors from taking the leap. He believes that, whether they know it or not, all South Africans are already exposed to what happens abroad – either through the global economy’s impact on the cost of living, or through the underlying funds that make up existing savings in pension funds, for example.
But where to start if you want to simplify the jungle of terminology around your options for offshore investing?
He suggests starting with the question around whether you are going to use your own Single Discretionary Investment (the R1 million you are allowed to take out of the country in foreign currency without approval from the South African Reserve Bank every year) or your own Foreign Investment Allowance (the additional R10 million you are allowed to take out with prior approval). You can also get offshore exposure without using your allowance, either by using the allowance of an asset manager (see table below for examples) or by buying shares on the local stock exchange that has offshore exposure through its operations abroad.
The table provided outlines the options available, depending on the amount you have and the type of exposure you want.
INN8 has compiled a white paper to further demystify the world of offshore investments. The paper goes into the detail of the advantages as well as risks that could be associated with the options at your disposal: Demystifying Offshore Investing.
Summerton suggests that you should always have a conversation with a trusted and registered financial adviser before adjusting your financial goals or plans.
“Some of the topics to cover when having the conversation with your adviser are access to your savings, how the fees work, the frequency and transparency of reporting, access to fund commentary, the legitimacy of the jurisdiction where the money is invested and your tax obligations,” he says.
Liberty Group Limited is a Registered Long-Term Insurer and an authorised Financial Services Provider (“FSP”) with FSP number 4209 and registered office residing at 1 Ameshoff Street, Braamfontein, Johannesburg, 2001; INN8 is a registered trademark of STANLIB Wealth Management (Pty) Limited, an authorised FSP with licence number 590 and registered office residing at 17 Melrose Boulevard, Melrose Arch, Johannesburg, 2196, South Africa; and a registered business name of STANLIB Fund Managers Jersey Limited, regulated by the Jersey Financial Services Commission with registration number 30487 and registered office residing at Standard Bank House, 47-49 La Motte Street, St Helier, Jersey JE2 4SZ. © 2019 INN8
This post and content is sponsored, written and provided by INN8.