Nowadays, we are all used to doing almost everything online. There can’t be too 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 much the same benefits.
However, when it comes to investing abroad, borders are still a significant psychological barrier. There’s no longer a real need to have your online brokerage account in the same country you live in, but it seems investors are still reluctant to open brokerage accounts in foreign countries.
A growing number of financial service providers offer cross-border online investment services. This trend has spread more in Europe than in North America, with larger online brokers like Saxo Bank and Swissquote offering services specifically tailored to investors from outside their home country.
However, North American investors are also becoming more adventurous, increasingly opening accounts with foreign banks and brokerages. These accounts can be opened as individual US citizens or, more commonly, through offshore companies 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 their portfolios among different institutions in different base currencies.
These sophisticated investors have potential access not only to a wider range of investment opportunities, but also to simplicity, tax savings and greater control over their portfolios. It is also possible to save money by accessing, through discount brokerage models, exchanges that would otherwise have to be traded over the phone through remote correspondent brokers.
The current economic climate means that many investors like the idea of being able to monitor their internationally diversified portfolios more closely. But, there remains a concern. Is investing through online offshore brokerage accounts safe?
Are offshore online banking and brokerage accounts safe?
In short, the answer is yes, provided that the normal precautions of common sense are applied. The internet allows you to buy and sell foreign securities through offshore brokerage accounts with as much ease and security as paying your home electricity bill – and in many cases, security. much larger.
The first of these precautions is to invest through a reputable firm. Do your due diligence on the company behind the service. Just like you should do at home (but many people don’t), check references, make sure the broker is registered and in good standing with the relevant regulatory bodies, talk to them in person, and learn about their experience. . You should also find out about the security provisions on their site and the protection they offer in case of DDOS and other types of hacking attacks. Many offshore brokerages are actually fully licensed banks, which makes them safer and makes due diligence easier.
Once 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 firewalls, is properly installed, working, and up-to-date. Consider using an encrypted VPN solution, especially if you want to transact from a laptop connected via wifi, which is notoriously insecure. Also keep in mind that, just like these online home banking anti-phishing warnings, offshore brokers will not send you an email asking you to confirm your details. If you receive correspondence by e-mail, confirm it by calling the company directly before clicking on any link or taking any action. Try to get to know just one brokerage executive who will recognize your voice on the phone.
What services do you need?
Just like with us, overseas investment services can vary wildly in terms of cost and functionality. Even within the same brokerage, there are often different packages available. Fees can vary widely depending on the features, information and access you request.
If you plan to invest in bonds, mutual funds, ISAs or European funds, you probably won’t need access to the type of “offshore day trading” account that allows you to buy and sell individual stocks in real time. A type of account called “supermarket fund” offered by a European bank would suit you in this case. But be sure to check which products from which fund managers are available, and whether the broker is willing to negotiate the fees or reduce the commissions they receive from fund managers (many will, especially on larger amounts , but only if you ask them)
Other banks and brokerages will offer discretionary management of your portfolio. This suits investors who don’t want to have to monitor their accounts every day and are more looking for a Swiss-style “private banking” feel in their brokerage. Having access to quality investment advice is of great importance in this case – so ask what kind of management skills the bank has access to in-house. Large schools have more expertise, but they can be busy chasing bigger fish. Smaller private banks and investment managers often offer a much higher level of personal service.
In turn, these various institutions will often target different types of investors. The more questions you ask your broker or banker before getting started, the more benefits you will get from the account you ultimately choose. This is called KYB (“Know Your Banker”) and is just as important for investors as KYC (“Know Your Customer”) for bankers.
If you take the time to do your homework, investing overseas and online is not only safe, but it can be very profitable, reduce costs, diversify risk and take charge of your own future. Are you ready for the challenge?