By Nathan M. Walters, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Technology is changing the way the world communicates, lives, entertains, consumes, and, most recently, invests. The idea of online investing is not new, many day traders have tried their hand at online investing through sites such as E*Trade and the like (often with negative consequences).
But recent developments, the culmination of many factors, have lead to a significant and lasting shift in the way expatriate investors plan for their future. Online trading platforms are changing the way expatriate investors approach life planning.
Their rise reflects the needs of a globalized world, connecting qualified advisers with investors demanding increased transparency and management of their varied global investments.
Howard Borsden, president of Looking for Dylan, has remained responsive to developments in expatriate investment during his twenty years as a certified financial adviser. “Online trading platforms are the future for expat investors,” Borsden states plainly.
“There is a platform for all types of investors, usually based on nationality, offering a wide range of investment products, such as funds, bonds, stocks, ETF’s, fixed term deposits.”
“Long-term offshore life insurance savings plan made sense for expatriates in the past. Expatriate workers may have taken a work contract in a foreign country for a long period, say, twenty years. That’s not the way the modern world works,” mentions Borsden.
“Today, people may work two years in a foreign country, a year or two in their home country, another year in a different foreign country. The new generation of expatriate workers needs to have the flexibility to work with their money. This is the major benefit of online trading platforms.”
Offshore life insurance saving plans have traditionally been the investment choice of expatriate investors. Yet, two problems regularly arise with these products. First, most life insurance savings plans are based on a long-term contract (e.g., up to thirty years).
The contracts can also be rigid, often with “early surrender” clauses that penalize investors for using the money invested prior to the term of the contract. Investors’ money can be trapped in the contract, causing problems when unforeseen events require financial flexibility.
The above is often a result of what Borsden identifies as a “misalignment between investors and the revenue generation requirements of financial advisers.”
Financial advisers in Brazil, many which operate outside domestic regulation, have a personal financial interest in selling long-term investment focused life insurance solutions as commissions are front ended loaded rather than being linear and so in alignment with an ongoing relationship with the investor.
Online trading platforms effectively allow full cost transparency and the “un-bundling” of the often-opaque charging structures of offshore based life insurance savings pans – and in so doing are fully in line with modern international regulatory thinking and policy – in that commission becomes a thing of the past.
At each asset allocation point the investor is asked to approve costs – thus transforming hidden commissions into transparent and visible fee costs for service given. The UK, the Netherlands and Singapore being the most recent governments to seek to transform their financial markets by eliminating commissions from financial services products in favor of fee based arrangements for client support.
“The inflexibility of offshore life insurance savings plans does not always make the most sense for expatriate investors. Online trading platforms are cheaper in terms of administrative costs, give the investors the option of how and when they will invest as well as the freedom to use the money invested should their situation so demand,” states Borsden.
Historically, investors relied on their financial advisers to invest on their behalf. The personal monitoring of ones own investments was often less than diligent. With the advent of the Internet, and the information gathering potential it provided, many investors decided to manage their investments on their own.
This idea was based on the notion that savings in advisory fees left more for investing. Yet, few do-it-yourself investors quantified the cost of time spent and other negative externalities.
Online trading platforms can efficiently meld these two most common methods for modern private investors. Investors benefit from the personal attention of qualified financial advisers but have real-time access to monitor their investments and, if needed, the ability to make quick decisions on how to use their money.
The lower cost of investing, which in many cases, though ultimately depending on the type of fund, can be as low as one percent per annum, increases the savings to allow for additional investments. The cost of maintaining an online account often pales in comparison to the potential administrative fees associated with offshore life insurance plans.
“Private investors have been waiting for this type of investment tool, one that combines transparency, adviser competency, and cost savings. The technology has caught up with the mentality of expatriate investors; this technological paradigm shift coincides with changes in the way people are living in a globalized world.”
“Many of the investment products of the past, including offshore life insurance planning especially the variety of marketed savings plans re pensions, school fees planning and general supplemental savings plans, are quickly becoming obsolete,” states Borsden.
Looking for Dylan, financial planners fully-certified in both Brazil and throughout Europe, has monitored the development in online trading platforms and now offers clients expert advice related to investment through the platform system.
Using such platforms with the advice of regulated, certified financial planners means that investors ensure the planning objectives of private investors are handled in a personal manner based on long-term relationships.
Borsden is excited about these changes, “Looking for Dylan has been monitoring developments in technology and the benefits they provide to our clients since we started. To see something like the online trading platforms is exciting for us. The potential it provides to investors is incredible. And the limiting effect it will have on the sometimes damaging results of unregulated advisers is comforting.”
* This is a paid Advertorial for Looking for Dylan.