Offshore vs Onshore Investment

[mighty58]

The levels of complexity you would willingly be introducing into your life are not for the faint of heart. Taxation complexity, portfolio complexity, not to mention the likely fee opaqueness, lack of liquidity, lack of regulatory protection, multiple layers of middlemen taking their cut, etc etc. Why even bother with all this? So you can tell people at cocktail parties that you invest in gold equity funds via your Cayman-domiciled investment vehicle? Dubious bragging rights. Or am I missing some benefit?... because I can't see any.

When investing for retirement, simplicity and boringness are attributes you want. Save the sophisticated-sounding stuff for your gambling account, and keep that to 1-2% of your portfolio.

[LukeTek]

So, here is the result from the first advisor:

the company is called Argentum Wealth. The insurance company used is Investors Trust, already mentioned in this topic at the beginning. The portfolio is called Evolution.
Here is the link to a Drive folder where I share some documents I received from them (this forum does not let me attach pdfs or "big" archive, so...)
https://drive.google.com/drive/folders/ ... sp=sharing

I don't have much time right now to type the summary, but the overall charges, including bonuses etc, would be 1,5% for the portfolio and 0,5% for the active management. I'll share a summary of what has been said in the details shortly. Please tell me if any of the information shared on that Drive folder should not be shared or in any way breaks some of the forum regulations. I avoided anything containing my personal information, of course.

[Kanto]

It would seem that you are paying some insane fees for a 5 ETF portfolio? I do not understand the incentive?

[mule96]

They offered something different than what they offered me, but it had a similar structure:

• You dont buy funds directly but you buy units, and those units get allocated to the etfs you buy, which is typical for such products and part of their strategy to hide and confuse real costs.

• There is something called Initial units. They cant be refunded and are probably part of it is what the advisor gets. Meaning everything that you pay the first 3.4 M - 24 Months (which would have most chance for a long term gain) is away. So your investment gain starts after that period. And that is why those products are so popular with financial advisors. This is imo insane. Only the gain on accumulation units is what you in the end get back. I cant be sure if that is the same here as we would need a pamphlet or so that explains the exact mechanism, but I would bet my money on it.

• There is some stuff like loyalty bonuses. This is typical for such products, but those bonuses don't out weight the other costs despite presenting it like that. There is still a 1.5% asset management fee and then the argentum fee of 0.5% if you let them handle it. And then you have the fund fees which come on top. Just 2% over several years is insane and will take away a lot. And as we know almost every actively managed fund underperforms the real market long term.

• I don't understand the goal of their portfolio, but even if there are 5 etfs it seems to be actively managed? The ishares etf (Which are an ok alternative to vanguard. Everything else is not recommended due being active funds) are for example all available at SBI without the additional management cost from ITA and Argentum (not that I would buy them). Or most international brokers like Interactive Brokers also have them.

May main curiosity is, did they disclose their earning for selling you the product?
Also under which regulation in Japan is this tax exempt until the end of the contract? I never got an answer to that question. Switching selling units/etfs in this product falls under capital gain tax unless proven otherwise (I am sure as a serious financial advisor they can point that out easily).

[fools_gold]

LukeTek

You might want to delete the Google Drive link if the account is in your real name.

Here's a link to the website of the investment product: https://www.investors-trust.com/product ... evolution/

I can't see any reason to invest in this either.

[LukeTek]

You might want to delete the Google Drive link if the account is in your real name.

Good point. I also tried to export it as images but each one is, apparently too large (285,8 kB...).
So here is the link to a shared Mega folder:
https://mega.nz/folder/SwN1iAoD#9gX0puqgV-A34eqNzGNpJA

Here is the summary: Argentum Wealth, through Investors Trust with the Evolution portfolio. It's a 25 years portfolio composed as per images. After all fees and bonuses, it results in a 2% fee per year (1,5 for the portfolio and 0,5 for the active management). The active management is not mandatory and it would be free for the first 2 years. All money put in the portfolio during the first 2 years cannot be taken out for the first 10 (or 15?) years. After that, they can be taken out. The monthly contribution is mandatory for the first 2 years. Not contributing would preclude the bonus, meaning that the overall fee would be higher than the 2%. Taking out money during the first 15 years would incur in a penalty, higher during the first years and decreasing till the 15th year, where it would be 0.
To the question "how do you get paid" the answer has been "with the 0,5% per year for the active managing".
I did not ask for the specific regulation in Japan. I'll send an email and post the response. He just said that it's tax-deferred and it would be taxable once I take the money out of the account.

The incentive of the portfolio would be, and I am quoting here:

• it's tax-deferred with no string attached
• it's a private, international, offshore account that is managed and monitored for you from anywhere in the world
• it's secure: all units are held and segregated in the Bank of America Merrill Lynch

[TokyoWart]

Just wanted to give my take on what this actually means:

•it's tax-deferred

It depends on the country but in general money coming out of an insurance product (that "insurance wrapper" that was mentioned earlier) is taxed to you as income at the higher tax rates applicable to ordinary income rather than the lower fixed tax rates that apply to capital gains. It is one reason why for the "tax deferral" to make sense for these products compared to investing in a regular taxable account you often need to go out to very long holding times like 50+ years. The tax advantage of an insurance wrapper is there is no tax friction while holding it and the tax disadvantage is that coming it tax rates are worse than for investments (again, depending on the country where you are paying taxes).

with no string attached

That penalty for taking money out early (after less than 10 years) counts as a "string" in my book. What's a little unusual about their product from my perspective is that the funds they mention appear to be very liquid with minimal trading costs but they are still making them illiquid to you.

•it's secure: all units are held and segregated in the Bank of America Merrill Lynch

This is a good thing (if you ever hire an investment advisor to manage your investments you want someone other than that advisor to serve as custodian) but it's basically no different from holding investments at any brokerage (Rakuten, Nomura, etc.) as those are also segregated accounts.

What's interesting to me is that the baseline fee structure is so high (1.5%) for the funds they choose before their added 0,5% fee. For instance, the ARK funds which are getting a lot of attention right now as actively managed ETFs with relatively high fees come in at 0.75% management fees and it's becoming more unusual to see funds above the 1% expense ratio.

[RetireJapan]

To the question "how do you get paid" the answer has been "with the 0,5% per year for the active managing".

That's almost definitely a lie. This product pays a commission to the salesperson (this is the reason for them locking up the first few years of contributions). Not the best start to your relationship with this 'advisor'.

2% a year (if that is actually all it is, it is low for this kind of product) is very high. Does this figure include the funds' annual fees too, or is it on top of them?

Just for comparison's sake, if you invested in mutual funds in Japan, you'd be paying 0.1-0.2% or so in fees, and you could put them in a NISA account which would be tax free, or an iDeCo account which would be tax free and reduce your income taxes.

[mule96]

All money put in the portfolio during the first 2 years cannot be taken out for the first 10 (or 15?) years. After that, they can be taken out.

I may be wrong on that, but it is the same with similar products. All money you put in in the first 2 years go into the initial units. Those units are used for paying the administrative fee (the 1.9\0.35%) over the lifetime. Everything that is invested here, doesn't give gain to you. This gets offset by the bonus that kicks in, but as you can invest the bonus only later, you lose valuable investment time (the first two years). Usually they give you a pamphlet with all the fine print and the explanation of initial units etc, where this is in detail explained. It speaks for the product, that this is not on their website.

To the question "how do you get paid" the answer has been "with the 0,5% per year for the active managing".

So if you choose them for the management, they dont get paid at all? For sure...

I did not ask for the specific regulation in Japan. I'll send an email and post the response. He just said that it's tax-deferred and it would be taxable once I take the money out of the account.

The incentive of the portfolio would be, and I am quoting here:

• it's tax-deferred with no string attached
• it's a private, international, offshore account that is managed and monitored for you from anywhere in the world
• it's secure: all units are held and segregated in the Bank of America Merrill Lynch

Just the 1.5%-2% fee justify imo the hassle on investing in Japan via NISA/Ideco, and if you leave Japan, selling those and transfer it to wherever you leave.
Another thing, why their ETF selection has at least some low cost funds, they have 35% in an active fund from blackstock. The performance that is visible on their November sheet shows, that it significantly underperfoms the global equity performance:

The negative voices here are clear If you go with such a solution, i would manage it by myself and just invest into the iShares MSCI World or so.
But you can do a similar investing here with 1.5% less fee, income tax reduction with IDeco and tax exemption with Nisa. The long term gain will be lower with that insurance wrapper for sure.

[mule96]

2% a year (if that is actually all it is, it is low for this kind of product) is very high. Does this figure include the funds' annual fees too, or is it on top of them?

The fund fees are separate. At least they have low cost iShare etfs, which is also rare for such a product.