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Re: Offshore vs Onshore Investment
Posted: Sat Dec 12, 2020 11:26 am
by LukeTek
RetireJapan wrote: ↑Sat Dec 12, 2020 5:34 am
[...]these firms make money by signing you up for complicated products that pay large commissions (like, over a million yen) with hidden fees and unfavourable redemption penalties. They ignore the more sensible options available in Japan because those don't pay commissions and try to confuse you by babbling on about 'offshore' opportunities. [...]
captainspoke wrote: ↑Sat Dec 12, 2020 9:57 am
[...] The advisors are sales agents, selling products that make them money, not fiduciaries. The products they sell, being "offshore", are unregulated--no SEC or the like to police things. If something goes kaput, you have absolutely no recourse. [...]
thank you both!
I am not US, I am 29, have Italian citizenship and I am living and working in Tokyo atm.
I have done 2 "first round" with 2 different financial advisors.
The first one: we came to the conclusion that unless you are a Japanese that speaks Japanese only, there are far better options than NISA/iDeco to invest with. Basically what he proposed is an insurance wrapper, but the details will be discussed in the next round (no offshore financial center mentioned here). We would have a second round, he will ask more questions, then propose me a financial plan and I would be free of taking it and invest in that kind of portfolio on my own or having his company as financial advisor and paying 0,5%/year in order to make them handle it for me (one of my next questions, which I should have already made, is if that 0,5% is on the ROI or on my capital...)
The second one: we got more into details. Long story short: investing in an offshore financial center (eg. Cayman Islands, Jersey, Guernsey, etc.) with the possibility of choosing between 4 portfolios: cautious, balanced, aggressive and ETFs. The details of the portfolios will be discussed next time. As above, they are going to propose those portfolios and I'll be free of using them on my own or having them manage them for me at 0,5% a year.
Amongst the questions I will be making them during the next rounds:
- details of each portfolio, obviously
- details of every fee I may incur at any point of time in any way possible, including when I'll take money back after 20-30 years
- regulation that they have
- how to declare these investments in the Japanese tax declaration
RetireJapan wrote: ↑Sat Dec 12, 2020 5:34 am
Feel free to post the specific product they are encouraging you to buy, and we'll be happy to take it to pieces
Shoot away ^^
Re: Offshore vs Onshore Investment
Posted: Sat Dec 12, 2020 1:01 pm
by Kanto
LukeTek wrote: ↑Sat Dec 12, 2020 11:26 am
RetireJapan wrote: ↑Sat Dec 12, 2020 5:34 am
[...]these firms make money by signing you up for complicated products that pay large commissions (like, over a million yen) with hidden fees and unfavourable redemption penalties. They ignore the more sensible options available in Japan because those don't pay commissions and try to confuse you by babbling on about 'offshore' opportunities. [...]
captainspoke wrote: ↑Sat Dec 12, 2020 9:57 am
[...] The advisors are sales agents, selling products that make them money, not fiduciaries. The products they sell, being "offshore", are unregulated--no SEC or the like to police things. If something goes kaput, you have absolutely no recourse. [...]
thank you both!
I am not US, I am 29, have Italian citizenship and I am living and working in Tokyo atm.
I have done 2 "first round" with 2 different financial advisors.
The first one: we came to the conclusion that unless you are a Japanese that speaks Japanese only, there are far better options than NISA/iDeco to invest with. Basically what he proposed is an insurance wrapper, but the details will be discussed in the next round (no offshore financial center mentioned here). We would have a second round, he will ask more questions, then propose me a financial plan and I would be free of taking it and invest in that kind of portfolio on my own or having his company as financial advisor and paying 0,5%/year in order to make them handle it for me (one of my next questions, which I should have already made, is if that 0,5% is on the ROI or on my capital...)
The second one: we got more into details. Long story short: investing in an offshore financial center (eg. Cayman Islands, Jersey, Guernsey, etc.) with the possibility of choosing between 4 portfolios: cautious, balanced, aggressive and ETFs. The details of the portfolios will be discussed next time. As above, they are going to propose those portfolios and I'll be free of using them on my own or having them manage them for me at 0,5% a year.
Amongst the questions I will be making them during the next rounds:
- details of each portfolio, obviously
- details of every fee I may incur at any point of time in any way possible, including when I'll take money back after 20-30 years
- regulation that they have
- how to declare these investments in the Japanese tax declaration
RetireJapan wrote: ↑Sat Dec 12, 2020 5:34 am
Feel free to post the specific product they are encouraging you to buy, and we'll be happy to take it to pieces
Shoot away ^^
There are really no specifics here. What could be more important than determining (1) the fee structure (2) the investment vehicles and (3) taxation policies?
Bottom line, NISA allows you to invest without paying tax on dividends and capital gainst, iDeco lowers the amount of taxes you pay, while allowing you to withdraw those funds in retirement tax-free.
They cannot offer a better deal than this, period.
I would be very skeptical if I were you.
Re: Offshore vs Onshore Investment
Posted: Sat Dec 12, 2020 2:08 pm
by mule96
There is definitely nothing better than Nisa/Ideco (especially now that if you leave Japan you can withdraw Ideco money in the future).
I guess they will offer something like rl 360 or generali vision. They are loaded with complicated fees and expensive surrender penalities (something which an index fund in Nisa or Ideco will not have). They will also state that offshore investment to products in those countries are tax-free - something which is dubious at best. Those investments work more under the as long as nobody knows there is not tax structure.
Re: Offshore vs Onshore Investment
Posted: Sat Dec 12, 2020 2:24 pm
by adamu
LukeTek, you are swimming with sharks and are in the middle of a grooming process. If you sign on the dotted line, you'll be regretting it for years once you realise what you've gotten yourself into.
By all means meet with them, but give yourself a few months to do your own research, including both fully understanding what they are doing, and what the alternatives are. Don't feel pressured or like "you need to do them a favour after everything they've done for you", and do not agree to anything without giving yourself plenty of time to consider the alternatives.
mule96 wrote: ↑Sat Dec 12, 2020 2:08 pm
Those investments work more under the as long as nobody knows there is not tax structure.
Not sure what you were trying to say here
Re: Offshore vs Onshore Investment
Posted: Sat Dec 12, 2020 11:36 pm
by fools_gold
Re: Offshore vs Onshore Investment
Posted: Sun Dec 13, 2020 12:54 am
by LukeTek
Thank you. I have read it and basically the TLDR is "understand exactly what fees you are going to be charged with before going with any financial program". Pretty sensible advice, but my question is: how do I do it? What questions should I ask and what documents should I ask for to any financial advisor in order to understand exactly what I will be dealing with? The article suggests:
- how are your commissions paid?
- explain to me exactly how the investment strategy works (in terms I'd be able to understand)
- demand that all fees are expressed clearly in terms that you understand
Do you have any other questions you would like me to ask these 2 companies next time I talk with them in order to be able to provide you with the exact details you need to understand if the proposed plans are a scam or are viable?
Also, I appreciated the part of that article talking about the regulatory issue one might face in offshore locations like Guernsey. So one other question I might add is "how would be my plan regulated? By which authority?"
adamu wrote: ↑Sat Dec 12, 2020 2:24 pm
LukeTek, you are swimming with sharks and are in the middle of a grooming process. If you sign on the dotted line, you'll be regretting it for years once you realise what you've gotten yourself into.
By all means meet with them, but give yourself a few months to do your own research, including both fully understanding what they are doing, and what the alternatives are.
This is exactly what I am planning to do. I want to have multiple sources of information in order to understand what I am looking at and have a good understanding of all my investment options in this country before I make any decision.
Kanto wrote: ↑Sat Dec 12, 2020 1:01 pm
Bottom line, NISA allows you to invest without paying tax on dividends and capital gainst, iDeco lowers the amount of taxes you pay, while allowing you to withdraw those funds in retirement tax-free. They cannot offer a better deal than this, period.
mule96 wrote: ↑Sat Dec 12, 2020 2:08 pm
There is definitely nothing better than Nisa/Ideco (especially now that if you leave Japan you can withdraw Ideco money in the future).
The issue with NISA/iDeco , as far as I know, are:
- you have limited choice about which underlying asset you can invest with
- you are (very) limited in how much you can invest in them
- the tax benefits are not going to last enough, meaning that you are limited to those 5/20 years for NISA. Which makes it kind of difficult to make long term investing plan, right?
- I am 29 and even though I plan to stay here indefinitely I cannot be sure about it, therefore I have to prepare for the occasion I'll have to leave the country. AFAIK that would be an issue if I am in the middle of investing in NISA/iDeco
this being said, of course I could invest in NISA/iDeco and also have some other kind of investment, but my point is: because all the above limitations, isn't it better to invest in a single plan that would last till my pension?
Re: Offshore vs Onshore Investment
Posted: Sun Dec 13, 2020 1:28 am
by captainspoke
It's not your job to be arguing down everything these advisors throw at you. Read this thread from the beginning and you should learn that your best (safest!) option is to walk away.
You're talking to insurance sales reps, fer christ sakes, not investment advisors. And yes, you're being groomed.
Re: Offshore vs Onshore Investment
Posted: Sun Dec 13, 2020 1:33 am
by TokyoWart
Adding to the comments above, in your position I would not even meet with these people. The underlying financial product they are selling is awful and because it's offshore you have almost none of the usual protections for retail investors.
Re: Offshore vs Onshore Investment
Posted: Sun Dec 13, 2020 2:00 am
by N00bster
LukeTek wrote: ↑Sat Dec 12, 2020 11:26 amThe first one: we came to the conclusion that unless you are a Japanese that speaks Japanese only, there are far better options than NISA/iDeco to invest with.
Reading this sentence really made me mad. A bunch of incompetent crooked liars, the whole lot of them.
There is no way the "products" of your advisor can beat what is available in a NISA account, period. Anything they can sell you will come at a total management cost of 4-5% (most of which hidden behind complicated layers) of your whole
capital per year, and that's before taking taxes into account.
Well the advantage of these plans is that you are unlikely to make any profit, and thus to pay any tax, at all. But due to their offshore nature you won't even be able to offset their losses.
And in the case you actually make benefits, well the only way to declare them is to submit a 確定申告 yourself. The structure of these plans make them almost impossible to declare accurately, and what your advisor won't tell you is that they won't provide any help at all for tax purposes. You can "forget" to declare these, but then good luck when the tax office calls you with a few questions...
Oh and also ask your advisor about the conditions for stopping contributions and how much you would lose if you end your contract before its term. If you stop a NISA or any regular brokerage account, you don't have to lose anything. With these plans, many people lose north of 50% of their investments after they realized they have been hosed, which is simply outrageous.
Re: Offshore vs Onshore Investment
Posted: Sun Dec 13, 2020 2:04 am
by Kanto
It sounds like you are trying to sell this product to us!...
I fundamentally do not understand someone turns away the prospect of lower taxes and tax-free capital gains in favour of a speculative uninsured product from a non-fiduciary.
If you believe you will be leaving Japan in 5-10 years then simply stick with the regular NISA. 1.2 million in tax-free capital gains and dividends. And you can invest in virtually anything in Japan, NYSE and Nasdaq.
Beyond that, a normal brokerage account with IBKR is probably a safe bet if you cannot open one in Italy abroad.
