We live in immensely volatile, risky, and uncertain times. This applies at both the personal and physical levels, as well as at the financial level. We are not even a quarter way through the 21st century, and already we have seen unprecedented numbers of political upheavals, catastrophic pandemics, natural disasters, and economic collapses. The question is: what does this mean for the safety of your hard-earned wealth?
Domestic dangers
It is becoming increasingly apparent that traditional “onshore” wealth management strategies are fundamentally flawed. Keeping all your assets tied up in your home country has many disadvantages and risks compared to the benefits of holistic offshore financial protection strategies. Truly, this has been the case for many decades now, but it is even more important to consider during these times of uncertainty and crisis.
Recent changes in domestic economic regulations, tax policies, banking practices, and information sharing requirements are just a few factors which have all played a part in degrading the effectiveness of onshore financial systems. Let us now examine more closely some of the major dangers to your domestic wealth.
High Taxes
Developed western nations have a tendency toward exorbitant tax rates. In many European countries such as Sweden, Portugal, Denmark, or Austria, more than half of your income can be lost in taxes. High-earning residents of Canada or the US can expect to pay 30 – 40%. Thus, for those living in these countries, high taxes are probably the most significant threat to your wealth.
Fortunately, there are many tax-friendly offshore jurisdictions that offer offshore protection measures that can be utilized to greatly reduce your high tax burden, one such company is Offshore-Protection.
Negative real return
The combination of high inflation rates with extremely low interest rates offered by banks and other financial institutions results in the real value of your money actually decreasing over time. The year 2020 has seen interest rates plummet to all-time lows. At the time of writing, average central bank interest rates are at 0.25% in the US, 0.1% in the UK, and 0% in Europe. Japan and Switzerland actually have negative interest rates, at -0.1% and -0.75%. Compare these with continued positive inflation in most of these nations, and you can see that the result is a negative real growth rate.
In comparison, offshore banks in countries like Turkey, Armenia and Georgia offer interest rates of around 10% or higher (in fact, Turkey has the highest interest rates in the world, often in excess of 15%).
Economic and banking collapse
Banking systems in many Western nations are extremely inefficient and unstable. This is especially the case in the US, which has more debt than any other country on earth. In fact, the US has one of the most unreliable banking systems in the world, along with policies that previously required banks to maintain capital reserves of only 3% (as of March 2020, minimum reserve requirements in the US were removed altogether). The figure is similar for other developed countries like the UK and the Eurozone. This means that banks in these countries are tremendously vulnerable to unexpected economic shocks and other unforeseen events, which can ultimately lead to debt crises and collapse (as was clearly seen in 2008).
In contrast, there are offshore banking centers which have average capital reserve ratios in excess of 20% (e.g. Belize and Cayman Islands). This, along with many other factors, makes these banks a much safer home for your hard-earned wealth.
Litigation and lack of privacy
Another threat to your domestic wealth and assets is local court proceedings. Having your assets tied up in your home country makes them vulnerable in a situation where you are unfairly sued. This is an important consideration in a country like the US, which is the most litigious nation in the world (America is home to only 4.4% of the world’s population but is where 96% of all lawsuits occur). The problem is compounded by the complete lack of financial privacy that places your personal wealth in full view of those who may want to get their hands on it.
Fortunately, there are offshore jurisdictions which offer powerful financial vehicles to help safeguard your wealth from local court proceedings and other domestic risks. They also uphold the values of confidentiality and the rights to financial privacy.
Disasters and political upheavals
Finally, there are the dangers of unexpected natural disasters, political upheavals, and other catastrophes which can lead to sudden losses of much of your personal wealth without warning. These risks are greatly concentrated when you keeps all of your assets within the borders of a single country. Should anything go suddenly wrong, the effects would be heavily felt. This is made even worse for those who live in countries with shaky and corrupt political systems, as many do.
The solution is quite simple: diversify your assets across multiple countries to reduce the specific risks associated with each system. Singapore and Switzerland are just two examples of thriving offshore financial centres with incredibly stable political and economic environments.
Why you need offshore protection
We have explored some of the most significant risks to your personal wealth that can arise within your country of residence. Of course, these risks are impossible to eradicate completely, but they can be greatly mitigated and reduced through intelligent offshore financial planning. An international asset protection strategy is undoubtedly the best way to safeguard your wealth from domestic risks and minimise losses which arise due to high taxation and low-interest rates.
There exists a wide array of offshore financial tools and methods which can be utilised. These rage from simply utilising a personal offshore bank account, to forming an offshore asset protection trust or offshore company, to even going so far as to acquire second citizenship in a tax friendly and economically stable country. The appropriate path and tools to employ will naturally differ according to each individual’s requirements, financial means, and willingness to take the necessary steps.
