August 29, 2021 Guy Carson

Our Investment and Banking Offering – a Q&A

BY GUY CARSON

Let’s imagine a client with a million dollars.

The client has decided on a foreign asset protection trust (FAPT) because they want the advantages of cross-bordering.

When the trust is set up there will be a small sum, known as an initial settlement, placed into the trust to make the trust valid. This provides some breathing space for settling the large assets into the trust which can take more than 3 months to properly structure and open appropriate accounts.

What comes next? Once the trust is properly set up we move to place the million dollars into the trust.

At this point our banking and investment team work with the client and advisor to devise a strategy on the best assets to hold in the trust.

The trust can hold almost any asset but a FAPT is best suited to hold assets that are outside of the settlors principle jurisdiction.  The most common types of assets held are cash, precious metals, equities, bonds and cryptocurrencies.

The setup and the accounts we establish for the trust very much depend on the purpose of the trust, what the client is looking to put in, what they are trying to achieve and the type of advice they need. Our investment team is available to talk with all clients to understand their situation and place them with the best banks and investment advisors for their needs.

 

Are there a group of banks and investment advisors that Southpac works with and what do we look for in identifying the right fit for the clients?

Yes, there is a range of providers we work with. We have banking relationships in Switzerland, and the Cook Islands, among other jurisdictions. We have a custodial relationship on the precious metals front in New Zealand. We work with several SEC registered investment advisors (mainly out of Switzerland) as well. So we have a range of options to meet all clients needs.

Depending on what the provider is giving us, whether it’s a bank or investment advisor, there are different criteria we look at. For example, a number of the banks we work with are non-lending private banks. They may not be your typical household names, such as a Wells Fargo or a Bank of America, but they are very secure because they don’t actually lend any capital out.

 

What else do we look for in a bank?

We look at their balance sheets. Typically, when you look at a major bank they will have a tier one capital ratio in the range of 10 to 15% at the higher end. The banks we look at are sitting at around 20%. Overall, they have very secure balance sheets.

We won’t work with any bank that won’t provide their financial statements to us.

 

So, what about getting an investment advisor lined up, what do we look for there?

We have a range of investment advisors and the reason we have a range is that one advisor doesn’t fit everyone. However there are a number of similar characteristics we look for in the advisors we use.

Firstly, we look at the people. When we look at the people in an investment advisory relationship, its not necessarily the person you are talking to most of the time that we want to look at. That’s the salesperson, that’s the person who is going to get to know you, they are going to get to know about your family. They are going to build a relationship. What we are interested in is the people making the investment decisions because ultimately your investment performance and your wealth is going to be driven by those people and not the people you are talking to on a day to day basis.

We also look at past performance, we look at investment process. There’s a lot that goes into it. It’s a little bit art and a little bit science. We recently wrote more extensively about what we look for in an advisor here: Selecting the Right Investment Advisor

 

Once that relationship is set up and we have the investment advisor appointed and the accounts open, what does the trustee do after that to ensure the investments are doing what they are supposed to do?

One of the advantages of having a trust is that the trustee acts as a second set of eyes. We monitor every investment portfolio that we have with an investment advisor, we are legally obliged to. We ensure that the advisor is doing what they said they would and they are performing in line with expectations.

On the banking front, we have a legal responsibility to reconcile all bank accounts so we know what is happening. We know what buys and sells are taking place and obviously any distributions from the trust have to go through the trustee. We know absolutely everything that is going on and this helps us provide the best trustee services we can to our clients.

Guy Carson

Guy Carson is Southpac's Investment Specialist. Guy manages Southpac’s external relationships with investment advisors and banking specialists in client relevant jurisdictions around the world. In addition he works with clients to find the most appropriate solutions for their circumstances.
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