If you manage investments for clients that have assets in places outside their home country, you may sometimes be asked by clients about ways to protect their assets in cases such as an unstable political environment, or for succession purposes. While an investment professional can claim that our main strength is in making investment decisions, if we can offer some information on common international asset protection schemes, we will most likely be even more appreciated by our clients.
With this reasoning in mind, I registered for the Private Wealth Management course offered by Baker & McKenzie, an international law firm with expertise in this area, through the CFA Institute. The course fee of USD240 was paid online through CFAI's website. It was an online course, so I took the lessons in the comfort of my own home and at my own pace. Despite some short comings which I will mention below, I found the course to be of excellent value, as it enabled me to acquire sufficient knowledge on the subject in a short period of time.
The course has eight modules, namely:
- what is a trust and who are the parties to a trust
- features and uses of a trust
- international succession principles
- insurance
- foundations
- introduction to US Qualified Intermediary Rules
- EU Savings Directive training
- international wealth planning
While the CFA curriculum touches on the subjects of trusts and foundations, the course goes into a bit more details. For example, it will explain that a trust works by legally separating the ownership of assets from the beneficiaries of the assets. Thus, the clearer the separation between the two, the more effective that trust can be for asset protection purpose. For example, a irrevocable trust, where the original asset owner gives up the right to change his/her mind after transferring the ownership of certain assets to a trust, is more likely to be given favorable consideration by the local court than one in which the owner reserves such a right. One of the advantages of having a trust is to protect the assets from creditors of the original owners as well as creditors of the beneficiaries, because these parties are deemed to not have ownership of the assets if the trust is properly constructed.
Similarly, while the CFA course touches on the subject of foundations, this course explains the circumstances under which a trust is more suitable than a foundation, and vice versa. It also introduces the student to a legal structure called a Liechtstein family foundation, which is popular among moderately wealthy Europeans for tax minimisation purpose.
The module on insurance was interesting, in that I did not know before that an insurance policy can be used as an asset wrapper for estate planning purpose. Essentially, an asset owner transfer his/her asset to the insurance company in the form of an insurance premium, and the insurance company will pay out earnings and principals from the assets to the beneficiaries of the policy when an insured event occurs.
Two of the longest modules in the course are the least useful, though. The module on US Qualified Intermediary Rules is repetitive and of little use to investors. There was only one useful piece of information. If a foreigner invests in US stocks, and files a WEN-8 form declaring that he/she is a non-US body, then details such as name and address are only submitted to the US Qualified Intermediary ( the broker or bank) and not to the US government. This information is presumably useful for those who are concerned about their privacy.
The EU Savings directive module informs European viewers that if they are from an EU country and invest in another EU country or a country that has signed a treaty with EU, they will have to pay certain tax to the country in which they invested, i.e. it reduces the tax advantage for EU residents to invest in another EU country. If you are not a citizen or resident of the countries covered, you do not need to read this module.
After you complete the course, you can still access the online materials for a period of time (which I am not sure how long).
As I said, the course is of very good value for those who deal with wealthy individuals with assets overseas.
(written by Chiu Ying Wong, CFA, 10 September 2009)