Diversifying securities across multiple brokers and jurisdictions (personal wealth)

[liroyb]

Martin Everson said:
Future plan sounds European heavy as LI, CH and LUX are basically all same in terms of stability and adherence so just pick one. You have not thought about any wealth planning. Cherry picking countries, brokers etc is wrong approach. The correct way to have done it is find a banking partner like VP Bank you mentioned that can book your assets around the world with proper geographical diversification and easy single point of contact. Its not a good idea to use discount brokers like IBKR for serious wealth planning. Best to pay a little extra unless your actively trading and don't have a buy and hold strategy.

Also with a mixed bag of jurisdictions and brokers, if you got hit by a bus tomorrow you may end up with stranded assets that your next of kin may have problems accessing even with a written will.

P.S On side note - if the world financial system splits in two i.e US sphere of influence and Chinese sphere of influence you want to at least be in HK and have local assets booked on the Chinese side of the fence. Maybe your not into Asian assets but thats where the future global growth is and we already seen 6 or more Chinese companies voluntarily delist from US exchanges and during Trump era similar companies de listed. So DO NOT hold any Chinese stocks in ETF's etc outside of HK or Mainland China - learn after Russia.
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Thank you for sharing this insight. If we take your VP bank example, I wonder what layer of safety or added value you obtain by splitting your assets between their LI, CH, LU, SG, HK branches over just concentrating all assets in LI?
I'm probably missing something, but your exposure to LI would always be there regardless if you'll split or not, and the subsidiaries aren't systematically important to the foreign governments in the other jurisdictions, so in case of bank failure only the headquarters would be backed by LI municipality.

Can you please elaborate what is the advantage/s of booking your assets over multiple jurisdictions via subsidiaries of the same banking group over just concentrating all of them with the headquarters branch?

 

[Martin Everson]

liroyb said:
Can you please elaborate what is the advantage/s of booking your assets over multiple jurisdictions via subsidiaries of the same banking group over just concentrating all of them with the headquarters branch?
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Sure. You need to manage political risk in that a Brexit, a rogue or populist government could come to power leading to adverse conditions for any wealth you hold in a specific country due t potential instability. Hence you need to be able to quickly book your assets elsewhere at another entity within the group.

Banking regulations can also change in certain places i.e within EU it might become less favorable or difficult to make investments with banks there. For example EU PRIIP affected EU resident retail investors trying to access US ETF's that did not provide investors with PRIIP KID. Plus other financial instruments may not be available in one jurisdiction but are in the other. Also depending where the bank is headquartered it is not uncommon for local entities to close their doors due to cost savings, jurisdiction blacklisting or costly operating requirements etc. Barclays, HSBC, UBS, CS etc have all done this in the past closing down operation in certain countries.

If you hold assets in just one jurisdiction like LI then you are basically betting on LI and entrusting your wealth to a small principality. No matter how confident you are about a jurisdiction you want to hedge your risk.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[liroyb]

Martin Everson said:
Sure. You need to manage political risk in that a Brexit, a rogue or populist government could come to power leading to adverse conditions for any wealth you hold in a specific country due t potential instability. Hence you need to be able to quickly book your assets elsewhere at another entity within the group.

Banking regulations can also change in certain places i.e within EU it might become less favorable or difficult to make investments with banks there. For example EU PRIIP affected EU resident retail investors trying to access US ETF's that did not provide investors with PRIIP KID. Plus other financial instruments may not be available in one jurisdiction but are in the other. Also depending where the bank is headquartered it is not uncommon for local entities to close their doors due to cost savings, jurisdiction blacklisting or costly operating requirements etc. Barclays, HSBC, UBS, CS etc have all done this in the past closing down operation in certain countries.

If you hold assets in just one jurisdiction like LI then you are basically betting on LI and entrusting your wealth to a small principality. No matter how confident you are about a jurisdiction you want to hedge your risk.
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Thank you for your response. I understand your point and it makes a lot sense, but when you hold funds in VP bank CH or VP LU, for example, aren't you still entrusting & exposed to LI since this is where the bank is headquartered?

 

[Sols]

liroyb said:
Thank you for your response. I understand your point and it makes a lot sense, but when you hold funds in VP bank CH or VP LU, for example, aren't you still entrusting & exposed to LI since this is where the bank is headquartered?
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In theory, it depends on how the bank is set up.

VP LU could be a branch of VP LI, in which case VP LU is almost entirely at the mercy of what goes on in VP LI.

VP LU could be a subsidiary of VP LI, in which case it has its own banking license in Luxembourg and answerable to Luxembourgish law to a greater degree than a mere branch. But if the parent folds, this may cascade and affect the subsidiary.

VP LU could be a group entity of VP LI, meaning for example that they are both owned by the same holding holding. This is an even greater separation of risk. VP LI could in that case fail and so long as VP LU is still liquid, it shouldn't spill over.

Reality is often a lot more nuanced than that, and I didn't look into the exact structure of VP for the above. For example, if VP XX is reliant on selling products offered by VP LI, it doesn't really matter how it's structured. In that case, if VP LI fails, hard times will befall VP XX as well.

A quick glance points to VP LU and VP BVI being a group entities of VP LI (neither a branch nor a subsidiary), while VP CH is a subsidiary of VP LI. VP SG is a branch of VP LI. VP HK is an asset manager (not a bank).

In many cases, international banks have both a branch and a subsidiary or group entity with its own license. When you open an account, you may become a customer of both the branch and the other entity at the same time for different services.

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This is the probably the answer to your question.

 

[Martin Everson]

@Sols Thanks could not have put it better.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[Deepbarrels]

Martin Everson said:
P.S On side note - if the world financial system splits in two i.e US sphere of influence and Chinese sphere of influence you want to at least be in HK and have local assets booked on the Chinese side of the fence. Maybe your not into Asian assets but thats where the future global growth is and we already seen 6 or more Chinese companies voluntarily delist from US exchanges and during Trump era similar companies de listed. So DO NOT hold any Chinese stocks in ETF's etc outside of HK or Mainland China - learn after Russia.
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Any recommendation of bank or online brokers in HK?

 

[Clank]

Avoid keeping your money in Europe.

 

[Clank]

Deepbarrels said:
Any recommendation of bank or online brokers in HK?
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Charles Schwab HK

 

[Houdini]

Clank said:
Avoid keeping your money in Europe.
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Clank said:
Charles Schwab HK
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Why would you avoid to keep your money in Europe?

What are the minimum to deposit with Charles Schwab ?

 

[Clank]

Houdini said:
Why would you avoid to keep your money in Europe?

What are the minimum to deposit with Charles Schwab ?
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The government in the EU can freeze your account at any point without any explanation. EU is not neutral, not a place where I want to keep my money.

25,000 for Schwab

 

[Houdini]

Yeah I read the the thread about it
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However, I don't think it is exactly like that and depends on what business you are into and if it is clean money you have as well as your citizenship.

 

[Forester]

Houdini said:
depends on what business you are into and if it is clean money you have as well as your citizenship.
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Well, in many cases this will not help you, I am afraid.

But it is to emphasize that above, at all places should stand “EU” instead of “Europe”. There are some (non-EU) countries in Europe that are not so crazy, e.g. LI, Monaco and still probably CH.

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I am just a simple countryman. Anything I say is only a personal opinion, not a certified advice 🙂

If you think it makes sense, you can like it; if opposite, please, tell me, why I am wrong...

 

[clemens]

Martin Everson said:
The correct way to have done it is find a banking partner like VP Bank you mentioned that can book your assets around the world with proper geographical diversification and easy single point of contact.
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That's a very good sentence to point out, thanks for that. I would have done the same as OP and was actually already creating a list of brokers in so called secure countries!

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One of my favorit articles in Mentor Group ~ Sending money anonymously archieve Financial Anonymity

 

[Houdini]

Forester said:
But it is to emphasize that above, at all places should stand “EU” instead of “Europe”. There are some (non-EU) countries in Europe that are not so crazy, e.g. LI, Monaco and still probably CH.
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True many people are confused with EU and Europe they don't know the difference 😀

 

[janissary]

wheelspin said:
What other bank should I approach? Isn't it a disadvantage having just one bank even with booking my assets in different jurisdictions? I have noticed VP Bank holds several banking licenses in different countries.

I agree. IBKR is just a temporary solution and only for FX exchange.

Valid point. Will do my research about that. That would trigger a sale or movement of my EM ETF where mainly China is disproportional represented. Thank you.


Has somebody more information about that?


OK, will look into the Golden Visa route. I need to assure that my German citizenship isn't revoked in case I go for a second one. It is not very easy to obtain it back and a German passport isn't the worst one to have.
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IBKR will disable your brokerage account or impose restrictions on withdrawal if you only use it for FX and payments.