Diversifying securities across multiple brokers and jurisdictions (personal wealth)

[liroyb]

Thank you for sharing︉ this insight. If we take your VP bank example, I wonder what layer of safety︊ 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 your︌ exposure to LI would always be there regardless if you'll split or not, and the︍ subsidiaries aren't systematically important to the foreign governments in the other jurisdictions, so in case︎ of bank failure only the headquarters would be backed by LI municipality.

Can you please️ 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]

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 might︀ become less favorable or difficult to make investments with banks there. For example EU PRIIP︁ affected EU resident retail investors trying to access US ETF's that did not provide investors︂ with PRIIP KID. Plus other financial instruments may not be available in one jurisdiction but︃ are in the other. Also depending where the bank is headquartered it is not uncommon︄ for local entities to close their doors due to cost savings, jurisdiction blacklisting or costly︅ operating requirements etc. Barclays, HSBC, UBS, CS etc have all done this in the past︆ closing down operation in certain countries.

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

 

[liroyb]

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’t︉ you still entrusting & exposed to LI since this is where the bank is headquartered?︊

 

[Sols]

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 banking︀ license in Luxembourg and answerable to Luxembourgish law to a greater degree than a mere︁ branch. But if the parent folds, this may cascade and affect the subsidiary.

VP LU︂ could be a group entity of VP LI, meaning for example that they are both︃ owned by the same holding holding. This is an even greater separation of risk. VP︄ 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 I︆ didn't look into the exact structure of VP for the above. For example, if VP︇ XX is reliant on selling products offered by VP LI, it doesn't really matter how︈ it's structured. In that case, if VP LI fails, hard times will befall VP XX︉ as well.

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

In many cases, international banks have both a branch︍ 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 the️ same time for different services.

 

[Martin Everson]

@Sols Thanks could not have put it better.

 

[Deepbarrels]

Any recommendation of bank or online brokers in HK?

 

[Clank]

Avoid keeping your money in Europe.

 

[Clank]

Charles Schwab HK

 

[Houdini]

Why would you avoid to keep your money in Europe?

What are the minimum to deposit with Charles Schwab ?

 

[Clank]

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

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

 

[Forester]

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.

 

[clemens]

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!

 

[Houdini]

True many people are confused⁠ with EU and Europe they don't know the difference 😀

 

[janissary]

IBKR will disable your brokerage︂ account or impose restrictions on withdrawal if you only use it for FX and payments.︃