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Swiss misconceptions

It is still a popular misconception that offshore investments are only for those people wanting to hide their money in secretive offshore accounts.

The reality is quite different. Granted, the Swiss bank account image still exists to some extent. However, more and more international financial institu-tions are cleaning up the way they do business and anonymity is becoming less available to investors.

Governments are realising that even the perception of “safe havens” for illegal money – whether sought or by accident – is damaging their legitimate economy.

They are now taking steps to regulate their financial institutions in a bid to reverse the poor image that has built up over the years. This move towards a more regulated approach will help to attract the legitimate investor back into their economy by providing a more secure investment environment.

It is the need for a secure and confident investment environment which provides one of the main reasons for the creation of the single regulator within the UK. It is true to say the FSA regulates the marketing and sales of UK-based products, not offshore products. But many investors and IFAs do not realise that, for an offshore product to be marketed to UK investors, the FSA regulations have to be adhered to the letter by the producing life office.

What is also often overlooked is that many of the offshore products on sale to UK investors have their origins in jurisdictions such as the Isle of Man, Jersey and Dublin. Each of these jurisdictions has legislation and regulatory requirements equal to or better than the FSA regulations in the UK.

Ironically, and contrary to popular misconceptions, some investors may find their investments are more secure offshore than in the UK. Take the Isle of Man as an example. The marketing and sales of Manx-based investment products is supervised by the Isle of Man Government Financial Supervision Commission. The marketing requirements placed on product providers by the FSC very closely mirror those of the FSA.

In this respect, potential investors should realise that, as in the UK, the regulator closely monitors the quality of the marketing material produced to ensure no outlandish promises are being made by product providers which cannot be achieved.

Again, as in the UK, the FSC monitors and audits product providers to ensure they are abiding by the regulations laid down.

In the field of investor protection, the Isle of Man also provides substantial compensation. The Policyholders Protection Act 1975 in the UK provides an element of investor protection should a life company collapse. Similarly, the Isle of Man has its own equivalent, the Isle of Man Life Assurance (Compensation of Policyholders) Regulations 1991.

Both acts provide a level of compensation equating to 90 per cent of the investment value. However, when the Investors&#39 Compensation Scheme steps in following the collapse of a UK financial services company, the amount of compensation available to an investor is capped at £48,000. In contrast, the Isle of Man regulations place no limit on the amount of compensation.

As every financial adviser knows, the key to investing offshore lies in investor confidence – confidence in the provider and its product, in the IFA and in the level of protection they have in the jurisdiction in which they invest.

The industry and offshore regulators must begin to work together with the IFA community to help the UK investor gain confidence in offshore jurisdictions.

Maybe then we can finally rid offshore investment of this tawdry image of the Swiss bank account and replace it with the truth that offshore is simple, safe, secure and tax-efficient.

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