South Africans looking to diversify their assets or hedge against currency volatility by investing offshore need to be cognisant of the complexity they may inadvertently be creating for themselves and their families when holding assets cross-border, writes Rex Cowley, Director and Co-Founder of the specialist international pensions and fiduciary business, Overseas Trust and Pension.
Whether they are looking to access hard currency in the form of dollars, euros or pounds, buy property or take advantage of investment opportunities in global companies, South Africans need to educate themselves about the various challenges they could encounter in respect their offshore investments.
Different jurisdictions, different laws
When placing assets offshore, many overlook the reality that those assets are now in a different jurisdiction with its own laws and financial services regulations, which govern those investments, as well as how they should be taxed and how they can be accessed.
These administrative matters are not necessarily top of mind when South African investors focus on what they hope to achieve through currency hedging efforts and harnessing global investment opportunities.
Some of the questions people need to ask themselves when considering offshore investment are: What happens in the worst-case scenario? Can I get my money back? How do I complain? What rights do I have as a non-resident?
The financial services sector in South Africa is well-regulated. If clients feel aggrieved or have a problem with a particular financial product, they have recourse in the form of the ombudsman or other regulatory bodies. However, the minute they leave South African shores, they are no longer protected by this system, especially if they have invested in another country without soliciting the services of a regulated Financial Adviser.
The level of protection and recourse is likely to differ from jurisdiction to jurisdiction and will also be affected by whether the investor is a resident of that country or not. While the country might offer protections, these may not apply to non-residents.