Multi currency investing is a must in the global economy for three reasons.
First, multi currency investing is needed to protect against the falling US dollar and the currency turmoil this brings around the monetary world.
Second, multi currency investing reduces purchasing power loss from inflation. Investors can chose currencies less likely to be hurt by inflation.
Third, multi currency investing puts investments in tune with the global economy. All of us are global spenders so should invest internationally as well.
But how does one know what to do and then how can one actually initiate multi currency investing?
You can be a multi currency investor though local banks and brokers or you can use banks and brokers in other countries for your multi currency investing.
Over the past several years your multi currency course has helped you invest through overseas banks by creating case studies based on portfolios that we developed with Jyske Bank.
There are four reasons to bank in other countries.
#1: To gain higher returns and/or lower risk with access to greater expertise.
#2: To reduce risk by diversifying out of your own banking system.
#3: To enhance your asset protection.
#4: To gain higher returns and/or lower risk from services unavailable locally such as multi currency loans.
However a continuing growth of global banking regulation, a falling US dollar and inflation have made banking abroad increasingly expensive and difficult.
Years ago my US bank welcomed clients I sent them from Ecuador, Canada, England and Europe. Today, the “know your clients compliance regulations” make it so expensive to process clients abroad that my American bankers do not want overseas referrals unless the clients have very large deposits and business to bring. Otherwise new overseas clients are not cost effective.
The reverse is also true…especially for American, Australian, British and German investors. The regulatory agencies of these countries have been especially aggressive. Excessive regulations in these countries force banks and brokers anywhere in the world, that open accounts for US, Australian, British or German residents and citizens to comply with their respective as well as local law.
This raises the cost of compliance everywhere especially since the laws of each country often clash. Banks and brokers have to create systems that comply with both laws…those of their country and those of the country were their clients are citizens or live.
Layer upon layer of regulation forces compliance costs to such high levels it is no longer profitable for banks to provide services to clients abroad except for very large investments. This is true for US banks serving non US clients and non US banks serving US clients.
The falling greenback has made this even worse for US investors. The dollar has fallen 50% against European currencies in the past several years. This means that your European banker who is paid in a European currency is 50% more expensive.
This added cost and two new events have magnified the cost of banking overseas.
The first event was created by the German tax collector who paid seven million dollars to a Liechtenstein banker for a list of European clients at a Liechtenstein bank. The Germans then began investigating all the Germans on the list. They also sold the data to all the other European tax authorities. Only the Danish tax authorities declined to buy the information saying it had been illegally obtained.
The second event came when a disgruntled Swiss banker began helping US authorities and saying that the Swiss bank he worked for had helped US investors avoid tax.
These new events and the overall compliance problem has caused many banks abroad to either stop or limit services to non locals and especially to Americans.
On the other side, many US banks now restrict non local accounts.
The limitations banks impose are based on three types of banking services that investment banks usually offer:
Managed Service. The investment bank, based on the client’s needs, makes all buy and sell decisions on a discretionary basis.
Advisory Service. The bank, based on the client’s needs, makes recommendations to the client. The client decides what to buy and sell.
Execution Only Service. The bank simply buys or sells based on the client’s instructions.
Various banks in differing countries offer various services and have different restrictions, but almost all banks limit the services available to American residents and citizens.
For example some banks will not buy stocks or bonds abroad for Americans. Others will not give advice or manage funds for Americans. The limitations in each case are created by conflicts of law (between the bank’s country and the US) that relate to the specialty of each bank.
I have been banking abroad for 40 years and have watched the regulations grow and hence restrictions increase…year by year…decade by decade.
As the rules have changed, my strategy has evolved.
In my early days as a corporate employee I was on the board of directors of a Panamanian bank and a Hong Kong insurance company so I have a little understanding of the inner workings of investment institutions and the problems they face. I know what to look for and how they make money.
I have considerable experience with operating my own accounts in banks abroad as well.
Many years ago, I utilized 14 banks abroad: in Austria, Australia, Bahamas, Canada, Cayman, Denmark, Guernsey, Isle of Man, Jersey, Luxembourg, London, Monte Carlo, Panama and Switzerland. xxxxxxsl
Over time restrictions grew. My Swiss banker (Credit Suisse) first sold all the Swiss mutual funds (way back in the late 1970s or early 1980s) I held. They would not allow Americans to buy non SEC regulated mutual funds. Then they restricted certain bonds that Americans could buy and hold.
My Canadian stock broker (in the 1990s) simply closed my account after they decided not to allow any US clients.
To reduce the administration of many bank accounts and because banking fees were rising everywhere, I began to study and refine the number of banks I used abroad.
I began to weed out bankers and selected bankers I would use based on five Fundamentals I call the Five Fs :
Fees: How much does the bank charge? I looked for reasonable fees.
Fit: Different banks specialize in different services. I looked for banks that specialize in services that best fit my personal needs.
Foundation: I want the banks I use to be safe and in countries that were politically sound.
Friendliness: I want to like the bankers I deal with and the country so I can enjoy visiting the bankers and brokers who preserve my wealth. After all satisfaction and fulfillment in life is a big part of the goal!
Faith: In the end, this is perhaps the most important of the Five Fundamentals. My system evolved over many years. The banks and brokers that I kept were the firms and the people whom I felt had absolute integrity. These were bankers, banks and brokers I had learned to trust based on many years of working with them.
Over a decade, ending over fifteen years ago, my system had evolved into using several US banks and brokers, plus just two overseas banks and brokers, Jyske Bank in Denmark and Smith & Williamson in London.
Jyske Bank became the main bank I have used for nearly 20 years.
Jyske is the second largest Danish bank with 450,000 domestic clients, 35,000 international clients, USD 23 Billion in total assets, and a Moody’s rating of AA1. Jyske has over 35 years’ specialization in private banking.
Denmark is ranked by Moody’s as one of the safest country in the world to have a bank account.
Jyske Bank uses a good value system for fund management company that has been rated #1 by Morningstar. They use this value system to help us select shares to study for our Multi-Currency Portfolio Educational Course.
Smith & Williamson are London stock brokers and independent providers of investment management, accountancy, tax, corporate and financial advisory services to private clients, corporates, professional practices, and non-profit organisations. With 11 principal offices in the UK and Ireland, 1,500 people and an international capability in 97 countries, they provide an innovative global service.
Smith & Williamson was founded in Glasgow in 1881 and merged in 2002 with NCL (Securities) Limited, who were my brokers at that time. This merger also included Cunningham Coates Stockbrokers, one of Northern Ireland’s oldest financial institutions.
It might be worth noting that London and Copenhagen are two of my favorites cities.
This system has worked well for me with all Five Fundamentals for over a decade.
I built our entire Multi Currency course around my banking at Jyske. The regular multi currency case studies revolved around my investments via Jyske Bank and portfolios that I developed with Jyske’s help.
However as restrictions about accepting US investors grew, Jyske Bank determined that it needed to create a special service for US investors. This need created Jyske Global Asset Management. (JGAM) a wholly owned but independent SEC registered subsidiary of Jyske Bank.
The changes JGAM has made creates a need for my strategy and your multi currency service to evolve.
JGAM now offers two services for US investors, a managed and advisory service.
The managed service is available for investors with $250,000 invested or more.
The advisory service is available for investors with $50,000 or more.
JGAM’s Managed Service manages discretionary portfolios of $250,000 and above
based on the clients needs and will make all by and sell decisions for the client.
JGAM’s managed service offers portfolios for all types of investors ranging from low risk to speculative. JGAM managers meet once a month for a top down global economic analysis that looks at markets and financial conditions around the world. From this analysis, they recommend asset class allocations for each risk level. Then they select individual shares/mutual funds and Exchange traded funds (ETF) to be used in these allocations.
JGAM’s Advisory Service looks at a clients (with $50,000 minimum) and makes recommendations to the client, but the client must make the final decision on what to buy and or sell.
This service is limited to currencies, commodities and US registered securities (including ADR`s) only.
As an SEC registered investment manager, JGAM cannot offer an execution only service for US investors.
This is where Smith & Williamson fits perfectly into my system because as British stockbrokers, they can only offer a execution only service for US investors. They cannot give advice to their US clients on what to buy or sell, but as London stock brokers they can execute buy or sell orders for shares and bonds in almost any market or currency in the world for US investors who know what they want.
Between these two banks and brokers, I have everything, a managed advisory and an execution only service.
Here is how your multi currency course comes in.
We will continue to create case studies based on the portfolios that we have developed and study with Jyske Bank.
Though these portfolios are not and have never been recommendations, non US investors can continue to instruct their account managers at Jyske (or wherever they bank) to buy any of the shares or bonds we track.
US investors cannot buy the shares in the current portfolios we will track until November 2008 from Jyske Bank. They can buy these shares through Smith & Williamson if they have an account there.
New Portfolios Tracked
JGAM’s management service offers portfolios for all types of investors ranging from low risk to speculative. JGAM managers meet once a month for a top down global economic analysis that looks at markets and financial conditions around the world. From this analysis, they recommend asset class allocations for each risk level. Then they select individual shares/mutual funds and Exchange traded funds (ETF) to be used in these allocations.
From this process they develop eight portfolios low, medium, high and speculative risk, with or without US dollar investments.
There are four asset types in the portfolios, Fixed income, Equities, Alternatives (commodities metals etc) and Cash.
Here for example are JGAM’s latest breakdowns.
Low Risk: Fixed Income 70%, Equities 20%, Alternatives 5%, Cash 5%.
Medium Risk: Fixed Income, 40%, Equities 50%, Alternatives 5%, Cash 5%.
High Risk: Fixed Income 10%, Equities 80%, Alternatives 5%, Cash 5%.
Speculative: Fixed Income 20%, Equities 60%, Alternatives 10%, Cash 10%.
We are now adding four portfolios, one each based on the risk ranges of the Jyske Managed portfolios.
In this way US and non US investors can continue to use Jyske and or extend their
multi currency investing through london as well.
Please send your questions! Remember to add BL in the subject line so I’ll know to give your question priority.
Join me with Jyske Bank at our next two International Investing and Business Made EZ courses this year.
October International Investing and Business Made EZ North Carolina