Offshore brokerage accounts

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Offshore brokerage accounts


Intelligent investing with offshore brokerage accounts. You can invest in global markets accessing opportunities usually not available to local investors.

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Offshore brokerage accounts to reap the rewards of international investing

Intelligent investing is one of the most effective ways to build wealth. With the help of offshore brokerage accounts, you can invest in global markets accessing opportunities usually not available to local investors.

As an investor, you have the option to choose from several different types of brokerage accounts. Making the correct choice, based on your financial requirements, can sometimes leave you feeling quite out of your depth. There is also the risk of being scammed and losing money when you make use of ‘International Providers’ that turn out to be boiler room scams.

Avoid the risks and seek advice from a FAIS compliant CFP (Certified Financial Planner) that will advise you on how to safely open an offshore brokerage account with a legitimate and reputable international partner.

How does a brokerage account work?

A brokerage account is a facility that allows an investor to buy, sell and hold securities (Shares, Bonds or Derivatives), funds and/or currencies that that are deposited with a regulated brokerage who holds the assets on behalf of the investor. It is similar to the way your bank holds your money on your behalf, allowing you to send and receive money using their “platform”.

Brokerage accounts are the best way to actively manage your investments. This is usually for hands on investors who want to make investment decisions themselves. In essence, they permit you to invest in several stocks by buying and selling through an online platform or by giving a trader an instruction via the phone or via email. The method of executing transactions will differ depending on the provider chosen.

Investors that do not wish to make the investment decisions themselves have the option of appointing a discretionary manager on their offshore brokerage account and giving them a mandate (guidelines on how to invest your money and what your expectations are) to trade on your behalf. There is usually a fee associated with this service. We will advise you on the best platform to use with your specific needs in mind.
The reason many people opt for offshore brokerage accounts is because you are more likely to see higher returns in comparison to low-interest offshore savings accounts.
How to determine if an offshore brokerage account is right for you
With a brokerage account, you have the opportunity to buy everything from stocks, bonds, mutual funds (unit trusts) and much more. Figuring out if a brokerage account is for you can be a tedious process; below we list some questions to ask yourself in your quest to determine if you should add a brokerage account to your investment portfolio;

  • What type of assets do you want to trade? Shares, currencies, funds or derivatives?
  • Are you interested in managing your own investments?
  • What is your investment time-frame? How long are you planning on being invested before you will need your money?
  • Do you want to take regular withdrawals from your account or are you happy to leave the capital as is and reinvest for a period of time?
  • What are the markets / countries you want to be able to invest in?

The next step in determining if a brokerage account is right for you is to go over the different types of offshore brokerage accounts available. Then you need to determine which account type will be most beneficial, based on your financial needs and goals.

The main 3 types of brokerage accounts

As a trader, you have the option to open a brokerage account in a few different ways.
There are 3 main types of brokerage accounts. Below we list each one followed by a brief description;

  1. Margin accounts
  2. Cash accounts
  3. Option accounts

A margin account is a type of brokerage account in which the client is enabled to borrow securities or money from the broker in order to buy as much as double what he/she could with a cash account. Thus, you do not have to have as much cash on hand to buy a stock when opening a margin account. This allows you to make use of leverage to enhance your returns but be warned the same effect also enhances your losses.

Note: when you open a margin account, the firm with which you do so, will require you to sign a hypothecation agreement, which in essence, stipulates regulations as well as enables the broker to have a lien on your account (should your balance account fall below the minimum maintenance margin).

Always keep in mind that there are risks involved in purchasing securities on margin.

A cash account is a type of brokerage account whereby you, the investor, are responsible for depositing the full cost of any purchases by the settlement date of transaction.
This account is the most traditional type of brokerage account. It is important to note that with a cash account, you are not permitted to borrow funds from your broker to pay for transactions in the account.
An option account is a margin account approved by your broker for trading. Your broker first needs to determine if there is adequate equity in the account and that you are of sufficient net worth. Once this has been determined and the broker is happy that you have met the above requirements, he/she will then grant you approval.

The benefits of a brokerage account

There are 3 main benefits to highlight when looking to invest using an offshore brokerage account, namely;

  1. Personalisation – With brokerage accounts, you have the choice to invest in companies that you personally favour.
  2. Instant statements – A big pro with brokerage accounts is that they have the ability to download your personal finance account. Your information is consolidated and is easy to understand.
  3. Higher returns – While there is much greater risk involved, you are more likely to see a higher return in comparison to low-interest offshore savings accounts.

How safe is your money in offshore brokerage accounts?

When you have money in a brokerage account, your money is as safe as if it were in a bank as long as you make use of a regulated offshore provider

FAIS compliant – What does it mean and how are you protected?
FAIS regulation is applicable to South African financial services providers, by taking local advice from a regulated provider in making the correct decision when opening an offshore brokerage account you know you are protected by local law and regulations.

The FAIS (Financial Advisory and Intermediary Services) act is put in place to make sure that you, as the client, receive financial advice that is not only sound, but specifically personalised to your individual needs.

The act states that any person, who stands as an untrained representative of a brokerage, should not be permitted to give advice. If you are someone who wants to pursue a career in the finance and insurance industry, you need to obtain a current FAIS accreditation.

Yes, a FAIS accreditation makes it legal for a person to work in the insurance and finance sector, however it also provides those people who work in said industry with the necessary tools and skillset to deliver the best possible guidance derived directly from your financial needs.
Ultimately, what this means for you, is that you are protected from making unsound financial decisions.

Whether you are an avid trader or a newcomer to the exciting world of investing, opening an offshore brokerage account creates an opportunity to invest in international financial markets and more effectively manage your money.