Day 19: Step #9, Take Your Administrative Life Virtual

Dear Student,

We’re talking about your money and how to be sure you control and can access it electronically from anywhere in the world. Yesterday we walked through a plan for organizing your personal bank accounts. Today, I want to help you to make a plan for setting up the investment accounts you’ll need to manage your portfolios in your new home overseas.

Keeping your liquid cash accessible is important, but being able to manage your investments is just as important. In this context, I’ll offer an aside that harkens back to your Day #1 lesson on knowing yourself and understanding what’s important to you.

If you manage your own investment portfolios and trade regularly (certainly, if you trade daily), this should be at the very top of your list of things you will not compromise on in making your move. Specifically, you should not consider relocating to a place where the Internet access is not state-of-the-art and international-standard reliable. You probably shouldn’t, for example, plan to move to a remote coastal region of Nicaragua. You’ll go mad struggling to get your trade orders to go through.

That said, with regards to your investment accounts, you have three options. You can keep them all in your home country; you can move them to an international bank or brokerage firm; or you can move some of them overseas and keep others “back home.”

Regardless where and how you decide to organize your investment accounts, the important thing, as with your personal accounts, is that you can access those accounts and the funds they contain. As with your personal accounts (checking and savings), you want to be sure that you have both online access as well as the ability to fax or call in wire and trading instructions.

As I explained yesterday, Schwab has become our financial institution of choice, not only for personal accounts but also, and perhaps primarily, for investment accounts, as you can tie them to your banking accounts and your ATM card. Schwab also offers excellent online services and, as I’ve explained, the ability to fax in wire instructions. The downside is that they offer only U.S. investment options.

Whether you move your investment assets offshore or not depends largely on whether or not you are comfortable diversifying your investment portfolios outside your home country. Offshore banks offer more investment options, including options that aren’t available through U.S. investment banks. And I’m a big believer in the fundamental wisdom of diversification in all regards (market, currency, asset type, etc.).

Whether you move your accounts and your assets beyond your home country also depends on how much you have to invest. The minimum account balance for many offshore banks is too high for some expats. For example, Swiss banks, probably the most famous offshore banks, generally have multi-million-dollar account minimums. Other recognized offshore investment jurisdictions, including Liechtenstein, Jersey, and the Isle of Man, for example, have lower but still high account minimums (of, say, more than US$1 million).

That said, you can find offshore banks with account minimums of US$250,000 and less. Following are three I recommend, all with minimum account balances of less than US$250,000 (and as low as 25,000 British pounds):

• VallBanc
• Caye Bank International
• Barclays Bank U.K.

If you’re an American, you have a secondary issue to take into consideration, as, in the current climate, the reality is that many offshore banks don’t want U.S. account-holders… and simply won’t allow you to open an account.

If you’re a self-trader who uses discount houses like Ameritrade or e-Trade for your brokerage activities, then you’ll find the fees of an offshore investment bank to be high. You’ll want to keep your U.S. brokerage account if you plan to continue day-trading from your new location. Offshore banks generally make more sense for longer-term investments.

The most important thing is to be sure that you have the ability to move funds easily among your operating accounts (the checking and savings accounts you use for day-to-day living expenses) and your investment accounts, including your regular investment accounts and retirement investment accounts such as an IRA. You’ll accomplish this by using banks that offer both online access and the ability to initiate transfers online, as well as the ability to initiate transfers by fax and over the phone.

The thing you don’t want (as I explained yesterday) is to have to go in person to some bank or financial institution’s office to initiate a wire transfer. I had this problem with one U.S. investment brokerage firm we used whose agent had assured us that we could make wire requests via fax. However, he failed to mention that that was only for domestic wires. Foreign wires could be initiated only with an office visit. Considering we were already living overseas, that was impossible. We switched immediately to another brokerage company.