Can UK standard financial products be right for the offshore market?
There's a huge disparity between the quality and in particular cost of offshore financial products and onshore UK financial products.
Why then are onshore products not more widely used for financial planning offshore?
The pros of UK standard financial products are clear:
Flexibility - to allow clients easy access to their funds
Cost - normally much lower and openly disclosed and explained
Transparency - clients can see and actually understand what the product does, what it's costing and what penalties or risks may be involved.
Security - most UK products are based in UK institutions rather than potentially obscure offshore environments
Regulation – the pain of regulation comes with the blessing of at least some protection.
There are also potential downsides to using UK based products :
Currency - most UK products are primarily Sterling based rather than the necessary dollar or euro denominations.
Availability - very often regulatory or access to the products are restricted
Commission - Most UK products don't now pay commission to advisors which means the incentive to distribute them is lower as clients would be faced with the prospect of actually paying a direct fee for advice
Protection – Most UK financial products to sold outside of the UK do not necessarily qualify for financial services scheme or FCA protection.
Tax - the tax advantages of some offshore products can’t be replicated by onshore versions, so a lower return is inevitable.
The biggest factor though is evolution. Whilst most regulated markets have evolved to protect the consumer – the offshore market hasn’t, as there isn’t an overall regulator to protect expats in different jurisdictions. Consequently many common products are still the same as were used in the UK 30 years ago. But in the UK they have been refined and evolved due to consumer pressure on government & regulators. This has improved the market for consumers and changed the financial advice environment significantly.
Change is slowly occurring in the offshore market, however in the meantime, expats are still predominantly faced with using old fashioned, expensive and inflexible “products” when they seek financial advice.