Trusted Advisor or pathological liar?
Many salespeople learn to ask great questions. They listen. Like a master salesperson, they might learn your birthday and your children's birthdays. They might send gifts, take you out for dinner, or pay for rounds of golf with a charismatic smile. Some salespeople are psychopaths with a lot of traits. Five of these traits include superficial charm, an overly high level of self‐worth, pathological lying, cunning and a lack of remorse.
Some of the traits might seem familiar if you have been sold an offshore investment product: a charming man likely convinced you to invest. Perhaps he cold called you at work. He might have taken you out for dinner, bought you tickets to a sports game or showed a velvet‐tongued interest in your health and well‐being. We are not saying everyone who sells an offshore investment scheme has a mental screw loose. But if they were honest about the products they sell, few people would invest in them.Expats still fall into these traps every single day. Financial salespeople rarely reveal the entire truth. They are trained to psychologically manipulate you into handing over your money.
What Type of Person Would Sell You Such Schemes?
- Those with extremely low levels of financial education. They don't fully understand the products that they're selling.
- Psychopaths or Machiavellians. They understand the products they sell you but they make them sound amazing so they can earn a big commission. They know these products can ruin expats futures, but they simply don't care.
Expats still Pay the World's Highest Investment Fees
Many sales representatives flog offshore pensions from life companies in Isle of Man, Dublin and beyond without realizing their expat clients are charged on three levels: annual management costs, establishment costs, and hidden mutual fund management fees. Sometimes, there are also "mirror fund" charges. These stab an extra pin in an already open wound.
Many financial experts have believed for years that hedge funds charge the world's highest investment fees. But expats pay even more when they buy an offshore scheme.
Paying investment fees of 4 percent per year might not sound like much. But let's see below what kind of damage it can cause. Imagine a one‐time investment of $10,000. If an investment, before fees, earned 8 percent per year, it would create a profit of $11,609 over 10 years. But if fees were 4 percent per year, it would create a profit of just $4,840 over the same time.
Investment Schemes That Cripple Like a Virus
Investing with actively managed funds is like walking up a downward‐heading escalator. Those doing so fight more than gravity. Like all expats, you will be sold debilitating offshore pensions, otherwise known as investment‐linked assurance schemes (ILASs). Chances are either you or someone you know has fallen into one of these schemes. Salesmen selling such products promise high, tax‐free returns.
As an expat, you are ripe pickings for these silver‐tongued sharks. If you are living in a country where you don't have to pay tax on foreign investment income, you can legally invest offshore where capital gains aren't taxed. However, you don't realize that you can do so without buying an expensive, inflexible offshore pension. Salesmen selling such products earn commissions high enough to make a cadaver blush. Expat investors buying them get stiffed. The investments are usually portfolios of actively managed mutual funds coupled with an insurance component. Neither the investment nor the insurance is typically worth the money.
You don't need to pay 4 percent in annual fees. You could pay as little as 0.60 percent. There's a 3.40 percent annual differential between paying 4 percent and paying 0.60 percent. But are the savings such a big deal? That depends on whether you want to retire on caviar or cat food!