Do this before you move your money overseas

Over the past two weeks, we've been speaking with Frank Suess, CEO of the Swiss-based wealth planning and management firm, BFI Capital.

If you missed the previous two interview features, you can find Part I here and Part II here. Let's conclude...

Interview with Frank Suess, CEO, BFI Capital Group in Singapore... Part III

International Man: That actually segues perfectly into my next question, which is, what are some of the greatest current threats to the wealth management industry in Switzerland?

Frank Suess: I have to go back again to regulations. Based on what you read in the press you might get the impression that the Swiss wealth management industry consists of a few large banks only. However, in reality there are hundreds of smaller banks, advisory and asset management firms.

In the past, that has always given the client a lot of options, and also access to highly personalized service. Not everyone wants to deal with a large bank. Not everyone wants to deal with a hierarchical monster. They like the smaller boutiques, the manager-owned operations.

I think the regulations now being passed will consolidate the financial market in Switzerland, and in other countries too. A lot of the smaller firms will find it hard to remain profitable and survive.

I'm quite happy that BFI is of a size that we are able to cope with the growing mountain of bureaucracy. But, there are a lot of two-man or three-man shops in Switzerland that do excellent work. In the end, they may have to close their business because they don't have the resources to comply with all the regulations.

Similarly, some smaller banks are finding it hard to handle all the new regulations. FATCA, for example, a draconian law which is coming from the US, puts substantial burdens on financial institutions worldwide - not just banks - but any foreign financial institution. The administration and bureaucracy required to comply with those rules, if it is indeed implemented, will be huge.

Another threat is the fact that Switzerland is a small country in the midst of Europe. It's surrounded by larger countries that have huge fiscal problems. A strong economy like Switzerland that sits smack in the middle of Europe is a somewhat unwelcome reminder of a failed European concept. That may lead to envy and more political pressure. This is threatening to chip away slowly at the competitive edge of Switzerland, thus potentially creating a dangerous trend toward the lower average standards of the EU member states.

In this regard, so far, Switzerland's direct democracy has been a major defense line. The people of this country are wary of giving in to foreign pressures. At this point, clearly, they will not join the EU. The independence of Switzerland is rooted in the system of direct democratic say and I am quite confident that system will ward off the threats and challenges, as it has again and again in the past.

IM: You've previously mentioned that BFI is willing to accept and work with US clients, even with all the new IRS regulations. In making that decision, what are some of the challenges you're likely to face, and how is it going to change the way you're forced to do business with Americans?

FS: The latest IRS rules do not really affect us. We have always helped our clients at being compliant with the tax rules of their home country. As far as our business goes, we've been more affected by recent SEC rules, especially Dodd-Frank.

In order to work with American clients, we have registered with the SEC. We're now what they call an RIA [Registered Investment Advisor] in the US.

Before Dodd-Frank, we were able to manage assets and advise US clients as long as they qualified as accredited investors or qualified purchasers. That's no longer the case. If today I advise a client on his investment portfolio without being registered, I may be doing something which is illegal as far as the SEC is concerned.

But we're dedicated to the US market and want to continue working with Americans. A lot of international banks, asset managers and advisors have been rejecting or sending away Americans. We decided to walk in the opposite direction.

Over the years, the US has passed lots of rules that, on the one hand, make it more difficult for non-US financial advisors to serve American clients. On the other hand, the rules make it more difficult for Americans to access international investments and advisory services without doing something wrong.

Americans need help, seriously!

IM: That brings up the FBAR, the Foreign Bank Account Report. Our members often ask about this. They read the rules and look at the form. It's confusing. We get questions on what needs to be reported, and what does not. For example, physical gold - does it or does it not need to be reported on the FBAR?

FS: I have to tell you that we are quite pragmatic in our response to such questions. It's very simple: At this point, the IRS - and possibly to a lesser degree, the Treasury Department - want Americans to report what they have overseas. The times of keeping things abroad in order to keep it out of your government's sight are over, at least if you want to be compliant.

I say: Check the box and complete the form. Throw as much paper at the IRS as you can find and make them drown in it! There is, as you surely know, already a new form underway: Form 8938. It is currently still in its draft format. While the FBAR, or TDF form 90-22.1, is a Treasury Department form, this new form will be a joint form with the IRS and the Treasury Department. And, sorry to say, Americans will soon have to report further information about all their assets overseas. This new form leaves little doubt about that.

IM: Can you take us through the general process that a wealth management firm like yours goes through in helping clients internationalize their assets?

FS: For the most part, our clients are high net-worth individuals and wealthy families that are interested in internationalizing their assets and to have it managed overseas. They want a combination of flexible investing, generally discretionary portfolio management, combined with a solid structure that entails such benefits as legal asset protection, tax efficiency and proper inheritance mechanisms.

We also have clients with a lower amount of funds to allocate, and very often they take advantage of a service such as a Swiss annuity or Global Gold, because the minimums there are CHF 50,000.

For our high net-worth clients, we start by emphasizing the importance of reviewing structure first. In our thinking, it's important to have a solid structure - one that allows you to have long-term planning - meaning that you don't have to change it every time the rules change. You have something that allows you to invest flexibly in a variety of assets globally.

For Americans, it's important also to have unrestricted access to international investments. When you look at most funds internationally - certificates and products - very often you see the term, "Not available to US persons." A proper structure can do away with that limitation.

Right now, it's a good time to do tax and estate planning. That is always the case when your portfolio has dropped in value. For Americans, there's also the Tax Relief Act which allows them to remove $5 Million per person without triggering gift taxes.

IM: What are some of the more popular services for Americans currently, and why?

FS: Clients who share our big picture like to take advantage of our asset management services. Our performance this year, for example, has been very positive. So far our year-to-date in our core strategy, which is called BFI Protector, is up over 11%. That's very good in a market that is not so easy.

However, if I had to pick a product that is uniquely and particularly suited for Americans, it's really the Private Placement Life Insurance. Unfortunately, people tend to switch off their attention when the word "insurance" is dropped. That is a big mistake. Properly structured life insurance policies and annuities afford a lot of planning benefits for Americans seeking to diversify their assets internationally. If an American wants to have something overseas and he wants the compliance in terms of taxation, and he may be interested in asset protection, then this solution is very interesting.

I don't want to get too technical, but there are a lot of different types of policies that you can use for US persons, depending on a client's situation and goals. Depending on the circumstances, you may go with something called a Deferred Variable Annuity or a Variable Universal Life Policy.

The key point to take away is that there are manifold variations that provide for a lot of flexible planning. If the planning is done properly, you can achieve a high level of safety, investment flexibility and asset protection, plus compliant tax savings.

IM: Right. Is this a useful strategy for Canadians or citizens of other countries?

FS: Most countries have life insurance rules that offer tax and asset protection benefits for these types of policies. For Canadians, there are similar benefits. However, I am not certain that PPLI will provide for the same level of tax benefits. We do have Canadian clients, but we haven't used variable policies for Canadians, at least not from a perspective of tax planning.

The Canadian clients we have are mainly taking advantage of Swiss annuities, our portfolio management services, and also Global Gold.

IM: I wanted to get your perspective on pegging the Swiss franc to the euro. What are your thoughts on the matter?

FS: I'm not a friend of the peg. I actually just recently wrote quite extensively about this in our weekly newsletter, Mountain Vision Update.

Obviously the Swiss National Bank's interventions have made one thing clear - even the Swiss franc is only a fiat currency. The National Bank was under a lot of pressure to stop the Swiss franc's appreciation. There was a lot of whining that went on, especially from exporters, and finally the SNB did intervene.

Their goal was primarily to stop the euro's depreciation against the Swiss franc, so they pegged the Swiss franc to the euro at the 1.2 mark. So far that has worked, and the current exchange rate is slightly above 1.2, so some are saying that the SNB's intervention was successful. I think that's short-sighted. In the end, the SNB cannot control and influence what happens around the rest of the world in every economy.

Unless the EU and the US get their houses in order, which I don't see happening anytime soon, it's going to be very difficult to keep the Swiss franc from rising once again.

IM: Well, that was the last of my questions so, if people want to know more about BFI or its subsidiaries, including Global Gold, how can they do so?

FS: The best way is to take a look at our website at From there, you can get more information about all of our services.

IM: Very good. Thanks for spending some time with us.

FS: My pleasure.

Tags: switzerland, reporting requirements, offshore banking, gold, fbar,