+ Larger Font | + Smaller FontInvestment wrapper account
Wrapper Accounts are offshore investment structures that provide investors with a personalised portfolio management platform, giving access to fund houses and investment exchanges world wide. Offshore insurance companies are the main providers of these, which are technically insurance products (see background below). This is of particular relevance to tax and estate planning in many world wide jurisdictions.
Many investors prefer to invest in wrapper accounts rather than other collective investment schemes because of the extensive investment flexibility, estate planning and logistical simplicity that make up the benefits.
Investment options and structure
The nature of a wrapper is effectively no different from a trading account with a stockbroker or private bank. The investor places assets within the wrapper and instructions are then given to buy and sell assets in this account. The wrapper acts as custodian, holding assets on behalf of the investor.
The types of assets that can be held are very wide ranging:
| Personalised | Collective |
|---|---|
| Stocks and shares | Unit trusts |
| Government & corporate bonds | Investment trusts |
| Investment funds | OEICS |
| Exchange traded funds | Deposits |
| Currency notes | |
| Structured products | |
| Deposits |
The investor can manage the account or appoint an investment advisor to manage the investment holdings on his behalf.
Existing assets can also be added to the account, including existing shares and bonds which can be transferred and maintained within the wrapper. It offers an excellent way to sell shares that have been acquired either through inheritance or share options, and negates any logistical problems with selling shares in one location whilst being resident in another and having to deal with different time zones. The time taken to sell the shares can be completed very quickly, avoiding any falls that may happen in the market.
The main benefit of a wrapper account is that the investor can create a portfolio of investments within a single investment plan that is tailored specifically to their attitude to risk and needs.
These benefits are particularly relevant to investors who will expect individually tailored solutions and product flexibility to suit changing circumstances. Many 'vanilla' product structures will therefore not meet the needs of these individuals.
In addition, the investor can appoint a professional investment adviser to select investments on his behalf, thus delegating investment decisions to someone with the skill and expertise to achieve the investor's objectives.
Multi jurisdictional assets
The natural diversity of an international investor's portfolio will mean a greater spread of assets held with many different investment houses, across various jurisdictions. Holding investments via an offshore wrapper centralises the investments in one place. This is important during the investor's lifetime, as he/she only has to deal with one investment house who handle all the paperwork.
If the investor, for an example, has a shares in Australian, US and UK companies these can all be held in one place and be traded from one location rather than having to deal with local brokers and their own rules and regulations.
Currency
The accounts can be dominated in different currencies normally around 10-11 currencies including GBP, USD, EUR, SGD, AUS & YEN. There is also the option to use these currencies within the wrapper so that different currency accounts are opened to take advantage of strengths and weaknesses.
For example, if the investor’s wrapper is dominated in GBP and this is falling against the USD, switching cash from a GBP account to a USD account will remove this potential risk and even turn it into an advantage.
Background
An investment wrapper is an insurance bond, which in turn is a single premium life insurance policy. Originally, single premium policies were written on a whole of life basis and their primary purpose was to leave an inheritance or donation to charity, on the death of the insured person. Typically the death benefit might by 125% of the investment sum. These were traditional with-profits contracts, whereby the investor participates in the profits of the insurance company.
These moved on in the 70-80’s and the scope of investment assets increased but by today’s standards the range was still extremely limited. Eventually the insurance element dropped to 101% and the requirement for medical underwriting also disappeared.
As open architecture became the standard, and trading platforms developed, the policy structure enabled it to construct truly bespoke investment portfolios.
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