Red flags when someone pitches you an offshore investment bond

The offshore investment bond is one of the most frequently pitched products to expats, and it is not hard to see why: it can pay the person selling it a substantial up-front commission, often recovered from your money over a long lock-in. That does not make it always wrong. It does mean it is sold far more often than it is genuinely the right answer, and that imbalance is worth knowing before you sit down to hear the pitch.

None of what follows is a claim that every bond is bad or every adviser dishonest. It is a list of the features that should make you slow down and ask harder questions before you sign anything.

A long lock-in with an early-exit penalty that tapers over several years. An establishment charge recovered from your money over that same window. Layers of cost, the bond, the platform, and the underlying funds, that are presented separately so the total is never stated. A projected return that quietly nets the charges out so the cost never appears as a line. And a sense of urgency, an offer that has to be taken now, that exists to stop you doing exactly the checking this article describes.

Any one of these can have an innocent explanation. Several of them together, especially the hidden total cost and the pressure to decide, are the pattern behind most of the bad experiences clients describe to me when they arrive after one.

Three questions, and insist on the answers in writing. First: what is the total ongoing cost per year, every layer added together, as a single percentage? Second: what do you, the person recommending this, get paid if I proceed, up front and ongoing? Third: what is the exact exit penalty if I want my money back in year two, year three, and so on?

A recommendation that is genuinely in your interest survives all three questions easily. The answers are clear, written, and unembarrassed. If the answers are vague, verbal, or come with reasons why they cannot be put in writing, you have learned the most important thing about the pitch, and it is the answer to whether you should proceed.

I am paid through commission on products arranged and a fee on assets managed, so I am not against commission as such. The thing that protects you is not the absence of commission, which is rarely real and often disguised. It is whether you can see the cost and what it pays, in writing, before you decide.

Apply that test to any adviser, including me. Ask what the recommendation pays the person making it, and require the answer in writing. If that is uncomfortable for them to provide, that discomfort is your answer.

This article describes common features of offshore-bond pitches in general terms. It is not a statement about any particular product or firm, and it is not personalised advice. Some bonds suit some people; the point is to make the cost and the conflict visible before you decide.

If you have been pitched something and want an independent read on what it actually costs and pays, book a consultation. The summary you receive afterwards is yours either way.