International insurance based wrappers for direct securities portfolios

The flexible frontier: International insurance-based wrappers for direct securities portfolios
By Cobus Kruger, head of product & investments, Glacier by Sanlam

In a flexible and increasingly customised world, high net worth clients are demanding more, and insurance-based international investment solutions have to keep up. Historically we had a limited range of insurance company life funds to invest in, the dreaded mirror funds (insurance funds investing in unit trusts) followed, leading finally to straight through unit trust pricing, increasing transparency therefore making it much easier to understand the underlying investment choices.

Portfolio bonds have been in and out of favour in the UK and other international markets for years but it is not really something that has been actively offered in South Africa in the past. The domestic market has made great strides in the recent past to include bespoke portfolio services especially for retirement assets, where larger amounts justify having a direct securities portfolio.

“Glacier International’s Global Life Plan now offers similar services to South African clients via external service providers, the first one being Pictet, the Swiss private bank,” says Cobus Kruger, head of product and investments at Glacier International, a division of Glacier by Sanlam. “We offer larger clients the opportunity to invest in discretionary and execution only portfolios as investment options. These investments still have to adhere to the approval process for assets on the life company balance sheet so there are limitations, but offer the ideal solution for those clients wishing to use, for example, an international exchange traded fund (ETF) such as the SPDR S&P 500 (SPY), at 0.09% net expense ratio per annum.”

The major benefit of making such investments via the Global Life Plan is that the tax is deferred until withdrawal or surrender and the tax administration of the international investment is handled by a life company. These are benefits that have been discussed in detail in the past, but are particularly well-suited to direct security portfolios.

Costs are obviously a major consideration and to that extent personal circumstances and the nature of the investment solution will clearly play a role. The advantage is that the Global Life Plan allows for every client to be accommodated according to their needs, i.e. a USD 500,000 client could have the lowest annual administration charges and hold an ETF such as the one described above in an execution only portfolio. The combination could be very cost effective; not that cost is the only consideration.

By making the portfolio services available, Glacier International is taking another step closer to providing high net worth clients with a holistic international investment solution for their discretionary savings. Clients have the option to choose from international, foreign currency denominated unit trusts covering all asset classes and regions, overlay these selections with P2Strategies (an investment strategy whereby cushioning is provided when market volatility increases) to personalise a preservation strategy or manage their investments using direct traditional portfolio services. A combination of the above could be used in the same Global Life Plan – flexibility and customisation for insurance-based international investment solutions has truly arrived.

“We will be adding more service providers during the course of 2011, with another international bank being available shortly,” says Cobus.