The discovery by Scottish Equitable that any European/ Channel Islands/Isle of Man-based insurer sel...
The discovery by Scottish Equitable that any European/ Channel Islands/Isle of Man-based insurer selling to UK residents is potentially covered by the UK's Financial Services Compensation Scheme (see pg1) could be the start of a boom in offshore sales.
This may seem to be a slightly extravagant claim, but one of the reasons why offshore products are not being bought by mainstream UK investors is not issues of cost, their sophistication, their complexity, or their suitability - offshore can match pretty much everything onshore can offer and provide more choice - it is because the average domestic investor, whether in the UK or anywhere else, reacts irrationally to the thought of using low-tax or tax-neutral products. There seems to be a thought that once you buy an offshore product, you have officially joined the dark side - and will never be viewed again by the authorities without suspicion.
To some extent there is truth in this - see this month's other front page story that the UK's Inland Revenue are hounding all owners of offshore bank accounts - but for them that is housekeeping, not persecution.
And that is the point. The attempts of the mainstream jurisdictions to shut down the international financial centres has instead forced them to become mainstream themselves - and because they all follow the same rules, the anti-offshore brigade have had their fangs extracted.
The tax authorities have, on the whole, reluctantly come to the conclusion that they must simply cope with tax-efficient competitors, but that message has not filtered down yet to the retail investor. It is the attitude to offshore which is holding back the industry, not its substance, and that is why this compensation story could be very important. It shows that European, Channel Islands and Isle of Man products have the stamp of approval, the financial backing of the UK industry, and that could significantly help shift attitudes more in favour of offshore. Now may be the time to go to any UK clients who have been ill-at-ease with offshore products and see if they feel the same way.
On a side note, the Isle of Man already has a compensation scheme covering all investors, not just British ones - a fact that has been heavily used in the promotion of the jurisdiction. This discovery - if it indeed turns out to correct - removes this advantage from the Isle of Man, levelling the playing field. That is, if your clients are British-resident. If they are not, then the UK compensation scheme does not cover them, so the Isle of Man still has the advantage.
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