KBC Relay Interview with Dai Billington (September 1, 2011) - "From British Embassy Trade Specialist to Financial Advisor to the International Community in Korea”

View Dai Billington's profile on KBC

September 1, 2011 - KBC Relay Interview"From British Embassy Trade Specialist to Financial Advisor to the International Community in Korea”
Dai Billington

Partner at Regency Asset Management
Dai was interviewed by Dan Vroon. (Click here for Dan's relay interview.)

 

Dan: Well Dai, why don’t you start by telling us how long you’ve been in Korea.

Dai: I arrived here in June 2003.  It was the first day of the rainy season - not unlike the last few days here - so I did wonder what I had let myself in for at the time.  Thankfully, my opinion of Seoul has increased dramatically since that first gloomy evening.

As you know, I was working at the British Embassy then and indeed recall many an evening at the Embassy bar or other functions, with yourself and several of your other partners in Craftworks, during my time there.

Dan: Tell us what brought you to Korea.

Dai: As mentioned earlier, my background was with the UK government.  This brought me to Korea where I spent over 3 years as head of the trade section at the British Embassy.  It was a great job giving me a wonderful chance to travel around Korea and see many aspects of Korean life I could never have seen without the Embassy.  Plus of course, I was well placed to meet folks in the local and foreign business communities.  One thing I found from long term ex-pats was that very few were still doing what had brought them to Korea in the first place.  After a few years here, this got me to thinking "I like Korea and like the idea of staying here after the Embassy, rather than another posting elsewhere".  Several opportunities came up.  Indeed, I strongly considered starting a pub restaurant, much as you have yourself.  However, I had already started as a client with Regency Asset Management myself.  I liked what they were about and the products they used, so was pleased to accept when my now business partner, Mark Howarth, asked if I would join him. 

Dan: How does your unique background in the foreign service inform your decisions?

Dai: I'm not sure how my background is now informing my decisions.  In government, policy of the day is what you follow.  There is a lot of freedom for decision making within a framework but much also depended on fitting in with other Embassy activities and organisations both in the UK and in Korea.  Now in a one tier unit, decisions can only come from myself and Mark, which means that you get to reap rewards - or otherwise - based on the quality of those decisions. 

Where my background certainly helped is that for many years my jobs entailed a large amount of meeting and talking with people, whether in a position of advising on business development or diplomatic receptions.  Unless you are a natural "life and soul of the party", the more you meet and talk with new people, the more comfortable you become in new company.  This was probably the key resource I brought to my new position. 

Dan: What should foreigners know about investing from Korea overseas?

Dai: For many the term "investing" suggests fatcats speculating on the stock market.  Regency certainly has many well-to-do clients with substantial accounts, but for the most part, the companies we work with provide a vehicle for foreigners to start regular savings plans, much as many people would do back home with their post office, building society or such-like.  I think that it is extremely important that foreigners still consider their futures while working abroad, and find some way of ensuring their financial security in later life or retirement.  We offer one such way. 

Saving offshore provides no "get rich quick" schemes.  Just solid medium- to long-term returns with the added benefit of that growth being tax-free.  This, of course, can make a substantial difference to final returns.   

The most popular offshore financial jurisdictions for savings are the Isle of Man or the UK Channel Isles.  They have gained their status by providing their clients tax-free growth, plus the highest levels of investor protection in the world, with all accounts protected to 90% of their value, with no upper limit, in the unlikely event of the holding company collapsing.  Furthermore, these companies are all about saving - they don't lend money and they don't get themselves tied up with risky leveraged products such as derivatives and futures that brought so many banks down in recent years.  That is why we exclusively recommend companies in these areas. 

Dan: Is it legal to move one’s money out of Korea?

Dai: Certainly, it is perfectly legal for ex-pats to save offshore.  Indeed, to invest offshore with the tax free benefits that provides, only ex-pats are eligible to do so, as you cannot open an account if living in your home country.  I would add that US citizens are also eligible to save offshore, although they are required to declare any overseas accounts exceeding $10,000 to the IRS.  

Dan: What can you offer that a traditional bank cannot?

Dai: What we can offer is access to a wide range of savings opportunities to fit all walks of life, budgets and time frames.  People can take advantage of offshore savings to provide returns above what they could achieve at home, due to tax benefits, plus access to funds from the world's leading investment companies, that they thought were beyond their reach or too expensive. 

These savings can be for any purpose, including pensions, but unlike traditional pensions, you can still access cash before you retire if needed.  For Brits, we even provide the opportunity to (legitimately) move your company pension offshore, so that when you do retire, you can draw it down free of UK tax if living outside the UK and it does not die with you but is left for your dependents. 

We cannot - and never will try - to match all the wide-ranging services of a bank (please don't ask us to lend you anything).  Ours is a specialist niche where, as independents, we can offer the market leading products, chosen to suit the individual.  

Dan: What do you like most about what you are doing?

Dai: I feel comfortable in this position because I feel comfortable with the service we provide.  As initially (and still) a client of Regency I have confidence in the value of what we give people.  Ex-pats often work on contracts for a year or two before an extension or a new contract.  Unlike steady work at home, this frequently does not include provision for savings or a pension, so there is a real need for foreigners to make that provision themselves.  For many clients, until we met them, they had not seriously considered this need.  I know that without services such as ours, they would have far less future security, so it does feel good when you find something you know is right for a client.  

Equally satisfying is when existing clients recommend friends to us or come back, looking to add more savings to their accounts.  Much as when someone (like myself) comes back to Craftworks for more of the ribs and a pint of dark ale, you know you are doing something right if your customers want a second helping or pass around positive word-of-mouth reviews.    

Dan: Do you have any advice for someone thinking of leaving a salaried position for whatever their new start may be?

Dai: Again, the learning curve.  Start finding as much as you can about the industry in general and specifically what you are looking to do, preferably before leaving your current job.  You are not going to be productive until you have at least a competent level of knowledge, so prepare yourself in advance.

Also, whether you are opening up your own business, or going into a commission-based industry, cash is unlikely to pour in initially.  Before jumping on board you will need to have the means to feed and clothe yourself.  So I would recommend thinking hard about taking this route unless you are confident you can get through at least six months to a year on your savings, in addition to money you may need for your business.


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Permalink Reply by Cory Olson on September 13, 2011 at 7:14pm

Thanks for the great little interview here, very informative and good food for thought for those (like myself) looking to savings options while over here. I do have a few questions for Mr. Billington about the financial services, if I might and if he is able to answer. First, given the troubled current financial times I do wonder what sort of investment instruments are offered, recent returns and also how easy it is to access these funds from Korea? If there are information packages available, please let me know as I do have personal interest. Thank you again for the time and the interview.

On a wider offshoot of this discussion, I would like to give an open question to some of the long-term expats here in Korea on KBC. If you wouldn't mind sharing, what sort of investing and saving are you doing for the future? Do you find yourself sending remittances back home and investing there or have you been dabbling in Korean markets and financial firms? For those who have done both, what are some of the contrasts of each? Thanks and I hope for a good, informative discussion.

Permalink Reply by Dai Billington on September 14, 2011 at 1:59pm

Hi Cory and thanks for the positive comments.

 

Our investment instruments are basically medium to long term (5 years plus), for those either saving on a regular basis (usually monthly from $300 a month) or lump sum investors.  For lump sums (usually $75,000 upwards), you retain pretty much full access to your cash from the start with small charges if its all taken out on day 2.  Regular savings products have different levels of availability depending on which product provider you have invested with and the term of your plan but they still provide a wide range of flexibility.

 

Level of returns is a very variable thing.  There are hundreds of fund options, plus treasury gilts, shares in individual companies.  We generally work with funds and over a period of time (e.g. 5 years) anticipate returns of 8-10% per annum.  This year has certainly not done that (more like 10% down so far) but I have yet to see a market go down that did not go back up.  Over the last 5 years, including the current downturn and of course 2008 as a real bad egg, most will have still seen growth around 8%.

We have no get rich quick stuff but good solid stuff.  I only moved to this sector after personal experience as a client and liked what I saw.  I still do.

Happy to meet up and have an in depth chat based on your personal circumstances.

Cheers,

Dai

010 8977 0064

Permalink Reply by Leo Corbett on January 18, 2012 at 2:25pm

Cory, avoid this like the plague.  I was signed up by one of these guys.  Even if you have already signed up, get out now before you sink any more money into this company.  See my post below.

Permalink Reply by Campbell J. Scott on September 13, 2011 at 10:04pm

First off, Dai and Dan highly pleasing interview.

 

I am interested in the decision process that you took and had the guts to follow through (which is where alot of people don't). Having recently completed an MBA in finance, I know from research and limited experinece that different investment vehicles tax nature depends on where it is domiciled, where the investors are domicilied and what type of returns are being made i.e. in domiciled country or in foreign cash returns (such as in some infrastructure investment IRRs).

 

I must admit to being jealous of the opportunity that you have set up, as with what the markets have shown us in recent times, when reputations of larger players are so battered, herein gives the smaller 'boutique' a chance to forge and grow its own reputation.

 

Questions remain in my thoughts though - that is in respect of the process and setting up of vehicles for ex-pats where if they are only staying on a one year contract - how do you catch the ex-pat early enough for it to be worth while for them (and you)? and one more question... what are the regulatory obligations that you have had to go through... presumably some sort of Stock Exchange or banking regulations or Financial Advisory? Or is it that beacuse of the service you are providing is not geared to a sophisticated investor as such - these are not onerous as its more of an introductory relationship.

 

Thanks again for sharing!

 

 

Permalink Reply by Dai Billington on September 14, 2011 at 2:13pm

Hi Campbell, thanks for your interest.

Indeed, the product providers that we are talking about are in the Isle of Man/UK Channel Isles which enables them to provide these tax efficient investments.  Because of this, only those non-resident in their country of origin are eligible to use the products. 

Many ex-pats may only be in one country for a year or so but often will move around several countries for a period of many years before returning home (if ever).  This gives them a chance for medium to long term exposure to the benefits of tax free growth before going home.  Once moving back, further growth is subject to domestic taxation but - in most cases - not that already made.  The UK, for example, will allow an expat - on return - to declare any offshore savings and give them 12 months in which to realise those savings without taxation.  Alternatively, the returnee can repatriate 5% of their savings annually tax free for the next 20 years.  In either case, tax will only be attributed on new profits after returning.

Regulation is with the Financial Services Authority plus the Isle of Man and Guernsey Authorities.

Hope this helps,

Dai

  

 

Permalink Reply by Oscar Michel on September 14, 2011 at 11:17am

Hi Dai and Dan,

 

Thank you for the interesting reading.

I was just wondering if this was a special case for expats as they are not citizens of the country where they are residing and do not reside in their country of citizenship. If that's the case, I would like to know what happens if they decide to go back to their country of origin? Are they still allowed to invest ther money offshore? And also do they still benefit from these tax breaks when they retrieve the money?

Permalink Reply by Dai Billington on September 14, 2011 at 2:24pm

Hi Oscar,

 

as you surmised, these products are available for ex-pats (although US citizens should declare any overseas  accounts exceeding  $10,000) not residing in their country of citizenship.  As mentioned in my reply to Campbell, in most cases you are legitimately entitled to tax free growth on offshore savings while living overseas.  On returning home, you should declare any offshore savings and will be subject to domestic taxation on any new profits made after your return.

In this situation, you are basically opn a level playing ground with domestic citizens who are saving in e.g. mutual funds while living at home and can still enjoy good growth on funds/shares etc, but will pay standard taxation but you will have benefitted from additional tax free growth up until that time.

Thanks again for the interest,

Dai

010 8977 0064

 

 

Permalink Reply by Charles Ahn on September 15, 2011 at 4:42pm

 

Thank you Mr. Dai for the informative interview.

I do have some questions, some of which are general and some more on a personal level. I saw that you've mentioned that you went from the British Embassy to Regency as a financial advisor. How hard was the transition? Also, what did you need in order to make your way from politics to finance? I was one day hoping to learn the ropes and join it as well. Now about taxes, how should investors view taxes when investing in a local market such as the Kospi or the kosdaq? Is this a good option as well? Why should investors invest in offshore accounts when like you've mentioned, currently the market is minus ten. Of course when the market is down, investors should buy but people are scared that it might go down even more so what should these investors do? I really enjoyed reading the interview and was quite educated about taxes and would like to know more about it. Now to my personal questions. 

Also, as someone who has lived in Korea for two years, and has money currently invested in the Korean market, what are the pros and cons of investing in your company as opposed to funds currently run by let's say Hyundai, Samsung, Hanhwa, Dongyang and/or the other investment banks. As a US citizen and as someone who might reside in Korea permanently, would I benefit since I would not have to return to the states? I would really like to know more about my options in investing in an offshore account in comparison to having money in the kospi. I graduated undergrad two years ago and came out here to teach English. As I was making some money, I figured I'll invest to make more. Then I started to do my homework and landed on a company called Macquarie 맥쿼리인프라. I started investing about two thirds of my money into that stock and received semi-annual dividends. Any advice on local taxes on the kospi vs the fund that your company offers? Obviously investors invest money to make the most money with the money they have and taxes will only reduce such amount. What would you recommend an expat do in such case? Invest in Korea (Have very little information on local taxes) vs the offshore account (taxes thoroughly explained in your interview)

 

Charles

Permalink Reply by Charles Ahn on September 15, 2011 at 9:18pm

Also, to anyone reading this post: I was just curious as to how expats out here are investing their money in Korea? Any other forms and methods being used to invest money such as investing in commodities like gold and silver? I've had some instructors buy silver or securities like Tiger ETFs (금은선물). I was just curious how others were trying to get great returns on their money. 

 

Charles

Permalink Reply by Leo Corbett on January 18, 2012 at 2:20pm

This is a scam.  They take all of your investment for the first 3 years and you won't see any of it again.  Yourself and Mark should be ashamed of yourselves - not hawking this rubbish to people who don't know any better.

http://boards.fool.co.uk/generali-vision-11920142.aspx?sort=whole

Permalink Reply by Simon Hoggett on January 20, 2012 at 1:47pm

I met some people involved with promoting this type of investment and thought....

Tax haven = free of laws = investment not protected by laws = license to steal.... of course it's not that simple and I know that they can't steal money, but IBs or Brokerages can implement a set of rules that would never be allowed in the UK or other places. 

Maybe I'm mistaken... yet so far, I've heard of no success stories from these investment "opportunities". I've heard the investment adviser/promoter pitch about retiring to some exotic location in 15 years. Of course he's going to retire.... He's getting huge commissions by getting YOUR money. On the other side I'v heard tales of woe from people who learn after 2-3 years that their deposits amount to 10% of their value... Apparently it takes roughly 8 years to even break even on the investment. (after all the front loaded fees are paid.) ... What other investment takes 8 years before breaking even? Maybe a mortgage? 

Comparatively speaking, this works as an opposite of Korea's bank loan system:  first 30% of the loan's term is spent paying interest before the principal gets paid.  In this case... the first 1/3 of the term is spent paying fees and the last 2/3 are used for investment. Except, I don't know anybody that has cashed out with a net increase in their investment. Maybe it works....To each his own... I'd rather take my chances on a weekly 5% spike in the stock market than have my money locked up and reduced by this type of deal. 

After reading the interview and comments above, I am left with one question: How is the investment insured, if it's not covered by the FSCS? 

According to Barclays

Banking: Barclays Bank PLC is a member of the FSCS established under the Financial Services and Markets Act 2000. In respect of deposits with a UK office, payments under the scheme are limited to 100% of the first £85,000 of a depositor's total deposits with the bank. Most depositors, including individuals and small firms, are covered. The FSCS covers deposits made with the offices of the bank within the European Economic Area and deposits denominated in all currencies are treated alike.

The FSCS is not applicable to branches in the Isle of Man or the Channel Islands.

Permalink Reply by Ondrej Slechta on January 20, 2012 at 8:02pm

I would suggest to first ask more fundamental questions before diving into technicalities of returns of investments and tax issues:

- why does a company that operates in Korea claims to be registrered in Eastern Europe?

- who are the people behind the company and what is their and the company's track record?

- how exactly does this work? what is the legal nature of the company's co-operation with the off-shore financial institutions and what is the legal structure of a typical advisory mandate?

- how come Regency Asset Management Ltd does not even exist in that Eastern European country it claims to reside in?

- is it the same Regency Asset Management Ltd that was involved in this fraud?

 

For what it's worth I'd challenge that Dai steps up and provide a clear and transparent overview of the whole business or suggest to take this interview down.

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