Official Entrust Blog

I had intended to write about our having established a relationship with ICICI bank in Mumbai in October, but the events which have unfortunately placed Mumbai on the map overshadowed that event. Our relationship with ICICI is one of many that we have established outside the United States to facilitate transactions for our US taxpayers who wish to use their self-directed IRAs and 401(k)s for investments outside the US, for real property and other assets not available through normal channels.  With the first and only real IRA checking and card facility available through our IRA custodian, one can travel the world and make purchases and pay for assets on the spot.  In fact, we have had quite a demand for this, even in India.What do the events occurring in Mumbai have to do with the ability to make investments in India?  Dramatically, the terrorist changed the landscape and altered the way people think about much of everything around them, much as 9/11 did for Americans and the rest of the world.

In the United `States we are very fortunate, we have one common language, religious tolerance, and mobility among socioeconomic classes to a great extent.  It makes commerce easy.  In India, there are many distinct languages, a caste system which is highly structured, racial divides, and three major religions.  Most of the over 1 billion people live on the equivalent of $800 per year. Tens of thousand of people live on streets in beds made for four or five people.  No potable water into a nice kitchen or bathroom (those are on the street as well).  The government can hardly cope.

The differences among the people are enormous, that even the publicizing of a railway exam in more than one language adequately resulted in street riots in Mumbai, killing of one person and injuries to hundreds and a burnt train.  Provincial government arrested those responsible, but let them go because it was the better part of valor.

The cost of labor is so cheap because even doubling income still provides so little. India needs investments.  It has been growing at a very rapid rate, although this will change with the world depression looming.  After all, there has to be demand for products that can be supplied by cheaper labor and other resources.  Even the used ship chop shops in India have closed down as the demand for steel has dropped.  So much for supply siders.  So venturing outside of the United States will still provide many options for investors, but remember that within those opportunities, a lot is going on that makes it an absolute requirement that you do your due diligence.  It is a lot easier in the developed world.

Hugh Bromma, Founder, The Entrust Group

Just visited the Seychelles again.  Most interesting news comes from the Seychelles:  the black market for currencies has gone.  The government has decided to let the currency float the currency and now all the puff of exchange has been taken out of the economy.

It was done in two stages so that the hit on the local “entrepreneurs” would not be too severe.  Now the currency availability becomes more interesting, and the banks seem to control the supply of cash.  Naturally, people are suspicious.

Now the issue is what happens to the ordinary person when the Seychellian Rupee is not able to meet the needs of the locals.  The cost of living has skyrocketed and a further devaluation is promised.  It is to be delayed until January 19^th so not to affect the holidays.  Earnings and cost of living have created a massive problem for the locals.  A €190 monthly income does not pay for a €1,000 monthly rent.  At least education and healthcare is paid for by the state.  I guess one can deal with the problems of devaluation by going to school and being sick.

What does this have to do with anyone else, particularly in the US?  Look at the purchasing power and the value of your assets.  Look through this year and beyond.  Make the investment decisions which take into consideration the value of the currency of your choice against the value of what you buy, such as real estate, commodities, including foodstuff and energy related opportunities.  Pay with cheap money going forward, as there will likely be a lot of it.

Hugh Bromma, Founder, The Entrust Group 

It isn’t hard to see this year end for most people on the planet.  We have seen the continuation of war, pestilence, violence, economic chaos and continued enmity among peoples and people doing violence to our one and only planet.  The last will most likely be our collective undoing as we forge onward into the future, unless we innovate. The United States has been an inspiration to so many over the last couple of centuries for any number of reasons.  One of the most important is the ability to innovate.  After almost eight years of chaos and disaster caused by the self centered ambitions of a very few, the time to innovate and be resilient has sure arrived.

It isn’t just up to Americans to innovate, but people over all of our planet.  Innovation takes a lot of courage.  It means adapting to changing conditions and finding solutions to problems in light of new events every day.  I see people innovate every day around the planet.  After World War II in Austria, my brother Guido (yes, I have an elder brother named Guido born in Italy, but that is another story), who made an observation about survival:  Those who were poor and had nothing at the beginning of the war, survived because they had nothing at the end just like they had nothing at the beginning.  Those who were the innovators at the beginning of the war also survived at the end of the war as they continued to re-invent and innovate, adjusting to the conditions.  Those who  fell in neither group had a difficult time surviving. Now is a time to think about innovation and re-creating yourself.  The years of the horror of war, continued ravaging of the environment, increased hostilities among peoples, and severe economic calamity not in evidence in eight decades means that all of us must rethink our futures and innovate ourselves.

I have always stressed education as one of the pillars of society.  Education provides information, and when used wisely, it benefits all living things.  It also is a part of due diligence.  When applied to investments, for example, it can help in a decision making process.  Along with great advice from people who know what you or I don’t know, making decisions will mostly be to our collective benefits. Seems like I may have a firm grasp on the obvious.

Hugh Bromma, Founder, The Entrust Group

A couple of weeks ago I met with financial industry associates in Zurich, Switzerland. As part of the expanding program of International Bank and Trust to establish operational relationships, I met with Rene Schatt and Robert Vrijof of Weber Hartmann Vrijof and Partners Ltd. (WHVP) and Hubert Buechel, their banker, of Banque Pasche, in Zurich, Switzerland (see photo below).  A significant part of providing bank to bank relationships is the Know Your Customer (KYC) laws of non-US financial institutions.

Similar to the Customer Identification Programs in the US, the KYC laws are oriented to deal with money laundering and other criminal activities.  Our discussions provided additional insight on protecting customer privacy and at the same time making sure that US and other nations laws were adhered to.

WHVP has numerous (legal) US clients who invest their IRAs in assets outside of the United States.  Our discussions revolved around how the securities and banking laws of the United States are to be adhered to in a bank to bank environment and also being able to serve the needs of clients.

International Bank and Trust provides for bank to bank relationships and other legally permitted financial institutions for its clients throughout the word.  Did you know that 6 millions Americans live outside the United States?  Almost all of them are NOT expatriates!

Rene Schatt and Robert Vrijof of Weber Hartmann Vrijof and Partners Ltd. (WHVP) (left and right respectively) and Hubert Buechel (Center)

Hubert Bromma, Founder, The Entrust Group

Buying property outside of the United States is something done regularly.  U.S. persons do it all the time.  You can buy real property in your self-directed IRA anywhere in the world.  I was first introduced to buying real estate with an IRA when a customer wanted to buy property in Baja California, Mexico in 1979.  In those days it was a bit more interesting to complete international transactions.  The fax machines were very busy, and sending mail overnight internationally was not a very common practice.  Certainly wire transfers were used, but documenting the purchase and sale using bank trusts outside of the United States was new to IRAs and Profit Sharing plans, known mostly as Keoghs then.  

Thousand of transactions and almost 30 years later the process is less daunting, but each country, with its changes in regimes, politic climate and the state of its economy, make for interesting times.  Some things don’t change much over 30 years.  The definition of what is considered “self dealing” or prohibited transactions hasn’t really changed, and investing one’s IRA for personal benefit…well, that certainly hasn’t changed much either –it’s still not permitted (some incidental benefit is allowed, well sort of…).  

So a subject came up with some of my contacts in India.  I was made aware of a situation used by another U.S. trustee, which basically puts the IRA at risk.  In this case, it was the investment in a Croatian property, purchased 100% by the IRA.  As the Croatians said the title could not be owned solely by the IRA, the IRA’s owner was listed as co-owner, along with the IRA.  The issue could easily have been solved by the beneficial owner owning an undivided interest in the property along with his IRA and the specific percentages listed.  The accounting for the separate interests is straightforward. 

This reminded me of how many times simple solutions may be the answers for very complex situations.  In India, for example, non Indians have generally little ability to own real property in India.  There are many other solutions when it comes to U.S. retirement plans an properties in India and most other countries around the world.  Been there and done that, and legally as well!

Hubert Bromma, Founder, The Entrust Group

When I was looking in on some of our relationships, I came across a very interesting situation: a United States citizen who told everyone he came across he never had to pay U.S. taxes as U.S. laws exempted him from paying any!

This isn’t the first time we have heard of this “sovereign” individual. Many exist and cite authorities all day long to support their position. The U.S. government sees it otherwise. In fact, there is a fine for even suggesting that one is above the tax law. What was interesting about this person was that he had in excess of $1 million in an IRA which was invested abroad. He decided he would further protect himself from U.S. taxes lest he be at some point be taxed, like through a Required Minimum Distribution. This person took a premature distribution and had it credited to his offshore personal account! Thinking that he was exempt from tax, he was apparently unaware that the distribution of his IRA would result in a taxable event and with it being premature, subject to a 10% penalty as well. I guess he just thought it was no problem as he never owed U.S. taxes anyway!

Hubert Bromma, Founder, The Entrust Group

Everyone is aware of the financial issues that the country and the rest of the world is facing.

Of particular interest to our clients is the status of their self-directed IRA and self-directed 401(k) plan.

All your un-invested cash, which is held for you by The Entrust Group, International Bank and Trust or its affiliated companies, is now and always has been placed in FDIC insured deposit accounts in FDIC insured banks. In addition, International Bank and Trust makes NO loans whatsoever. Also, not all custodians offer FDIC insurance on the cash their clients have with their institutions.

We have done this for our clients for 27 years. This has always been a protection for our clients’ accounts, and as a result of the collapse of certain banks and savings associations in the nations past. In 1981 we developed a system of making deposits of your behalf in many FDIC insured institutions. Therefore, even if the un-invested cash in your Entrust IRA exceeds $250,000 each IRA un-invested cash with us is insured for many times that amount.

We always make sure that your cash is more than adequately protected and you can continue to be assured that it will remain so. For those of you who have un-invested cash in excess of $10 million in a single IRA or 401(k) we will contact you. If you intend to exceed $100 million in un-invested cash, please let the office which handles your account know, so we can provide additional protection for your IRA or 401(k). If you have self-directed the purchase of individual Certificates of Deposits or other FDIC deposit accounts in your IRA and 401(k), they are also insured.

Of course, all assets you have self directed to the investment of your choice are not insured as a deposit account. So, for that private placement or real property, note, stock, bond or mutual fund for example, the risk remains with your IRA or 401(k).

We thank the tens of thousand of you for your continued use of our self directed services. In this time of uncertainty, we are proud of our customers who have taken the step to complete self direction and control of their financial future. We are also very happy to have provided the complete safety of your accounts’ un-invested cash and certificates of deposit.

In these troubling times, safety and security are paramount to the last savings benefit Americans have. An Entrust self directed IRA or 401(k) provides peace of mind for individuals who need to feel their funds are secure and want to fully control their investments.

Hubert Bromma
CEO
The Entrust Group, Inc.

Just having a completed a business trip to Switzerland, I noticed something very interesting about U.S. clients wishing to do business with securities firms outside the United States.

To be compliant means just that.  In discussing with Renė Schatt of WHVP, a well regarded asset management firm in Zűrich, and Hubert Bűchel of Banque Pasche (owned by CIC) what IRA owners and private investors wish to have done, we all agreed the best way to invest in traded assets and private placements abroad was with bank to bank relationships.  In today’s world of anti-money laundering and terrorism protection laws, regulated companies are best equipped to work with each other to permit the best outcome for the client.  U.S. laws and rules may be thought by U.S. persons to be burdensome, but in the much of the rest of world, the U.S. tends to be more lenient than other countries.  

Many customers of ours invest outside the U.S. for many good reasons.  It is important to recognize that non-U.S. securities firms and banks may not solicit U.S. persons’ business from abroad.  However, U.S. persons may, under very specific circumstances, trade with non-U.S. securities firms and banks.  U.S. banks do have the ability to accommodate their clients’ investment needs.  Again, the U.S. person has an uphill climb to do business abroad.  International Bank and Trust establishes bank to bank relationships in the U.S. and abroad in order to accommodate the investment needs of its clients and those of their record keepers.  International Bank and Trusts record keepers and administrators, many of which are part of The Entrust Group, are required to meet or exceed all the requirements of the bank and are regulated and examined to ensure compliance with all federal and state laws governing its business.

At the end of the day, Renė, Hubert and I all agreed the best business is the compliant business, and that allowing anyone to violate any of the countries’ laws and rules was not permitted.  We all agreed that we would never sacrifice our entire business because one person was allowed to violate the law, regardless of the size or income from the account.  

Hubert Bromma, Founder, The Entrust Group 

Well, it isn’t really new news, but a recent USA Today article indicated that people need to work longer and save more.  Well, that isn’t news at all, is it?  We knew that all along.  For about 45 years, I have been saying that the artificial retirement age of 65 was just that: artificial.  Sure enough, the rest of the world has figured out that this is true.  Now Hewitt, a major administrator retirement plans, has come out and said that people need to invest more in their retirement accounts, increase their risk tolerance over the long term and diversify.  Finally, a major paper is telling us what for many has been obvious for decades.  Good going!  It is better than continuing to evade the issue.

The biggest problem is that Americans are lousy savers.  Americans are great spenders. Borrowing has just about ended for a while.  Consumption has been curtailed by natural market forces, like the extension of credit to those who should never have had it, for example, dragging down the world economy to a large extent, because the world’s biggest market is drying up.  So what to do? Well, save more and consume less.  Right now, according to Hewitt’s study, two thirds of us will not even meet 80% of our retirement dollar requirements.  That is awful!  We can’t make it up in volume by spending more! 

So the answer is to put in your maximum amount you can contribute to your 401(k)s and IRAs.  You can see the limits on our web site at www.theentrustgroup.com.  Then also put away savings, and look out for long term care insurance (read carefully), and thoroughly review your risk profile.  The old adage that you should switch to more conservative investments when you reached your fifties only held true when your life span lasted until 65.  It is now more than a decade longer, and yeah, people are working sometimes multiple jobs well into their seventies. 

If you don’t look out for your future, who will? It right now looks like the biggest government bail out is waiting to come as the “baby-boomers” age without any money to age with!

It is never too late!!! Start now.  And for those who are just starting to work, look at the above and remember this can happen to you.  Start now, educate yourself, learn as much as you can and figure out what you will need.  Another study found that people who hadn’t saved for retirement before and figured out how much they needed increased the numbers of people who began saving by 20% after being faced with the shock.

Hubert Bromma, Founder, The Entrust Group

The ability to decrease the U.S.’s dependence on energy sources outside of the United States has become hampered once again by those who are, ironically, telling the public they are all for it.

Solar Energy investor Starwood Energy who wants to put billions into southwest solar energy fields is telling Congress that the tens of billions of dollars in investments and returns will come to naught if the extension of the tax credit of 30% is not approved for the next six years.  The cost to the public purse is $1.4 billion. 

Let’s see here, we could do without a senseless war and subsidies to tobacco companies, and help out the broad population of the United States.  Congress is wrangling with hedge fund regulation from offshore income tax avoidance, and other matters having NOTHING to do with the instant issue.  The executive branch?  Well, I needn’t go into that.  After all, the only investors they have been interested in are themselves.  How about you, who would like to retire at some point and have great investment opportunities?  They are out there.   Your local solar projects will be worth looking into.

Hubert Bromma, Founder, The Entrust Group