The UK-headquartered company, which provides advice to expats across Europe and the Middle East, said the underlying costs are being paid to advisers, product providers, and investment managers.
It said that expats are often not told that on top of paying between 0.5% and 1.5% of their offshore bond’s value to the product provider, they can expect to have to pay a fixed £400 annual charge and a 0.5% to 1.5% “establishment charge” for the first five to 10 years to advisers.
It added that clients often have to pay an additional 4% – 8% initial commission on funds within an offshore bond, and a 1% – 3% annual charge.
To demonstrate its point, AES said a portfolio of £100,000 growing at 5% a year for 20 years would only achieve a return of 0.08% per year if subjected to normal charging rates. This would leave it at a value of £107,768 after 20 years with charges of £88,698.
Sam Instone, chief executive at AES International, said: “Unfortunately, there is a lack of transparency within the offshore investment bond market, and many clients are therefore unaware that these plans can be opaquely loaded with high charges.
“Trying to make money with charges set this high can be likened to swimming with weights on; possible, but substantially harder.”
Instone’s comments come as AES releases a new free portfolio review service for consumers which aims to explain the effect high, undisclosed charges could have on people’s wealth in the international market.
It will also offer a “portfolio X-ray” which will tell investors whether they are paying too much in charges.
AES is regulated to provide advice in 36 countries, employs 150 financial professionals, and had assets under management of £500m as of 31 December last year.
