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BREAKING THROUGH THE FINANCIAL IRON CURTAIN

An interview of Jurg M. Lattmann

by

John Pugsley


John Pugsley was the keynote speaker at the Swiss Wealth Protection Seminar in Zurich last April. He published a conversation with Jurg M. Lattmann in the July 1995 issue of John Pugsley's Journal. Excerpted here are some of the issues on Swiss investments and global diversification that they discussed.

John Pugsley: Jurg, it seems that I met you sometime around 1978 or '79 at one of the seminars put on by Inflation Survival Letter... At the time Americans, including those of us who were convinced that the Swiss franc and gold were headed up, were just learning about Swiss investments and didn't know much about Swiss annuities or insurance companies.

JML: At the beginning there was a big information gap. We had to explain to Americans how the benefits of diversifying into foreign currencies such as the Swiss franc, as well as how important it was to have one's assets geographically diversified. At the same time, all I knew was Swiss insurance law and nothing about American law. More and more American legal questions came up -- such as, can an individual retirement account own a Swiss policy, etc.? So I learned the answers. Until five years ago, we didn't receive a lot of questions regarding privacy and asset protection. When I started in business I didn't even know that this was of any importance. There are precedents in Swiss law that an annuity really is a very, very private investment and under Swiss law there is no way that a creditor can attach this investment. Coupled with this, Americans don't legally have to report annuities as they are insurance policies and not foreign financial accounts. Today, privacy and asset protection have become the most attractive features in annuities, especially to Americans.

JP: I've long promoted four attributes of Swiss annuities for my readers: geographical diversification, foreign currency diversification, privacy and protection from creditors. Aside from these, how do Swiss annuities stack up against the annuities sold by American insurance companies?

JML: You've hit the four primary benefits. I'd add that Swiss insurers are more fiscally stable than their U.S. counterparts, in part because they are restricted by the Swiss Insurance Commission to hold only the most conservative investments. As you know,...no Swiss insurer has ever failed to meet its obligations and not one has ever failed.

I've personally helped design a new generation of annuities that offer the insured a number of other unique advantages. For one, unlike most annuities, ours are completely liquid. For another, there is no up-front or back-end commission load -- the sales fee of about 5% is deducted from dividends earned over the first year. And, of course, the earnings accumulate free of any Swiss or U.S. tax. In fact, the investor doesn't need to report the annuity on his tax return. Finally, we've designed them so that the funds may be switched between Swiss francs, U.S. dollars, pound sterling and ECUs, so the account holder has the flexibility to choose the strongest currency.

Consider the $10,000 client who bought one of our Swiss annuities 15 years ago. We have thousands of annuitants who started in the 1970s and today are paid monthly annuities. These people have seen their annuity income triple. I'm not saying the dollar will continue to depreciate against the Swiss franc as it has in the past twenty years, but the fundamentals remain very bad for the dollar. Yet now the government pressure is increasing to block Americans' access to information on these annuities.

JP: Do you think that foreign-trust products...will be a conduit for a lot of the smaller American investors to put money into annuities?

JML: Unfortunately, whenever an investment vehicle becomes too popular it becomes a target. What I'm personally afraid of is that when something that has cost $10,000 to $20,000 to put in place is now available for $500, this is near the end of the cycle.

JP: You're saying trust devices are near the end of the cycle in terms of the popularity?

JML: No. The trust business is as old as Anglo-Saxon law and most nations honor trusts. The problem is the U.S. government is treating foreign law with contempt and it may someday outlaw the setting up of foreign trusts. If any device becomes too popular, no matter how logical and right it is, the government can make it illegal.

This is even a greater reason to diversify globally now, before it becomes illegal. It's like your trapper, who caches supplies along the trail. Keep things separate and if there is a law change, make sure it doesn't destroy your entire financial house. Use a trust for some assets, but also have an annuity policy outside the trust. The annuity policy does not need to be in the trust because you already have asset protection in the policy. With a bank account you don't. So put the bank account in the trusts. These kinds of things.

You see, I'm not saying that either an annuity or a trust protects your assets entirely, but each is a hurdle for anyone attacking your assets to clear, and if they are not expensive, I would put those hurdles in.

JP: As laws get more onerous are you going to move away from the American market?

JML: I'd like to service the American market but America is getting more and more isolated. Already, the big institutions are concentrating on other markets, such as the emerging markets in Asia. ...If you have to make priorities, and Americans are isolating themselves more and more, you move to other markets.

JP: Has it been hard to convince Americans about the benefits of your products?

JML: Americans are very patriotic. Many feel that it's almost unpatriotic to make an investment outside the U.S. ...I travel 20 miles north of Switzerland and I'm thinking in Deutsche marks, 60 miles west and I'm in the French franc. It makes no sense for a Swiss to have all assets in Swiss francs or all assets in one legal jurisdiction. The same is more true for Americans.

The correct stance is to neutralize yourself by becoming globally diversified. You don't keep all of your assets in the U.S., but you don't put them all in Switzerland, either. You may have your legal house domiciled in the Isle of Man, with an account in Switzerland and the account in Switzerland is invested in Southeast Asia. Only a fraction of your assets are actually invested in Switzerland -- perhaps in the form of a Swiss annuity, bonds, or whatever.

Private banking in Switzerland allows you to develop a global strategy. What Switzerland offers is privacy, asset protection and access to worldwide information and markets. You use Switzerland as a gateway to the world.

Much more information on Swiss annuities is available at Fortress Switzerland.



 
 
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