The current economic climate provides many challenges for charities when it comes to planning for long-term financial security. Ed Pearce, Managing Director of Douglas-based gold bullion depository and trading company IMGold, explains how owning bullion could help charities protect wealth.
Interest in owning gold as a form of wealth protection – for private individuals, businesses and charities – has been increasing in recent years. This trend comes as no surprise when you consider that confidence in banks, financial institutions, and currencies has been severely damaged as major economies and financial institutions stumble from one crisis to the next. In the case of local charities, this scenario presents two huge challenges: the increased difficulty of raising funds in a harsh economic climate; and the problem of choosing reliable forms of wealth protection on the Island.
The pressure on fundraising makes the second challenge even more important for the long-term future of charities. To illustrate the dilemma, let’s imagine a Manx registered charity which has ?100,000 deposited with a bank on the Island that is licensed by the Financial Supervision Commission. In this situation, if the bank fails the charity is likely to be covered by the Isle of Man Depositors’ Compensation Scheme (DCS). However, although charities are usually classed as either a company or trust, and will be entitled to 100% of the deposit in the event of the bank’s failure, this is only up to a maximum of ?20,000. Spreading the risk by holding deposits with a number of different banks is one solution, but it could add a significant administrative burden for trustees who will need to establish and manage these segregated accounts in order to protect their deposits.
This is where holding a percentage of the charity’s wealth in the form of physical gold bullion can provide a more secure and convenient solution. For example, if a charity purchases bullion from IMGold it will be stored in our state of the art security vaults, but the gold is secure against the possibility of bank failure because it is owned directly by the charity and not part of the assets of IMGold. IMGold can buy back gold at any time – funds can be transferred into a bank or building society deposit within five working days from receipt of instruction.
Gold is renowned for its long-term performance. Its underlying value never changes - its price is simply a reflection of the prevailing economy. In 1970, for example, the cost of one ounce of gold was ?30, which would pay for a hand-made suit. This has been the case in each decade since, and today one ounce of gold will still pay for a hand-finished suit. Gold’s ability to provide a safe haven for wealth in turbulent economic times is the main reason why it has retained its appeal for centuries.
Businesses such as IMGold have been founded to meet this demand and to make the buying, selling and storage of gold and precious metals as simple and straightforward as possible. In short, it’s never been easier to own bullion, and the simplification of the purchasing and ownership of precious metals has opened it up to individuals from a wide range of backgrounds. There are alternative ways to ‘own’ gold such as ETFs (exchange trade funds), or pool allocated bullion which means owning a percentage of bullion shared with other individuals and stored in a vault owned and managed by a recognised bullion dealer or depository. However, allocated bullion is widely regarded in the industry as the most secure way of owning gold. Allocated bullion means that gold is purchased and stored in a vault owned and managed by a recognised bullion dealer or depository. The bullion dealer or depository that owns the vault may not trade, lease or lend the bars. It also gives the owner of the bullion the reassurance of knowing that they can take physical possession of their gold whenever they wish to do so.
For Isle of Man charities which hold funds that could be at risk if a bank or other financial institutions fail, gold bullion is certainly an option worth considering as part of a diversified wealth protection portfolio.
For more information go to www.imgold.com or call +44 (0)1624 888 888.
Photo - IMGold’s offices and vaults in Victoria Street, Douglas.
