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Getting residency in Italy before Brexit

By Gareth Horsfall - Topics: BREXIT, Italy, Residency
This article is published on: 16th June 2020


In this E-zine I am going to provide anyone who is still wondering about residency in Italy, before Brexit, with a quick, hassle-free guide how to obtain it.

I was hoping that I could try and avoid the ‘B’ word again in my lifetime, but alas we are not quite there yet and a number of people have contacted me in the last two weeks to ask about the process of getting residency in Italy before Brexit day arrives (currently 31st Dec 2020, although I have my suspicions it might be extended again – watch this space!).

You may know that the process of getting residency in Italy once the UK leaves the EU will get considerably more complicated. If you are unconvinced then ask an American resident in Italy, they should be able to tell you! Therefore, if you are a British citizen and thinking of making the move to Italy, and are in a position to do it now, then you may want to consider applying before Brexit day to simplify your life. Equally, I know there are many people who are living in Italy but are procrastinating about taking residency. This will act as a useful guide for anyone still sitting on the fence and feel free to share it where you see fit.

Before I give an explanation of the things to watch out for, here is a summary of the much more complicated process of elective residency, if you choose to do so POST Brexit

***This guide is mainly for people who are choosing to move and sustain themselves economically, i.e. retired individuals or those living from savings. It is not relevant for anyone considering self/employment in Italy. Different rules may apply in those cases***

Post Brexit (non EU citizen) elective residency application process

Step 1: Make an appointment at the Italian Consulate in your home country – this can takes months!

Step 2: At this appointment you need to complete a request for a visa granting you a right to live in Italy for more than three months in any six month period. You will be required to submit information on where you intend to stay (a property or rental, and evidence of specific accommodation), proof of your ability to support yourself financially, with evidence of income of at least €31000pa per single person or €38000pa for a couple, although this may be flexible depending on a) who you are speaking with and b) which region of Italy you may be moving to. You will also be required to prove that you have sufficient private health insurance cover and will not be a burden on the Italian health care system. The visa will be granted within 90 days of application being submitted.

Step 3: Once you receive the visa and make your move to Italy, within eight days you will need to make your request for a Permesso di Soggiorno (right to stay). This can be obtained from the post office. This process can take weeks, even months to issue and you will be informed that you need to go to your local Questura once it is granted, to pick up the certificate. The permission will normally be issued on a one or two year renewable basis for five years, after which time you can apply for a long term permission.

This is a very brief overview of the procedure, but as you may have understood, the process from start to finish is likely to take months, possibly years, and will probably need a lot more planning to make the move. In addition, there are much higher minimum income and savings requirements. However, as things stand you can still apply as a EU member state citizen until 31st December 2020 and most of the EU member benefits will carry forward after Brexit provided that the application is submitted before Brexit date.

Residenza Italy

The NO-HASSLE guide to getting residency in Italy before Brexit

So let’s examine the process of attaining residency as things currently stand and see why, if it is possible for you, it might be better to try to get residency before Brexit.

Going along to the comune/municipio office and requesting residency is a relatively easy process, but can be cumbersome if you are not prepared (it took me five visits to the Municipio in Rome to receive my residenza). You will inevitably run into people who have formed opinions about Brexit already and may refuse your application on the basis of the UK having left the EU already. This is incorrect and you would do well to go armed with the Italian ministry circular which says as much. You can find that document HERE. There are a few simple things you need to provide, but they may deem your evidence unsatisfactory for their requirement. Knowing the pitfalls of each criteria can be the difference between multiple failed visits to make the residency request or one successful visit.

The three basic items which you will require (apart from identification) are:

1. Evidence of sufficient economic resources to stay in Italy
2. Evidence of health insurance to cover at least the first year in Italy
3. Evidence of a place to stay

Whilst these three items might seem at first glance to be relatively simple to provide, there are some idiosyncrasies that trip people up and which can cause delays. Given that time is no longer a luxury then knowing the details could help. So, let’s deal with each one in turn.

  • 1. Evidence of sufficient economic resources to remain in the country

    The first thing to understand is that this requirement is governed by regional authorities and is very much at the discretion of local services as to whether they will accept you in their comune or not based on your evidence of income, savings, pensions etc. Rome or Milan, for example, will have very strict rules and will adhere to them rigidly. A small comune in Abruzzo, for example, might be more relaxed as they are happy to have an influx of foreign money into the area. However, it is worth checking with your local comune first to see if they have any minimum income levels for which they would need to see evidence. At the time of writing, the minimum income requirement for the Roma Capitale comune is €5.824,91pa and they would typically expect to see approximately €10,000 in savings as an emergency reserve. However, these figures can be subject to interpretation depending on who you are speaking with on any particular day! So be prepared.

    Make sure you take both the original and copies of any documents with you to any meetings, including bank statements showing regular income payments, or pension statements demonstrating the amount of money you have in the fund and any regular income payments from it. Additionally, if you have any savings and/or investments then take recent statements along as well.

    Remember to only present documentation that you are asked for, so as not to open a can of worms which could generate requests for additional documentation.

  • 2. Evidence of health insurance to cover at least the first year in Italy

    This factor seems to be the one that trips most people up when making an application for residency and it comes as no surprise. The EU requirements for a change of residence clearly state that when transferring EU member state, you must have sufficient health cover provision to not be a burden on the health care system. (If you are employed then this doesn’t apply as you will be automatically enrolled in the health care system when paying social security contributions.)

    The confusion derives from the following factors:

    i) That all EU citizens have an emergency health card which would cover you for travel within the EU area. This is correct. In Italy it is known as the TEAM card and is link to the tessera sanitaria and in the UK it is called the EHIC. However, this card only provides temporary emergency cover for medical care during visits as a tourist in the EU area and not any longer term protection. Therefore, making an application for long term residency cannot, by definition, be covered by a short term medical provision agreement.

    ii) Another assumption is that once you are resident in Italy you can apply to make a voluntary contribution to the health care system to receive full medical care (see document HERE). This is correct and the price is relatively cost effective depending on your annual total income. However, here is where a classic Catch 22 exists. You cannot register for and pay for healthcare in Italy until you have residency and you cannot have residency until you can demonstrate that you have adequate medical insurance cover in place. Therefore, an interim arrangement is needed as per point iii) below:

    iii) It is assumed that a health care insurance needs to be a full provision medical insurance policy, e.g. Bupa. This is not the case and could cost thousands for full medical care benefits which are not needed for the purposes of making a residency application. In fact, we need to refer, once again, to the EU rules regarding residency. The rules state that if you are not working and have sufficient economic resources to live on then you need to provide yourself with the equivalent S1 reciprocal agreement on healthcare for retired member state citizens, until such time as you are eligible for the S1 or have alternative arrangements, e.g. annual voluntary payment into the Italian health service.

    To resolve this you need to take an insurance policy on a one year renewable basis, which is acceptable for the purposes of obtaining residency and that can be cancelled from the second year in the case that you can make the application for the annual voluntary payment.

    Speak with a good insurance agent and ask for cover for the codes: E106, E109, E120 and E121. These are the specific codes which need to be covered for insurance purposes. However, it would be sensible to ask the insurance agent to check with your local comune in the case that they have additional regional or local provisions that they would also want to cover. My advice has always been to stick to one of the main insurance companies in Italy rather than going through smaller companies. The main players would be Generali, Zurich, Allianz, Groupama and UnipolSai, as examples. A policy of this nature may cost a few hundred instead of a few thousand depending on your age and pre-existing health conditions.

  • My tips for a better residency application

    In addition to the above, here are a couple of tips which you might find useful.

    An email pec
    You might be thinking, what is an email pec? It actually stands for Posta Elettronica Certificata and I find it is one of the most useful things to have in Italy. A few years ago the government introduced legislation to allow electronic communication between individuals and municipal offices/agencies, police and also companies. However, they rightly had suspicions about the efficacy of traditional email channels because of the inability to confirm the identity of the individual sending the email. Enter: pec email.

    Pec email is an email account that can be opened for about €30pa with a lot of service providers and during the opening process you are required to provide identification (copy of passport and/or ID card) to clear a security check. Once passed, the account is opened and you will be able to communicate freely with most official offices. Any email you send is certified as having been sent from you, but in addition you receive a receipt when the email has been received and accepted by the receiving party.

    This is useful in many ways, but specifically with regards to residency it does mean that you can submit an application to your comune by sending all the necessary information via the pec email. (Check the comune website for their specific email pec to which you can send documents). For instance, if you are unable to return to Italy, for whatever reason, and want to submit your application before Brexit date, then it can be done via pec email.

    Residency applications will be backdated to the date which you officially submitted the application (with correct documentation), so for any applications submitted by pec, or in person, before Brexit date, but then formally approved afterwards, you ‘should’ be granted residency from the moment of application.

    You will also find an email pec useful if you have to submit documentation to the police, other government agencies and even some companies. For the cost of approx €30pa I think it’s worth it, although responses to your emails will be few and far between and any follow up may need to be done in person or on the phone. Expect to do some follow-up!

italy tax

The best tax day of the year 2020
July 5th

A little known point about residency and tax, in Italy, is reference to the 183 day rule.

This rule states that if you are considered resident in Italy for less than 183 days per annum, then you are not considered tax resident in the country for the full tax year (different rules apply to employed persons). So, for calendar year 2020, if you take residency after the 5th July then you are assured to be considered non resident for the full tax (calendar) year and your first taxable year will be 2021.

This might be important for anyone who is thinking of applying now, but might like to remain tax resident elsewhere for the year 2020.

It will not affect your ability to get residency in Italy in 2020, but it will merely mean that your taxable year of residency will not start until 2021.

A useful piece of information if you need to look at your financial arrangements and how you can streamline and simplify them to make them more tax effective for life in Italy. The transition year is always the most important because of the ability to use cross border financial planning opportunities to their fullest.

And that, in brief, is your no-stress guide to to obtain residency in Italy as an EU citizen. However, whilst I write the words ‘no-stress’, they don’t correspond with my experience of municipal offices in Italy, or indeed the experience of many others. Always expect the unexpected.

I wish you or anyone you know all the best of luck making an application for residency in Italy, pre-Brexit, and who knows, we may even be in for an extension again. My guess would be at the witching hour on Dec 23rd so as not to ruin Christmas too much for the retailers and companies that will suffer most from a hard Brexit. Non vedo l’ora!

Italian banks – should we be worried?

By Gareth Horsfall - Topics: Banking, Italy
This article is published on: 27th May 2020

Milano palazzo Banca Commerciale

In this month’s article, I promised I would take a slightly closer look at Italian banks and at what our risks are as deposit holders in banks, which, in all probability, are going to be a risk in the near future as the Italian economy slides further into contraction and a likely deflationary spiral.

But before I go into that I thought a little update on life post-lockdown might be in order. I was hoping to have written more articles during this time, and also send more videos, but after week 3 of lockdown and a decision to do an exercise challenge online every day with some friends and colleagues, I ended up with a herniated disc, a lopsided spinal column touching the sciatic nerve and was unable to sit down for 3 weeks due to the pain (lying down and standing up only). In fact, writing this article is my first attempt at spending any length of time in front of the computer. Well, if nothing else I have learned that I am no longer a spring chicken and need to be a bit more careful about my exercise routines in the future! Other than that, nothing has really changed much for us here, apart from being able to go out more. An unexpected upside of the lockdown has been that Rome without mass tourism is an absolutely beautiful place to be at this time of year. But since schools are still online and the teachers have ramped up the lessons to 4 hours online a day, then there is little chance to do anything other than manage the daily lessons and homework routine. Thankfully only 2 weeks to go and the school season will be over. Then what we do is anyone’s guess! I will keep you posted :0)

OK, so back to some financial news. I want to take a closer look at Italian banks in this E-zine, specifically just what our risks are by holding our cash in them, whether the minimum deposit holder guarantee is really worth anything and what we might be able to do to avoid any potential near and medium terms risks.

italian debt

To start this somewhat complex journey we need to first look at the subject of Italian government debt: who holds it, how quickly they would be likely to sell it if problems persist and ultimately who would be left carrying the losses.

Domestic v foreign debt holders

Firstly, let’s examine the distribution of Italian government debt between domestic and foreign holders (foreign holders tend to be less loyal and more likely to sell at the first whiff of trouble). There is a widely held belief that the majority of Italy’s public debt is domestic because Italian households hold large financial assets. You may have heard the term ‘Italians are great savers’. This is true and the approximate net wealth of Italian households is €10 trillion, of which about a half, €5 trillion, is in financial assets. This figure is about twice the amount of public debt (before the Covid crisis) and could go some way towards explaining why one might consider the public debt to be covered by the assets and cash that Italians hold in the country.

However, the figures show that Italian households only hold about €100 billion in Italian public debt (roughly 5%) because a much larger part is held by Italian financial institutions: banks, insurance companies etc. whose ultimate beneficiaries, interestingly, are Italian households! This is where our risk lies! As Italian bank account holders, the real risk is that since Italian financial institutions are so heavily invested in the Italian state, a crisis in government could create a potentially bigger crisis in the financial sector.

Other categories of debt

We should also note that public debt also comes in the form of direct loans. Italian banks also have on their books about €290 billion of loans to general government and we don’t know much about the rates charged by banks on these loans. These are mostly issued to Italian local and regional authorities.

A web of complexity

A web of complexity

We know that Italian households don’t own a large part of the public debt (directly): it is the financial institutions that hold the lion’s share. Banks alone hold about €400 billion of Italian government debt and if we include

the loans to regional government then their total liability is in the region of €690 billion. This means Italian banks are by far the biggest source of funding for the Italian government and they lend more to the government than they do to small and medium sized businesses. That might explain the somewhat eternally sluggish entrepreneur market in Italy.

We also know banks are supposed to be safe and deposits guaranteed up to €100,000 per bank / banking group (clarification on this point below), but our deposit money is, in reality, an indirect loan to the Italian state.

Another 2 groups who hold Italian government debt are insurance companies (think Generali) who actually take a much longer term view and are less likely to sell in distressed markets, so we don’t need to worry too much about them. The other group is investment funds.

Investment funds are all those funds which you often find being offered by the banks to investors and quite often are loaded with Italian government debt. Those holdings need to be valued daily and will be much more likely to be traded quickly on the back of bad news. Between domestic and foreign investment funds, they hold approximately €750 billion of traded Italian government debt. This might sound a lot, but running into the Covid crisis it represented only about a third of all the Italian government debt in issue, and so even if subjected to frequent trading, it is less likely to have an impact on the stability of the system. Although, in the case of a government default they would be the first in line to take the losses, along with the banks!

banca d'italia

The last major holder of the debt is perhaps the elephant in the room: Banca D’Italia.

They owned approximately €400 billion of Italian government debt pre-Covid, and probably a lot more now. However, this is essentially a ‘giro dei soldi’ and

any interest that the Banca D’Italia earns from the Treasury, it immediately pays back. This debt can pretty much be considered Italian government debt. Also, it’s worth noting that the majority of this €400 billion was acquired under the last financial crisis European Central Bank quantitative easing programme, which basically means that Italian government debt is held by the ECB and has the effect of mutualising debt across other EU states. The ECB could raise interest rates on this debt and / or create less favourable payback conditions, but given the state of the EU, economically and politically, this is very unlikely.

How could trouble start in the banking system?

It is at this point that we return to the start and I answer the question (to the best of my ability), Italian banks – should we be worried?

As we have seen, the whole financial system in Italy is pretty much tied up with the state. It’s a clear case of robbing Peter to pay Paul. In addition, the majority of Italian debt is held within the EU, so there are vested interests holding the machine together, maybe with sticking plasters and bits of twine, but it is holding and working. And let’s not be under any illusion that this is just an Italian problem. France, Greece, Spain, Germany to name a few, are in similar situations.

Covid will not ease the situation, but given that a lot of the debt being created to ease the burden across the EU, will in some way or another be spread across it, it would take a pretty big move across global financial markets against the EU or one specific EU state for something major to happen. That being said, we would never have expected Covid to occur and so never say never.

What we can do to safeguard ourselves?
We all need banks for our daily living, and as we have seen in this article, Italian banks are just another appendage of the state. So, the safety of them is essentially a bet on the reliability of the Italian government, which brings me to my most important point. The safety of your Italian bank deposits, in truth, probably relies more on the stability of Italian politics than any other factor and my opinion, for what it’s worth, is that no matter which party comes into power in Italy, things move at such a snail’s pace that it’s hard to find myself losing sleep over my banking arrangements.

Protecting myself

That being said there are some measures to try to minimise my risk. The first being the minimum deposit guarantee of €100,000 per bank / banking group. In all honesty it’s not really worth the paper it’s written on and if there was a widespread run on Italian banks then the state would have to jump in and issue more debt, (which the banks would buy even more of), or the EU would have to step in to hold together the EU project. There are no reserves set aside for a moment like this. However, that being said it does make sense to spread your money if you hold more than €100,000 in cash. The key is in the wording, in that it is €100,000 per bank / banking group. The 4 banking groups in Italy are the Intesa San Paolo group, the UniCredit group, Banca BPM and Monte Paschi di Siena. Look out for the logo of one of these groups on your banking material, or check out your bank website and look at the small print to see if it belongs to one of these groups and if you have more than €100,000 in any one bank or group then think about spreading it. Alternatively, with bank interest rates being effectively negative, consider investing cash to maintain its long term value, whilst always leaving yourself with an adequate fund for emergencies.

Other banking options to look out for are the online bank offerings. I hear many people tell me that they opened up a bank account in Italy when they arrived, either by going along to their local branch and speaking with someone there, or a real estate agent helped them to do it. Most of these accounts are really basic bank accounts with very high charges and if you are a resident, and have an account like this, then consider looking at the online banks in Italy. I am a fan of Fineco bank, with whom I bank with myself. They have excellent terms and conditions and low charges. There are others as well such as Che Banca. Just make sure it is a separate ‘banking group’ to your main bank!

Other than this there is not much more we can do to protect ourselves from a banking crisis in Italy. A banking crisis will evolve from a political crisis and we should see that slow train coming from some way off. I will keep you posted. So no need to lose sleep about it, and concentrate more on getting back to our ‘bella vita’ in ‘il bel paese’.

Are you staying informed?

By Gareth Horsfall - Topics: eu citizens, Euro, Inflation, Italy, Stock Markets, The EU
This article is published on: 23rd April 2020


What is your barometer for political talk? Where do you go to get informed? I think most people would say that polls are a useful, if often wrong, source of information, then there are the International Monetary Fund reports, the European central bank forecasts, newspapers, economic reports, financial institution analyses (which are basically economic reports) etc. I worked out some time ago that most of these were self serving and although some of that information is useful it shouldn’t ever be a real gauge for what the average man on the street is really thinking or doing.

For me, I get that information some where else….mercato Trionfale in Rome where I do my weekly food shop. I find it a hub of differing opinions and characters that all have something to say on the state of the country, world politics and the health of their country. OK, I admit it is probably not quite as well reseached as the other methods mentioned above, but I do find it gives a different perspective on what people are thinking.

Pension Transfer from the EU Institutions

However, whilst writing this I stand humbled because I attended a webinar on the state of the EU, which I will write about for you here. The webinar was hosted by a large Assurance company called Utmost and they had as their

guest speaker a man named Ashoka Mody. I openly admit I had never heard of him before but he has a string of book titles to his name, a career at the World Bank and also influence in the EU’s bailout of Ireland in 2009. The reason I stand humbled is because he was a pretty straight talking economist, it would seem. He had very strong opnions on what is likely to happen in the EU as a result of the Covid 19 crisis and particularly how the crisis will develop in Italy, which is, of course, very important to a lot of us.

So without further ado, here goes my summary that webinar and the evolving situation and some of the thinking about the future of ‘Il bel paese’ and the European Union.

Where is the money going to come from?

Let’s start by saying that whatever predictions are currently being made about the financing needs from the effects of COVID-19, the true reality is that it is likely to be a hell of a lot more than we think. It is likely that the global effects of COVID-19 are going to be felt long after the virus disappears (assuming it doesn’t make a return in the winter) and to return to normal the best estimates are that we will need at least 2 years for travel, business and supply chain to return to pre virus levels

At the moment there is little point looking much further than 2020 as this is so unprecedented no-one really has any answers, but the realistic thinking at the moment is that the cost for BOTH Italy and Spain will be upwards of 20-25% of their GDP in 2020. In monetary terms that is a potential €500 billion black hole in the finances of Italy and about the same for Spain.

To look at the viability of filling this hole, we have to turn to the EU. Just last week they announced a potential €500 billion recovery package which, as we can see, does not even come close to the potential needs of the countries worst affected by the virus. So, what do the EU members states really need from the EU now? The answer is not a financing solution because they will never agree a package big enough as we will look at below. What the EU needs now is a political revolution and who would like to place any bets on that happening?

Normalcy: the condition of being normal; the state of being usual, typical, or expected

I am sure you, like me, have concerns about how the EU is going to deal with this and how Italy will extract itself from this mess, but my more immediate preoccupation is what happens to all the small businesses, restaurants, bars, pubs, shops, etc. How are they going to survive this? And I don’t just mean the lockdown period, because any extended set of conditions put on a return to normalcy which will, in turn, have a further damaging effect on the supply chain. The best economic forecasts predict a return to growth for most countries in Q4 2020, but the likelihood is that growth will only return, after a severe contraction for all of 2020 and a return to growth in the first quarter of 2021.

financial advice in Italy

Cogs and Wheels

We have to imagine that the whole world economy is a machine which is comprised of cogs and wheels and for the machine to keep working all the cogs and wheels must keep moving. If one slows then it inevitably has a slowing effect on the whole machine. Not only, but if we imagine the supply chain of a restaurant for example (I choose this because there may be social distancing rules applied to restaurants when they reopen) and

assume that they can only open initially at the capacity of 30-35% of their pre virus levels, then effectively that slows the whole supply chain down to 30% as well. It is not correct to say that it will affect only the restaurants, but also the lavanderia that cleans their table cloths, the food suppliers, the deliveries of detergents, the wine consumption etc. This affect of an extended return to normalcy could be the difference between many businesses reopening and staying permanently closed.

We can extend this thinking globally as well based on different countries coming out of lockdown at different times. If we think about global trade in it’s most basic defintion it is an exchange of goods. A buyer finds a seller and they make an exchange. But, if in the case of Italy, it comes out of lockdown and businesses start again, will they be able to find buyers, or even sellers of their goods and services if other countries in the world, the USA, the UK, Russia, China etc have continued restrictions in place themselves and they can longer trade in the way they did before?

The system is a machine of cogs and wheels which are all inter-dependant on one another. When the wheels stop turning it affects the whole machine.

financial ripple effect

The ripple effects in the EU?

The first thing to remember about the eurozone economies is that coming into this period, nearly all the eurozone countries were in or near recession.

Italy has been in a low growth, low inflation cycle for about the last 30 years. This crisis is expected to cause respective contractions to the economies of Italy and Germany of -9.1% in 2020 and -7% followed by growth in 2021 of +4.8% and +5.2%. Unfortunately the reality is likely to be much worse.

Italys’ national debt to GDP ratio is predicted to rise to 155% and it could very well fall into a persistent deflation spiral. This is very bad for business, the economy and the country as a whole because it will exacerbate the effects of the debt meaning that Italy has to pay even more back to meet it’s debt obligations in world financial markets, meaning less investment in infrastructure schools, hospitals, and public services. Could we see even more forced privatisation of public utilities and services?

In short this is a very bad situation!

As I also explained above, the effects will not only be isolated to Italy and Spain, but the rest of the EU. For example, French banks have lent approximately €300 billion to Italian banks in recent years. Italian banks are almost inevitably going to wobble after this crisis and we might have to expect some bank failures (the subject of my next E-zine). But, if they default on their obligations, what will be the ripple effect on French banks? And French banks are not the only banks that have lent to Italian banks in recent years. Also, Greek, German, Spanish, Portuguese…can you see the trend?

So how will the EU deal with this crisis?

The short answer is don’t expect anything from the EU. It is likely that we will see a new idea almost every day in the press but none of these will solve the problem because one the single biggest failure of the EU project. No political alignment. We cannot fix a financial solution without first having a political solution, because any political solution ultimately means that there will be a fiscal transfer from one country in the EU to another, and neither the Dutch nor the Germans are willing to take that risk.

how safe is your bank

The European central bank already owns 23% of Italian government debt and to bear the cost of the Covid 19 breakout it would need to purchase another 25%, meaning that the ECB would be holding nearly 50% of Italian government debt. If we remove the morally right thing to do for a moment, it is perfectly understandable that the Germans and Dutch would

not want to be on the hook for this amount of debt should Italy fail to pay its debt obligations in the future, because of its inability to manage its economy.

National interest will always come first, over EU solidarity. Let’s bear in mind that Germany is also going to have to apply it’s own fiscal stimulus and if EU bonds were created then that would mean a transfer of approximately €200-300 billion euros of government debt transfer from Italy to Germany alone. It might be the morally correct thing to do, but is it the practical thing to do?. Is it right that other EU states should shoulder the burden of debt from less efficient Southern European states?

A quick look at history

You may think that these are historically unprecedented poltical times, but you would be wrong. We only need to look at the USA to see what happens when no political union is in place:
Between 1776 and 1789 the US was like Europe is today. It was a group of federal states that all operated their own finances and budgets. This was also the time of the War of Independence from Great Britain. In 1788 a currency union was formed and the US dollar was granted as the common currency across the USA, allowing them to spend without the worry of exchange rates. Following the currency union a federal government was formed in 1789. At this point the federal government now had a right to tax the nation. However, this led to a fractures between individual states, principally those in the north and those in the south and lead to the American civil war in 1861 – 1865.

So there we have an example of a similar situation as that of the EU, but with one major difference: The EU doesn’t have a federal government in place and without a federal government, (but a currency union), then the central bank (the ECB in the case of the EU) does not have the authority to bail out the individual member states in the time of need. In other words the central bank cannot play it’s role of being a lender of last resort. Herein lies the problem.

USA Federal Bank

In the USA, as we have already seen in past weeks, they will essentially ask the Federal Bank to print as much money as is required to bailout the nation. If they lend to any institution, municpality or corporation and that entity fails to pay their debt obligations then the

taxpayer will bear the burden for that debt and it will be added to the governments existing debt obligations, which they can then, over time, work to payback or erode through inflationary measures.

taly, as per all EU member states, have no lender of last resort, (independent central bank) to which they can turn to bear the cost of the measures introduced during the Covid 19 outbreak.

So where do we go from here?

Well, it is quite clear that this is going to swiftly move from a health crisis to an economic crisis and then even more quickly to a political crisis.

There seems to be no political will in the EU to create EU Bonds to alleviate the burden on Southern European states who were most severly affected by Covid 19. The only solution being offered at the moment is to extend the European Stability Mechanism to Italy, Spain and other affected states which is ( without going into details) an offer of loans at low to zero interest rates, but which must be paid back and with conditions attached. This is something which Italy is going to try hard to fight against. This isn’t a financial crisis but a health crisis and they believe, and I am with them despite the financial and political consequences, that the EU must bear the burden of the additional debt created because of this crisis. Italy does not want to take loans with conditions attached because it is essentially the same financial treatment as that imposed on Greece in 2010. The only outcome from that was complete financial hardship and a failing economy. Italy is, obviously, keen to avoid the same fate as is Spain.

So that leads us nicely to the term which we are likely to see in the press in the coming weeks and years ahead: QUITALY.

moving to italy

Is Italy going to decide to do a Brexit and leave the EU. Before any Brits, like myself, who have taken citizenship in recent years, start to panic about the possibility of Italy leaving the EU as well, it should be noted that the Italian constitution would prevent a hasty and

quick action, (They couldn’t do a Brexit!!) and even if they were to hold a referendum on the matter it would take years of negotiation within the warring Camera dei Deputati and Senato to even arrive at a referendum.

So we have a long way to go yet, but one thing is clear. Political opinion is changing in Italy. In recent surveys 42% of Italians said that they didn’t want to leave the EU, but an equal percentage said that they would want to. 50% of Italians said that they did not want to take any money from the European Stability mechanism if it came with any conditions attached, but conditionality will be key to the future of the EU, and the economic health of Italy.

As you might imagine at this time, this is stoking more populist revolt and Matteo Salvini is now number 1 in the polls. The Frattelli D’Italia led by Giorgia Melloni ( who is a far right party allied with Salvini’s, La Lega) is also polling well and her ratings are rising fast. It is not beyond imagination that when the Covid virus passes, a political crisis will quickly ensue, Conte and the M5S coalition will hold on to power by a thread but a Salvini / Melloni coalition could be very quickly ushered into power in the not so distant future. Prepare yourselves!! I can only add that my conversations with Italian friends, people I chat to at the market and with some clients has turned from being very EU positive to negative. One of my clients probably hit the nail on the head when he said, “if the EU cannot get their finger out on this one, then I can’t really see the point of a politically unified EU anymore and it should return to it’s roots and become merely a trading block, with freedom of movement). I am inclined to agree.

What can we expect?

The Eurogroup [the group of EU finance ministers] is meeting on Thursday 23rd April to discuss the future. Conte will be meeting with them to try and negotitate a good financing outcome for Italy.

The likelihood is that the EU will do what they are good at and kick the problem into the long grass. They will not provide any concrete solution, which will throw Italy and possibly Spain into a spiral of recession, deflation, more political infighting and economic hardship. The Eurogroup only has €500 billion euros at it’s disposal to provide unemployment insurance, economic stimulus, and the fight the Covid 19 virus across the EU. It is nowhere close to the amount required. The ball park figure would be closer to a € 1trillion. The sad fact is that the European Central Bank could print € 1trillion euros, if only it had the mandate to do so from all EU member states.

In truth, Germany will likely have the last say. Brexit has already left a funding hole of approximately €60 billion in the EU budget and so the logical conclusion is that Ms Merkel will give the problem the kiss of death by requesting that the issue of funding is placed in the EU budget and each country will be left to fight it out with other member states as to who pays what and when. In others words it will fall into the bureaucracy of the EU. The problems will persist in Italy and economic hardship will worsen.

Expat Money and Finance Articles

So what does this mean for our money

Well, to try and leave this E-zine on a positive note for investors, at least, we can be thankful that there is a whole world out there in which we can invest and whilst Italy likely sees hardship, other countries will exit this crisis and proper. One country that springs to mind is China. So for all our concerns about the country that we live in, we shouldn’t worry too much about our money. I can’t say for sure when stock markets will recover fully. We may be waiting until the end of this year at the very earliest, but they will and with a well managed, diversified portfolio with good oversight, then your portfolio will recover as well. The economics will play out over a much longer period. One upside for currencies is that it could weaken the Euro which would make those who have assets in USD or GBP, for example, worth a lot more. Maybe a return to the heady days of 1:45 GBP to 1 €?

All I can say that it is all to play for. In the meantime, I will be taking a closer look at Italian banks in my next E-zine as they could be a huge risk to use, and to financial markets in the months and years ahead.

Why do we use asset managers?

By Gareth Horsfall - Topics: asset managers, investment diversification, Investment Risk, Investments, Italy
This article is published on: 10th April 2020


In this article I would just like to touch briefly on a subject which, during the good times might seem somewhat banal and maybe even pointless, but when we hit the bad times we can see the merit of why we use asset managers such as Rathbones, Tilney, WHIreland and Cazenove to manage our clients’ money.

During this time in lockdown and financial market instability, I have been listening to a number of webinars from investment managers and financial gurus to try and understand what they think is likely to happen when we exit this crisis. Below are some of the points which I have heard:

  • Within the next 6-12 months dividends from some of the best dividend paying companies will be slashed or even cut completely, to shore up cash reserves.
  • Even more focus will be put on the way we live and the way companies operate. We could see an even greater resurgence into ESG (Environment, Social and Governance) stocks. If you are unsure what they are then you can check out the article I wrote on this earlier this year.
  • We may have seen the bottoming of the markets, but much depends on what will happen in the USA. As it stands, almost 7 million people have already applied for unemployment benefit. If that rate continues it means the US will have an unemployment rate of approx 15% very soon. A level not seen since the Great Depression in 1929.
  • Any early plateau’s in the infection and death rate in Europe will be a good signal for financial markets.
  • Companies who were struggling to survive prior to this crisis will likely collapse. A great example of this is the UK retailer Debenhams which, as I write, has just brought the administrators in to look at winding the company up. However, the new tech savvy companies that have responded to changing customer trends will strengthen their position as market competition fails.
  • Nationalisations are likely, more so in the EU than the UK and the USA. Companies in the travel, retail, and leisure sectors are at the greatest risk of being nationalised. Part nationalisations are a huge drag on company performance and would be areas to avoid when the dust settles.
  • Smart working could become popular. Companies may start to change their attitude towards office space and allow more smart working for their employees. This could mean potential productivity increases but may also change the dynamics of the property market as well, mainly in the cities.
  • Is Capitalism dead? A subject which seems to be thrown around whenever we have a crisis. Actually the thinking is, not at all. In fact, one manager thought that there was likely to be a resurgence of ‘responsible’ capitalism. A capitalism that is no longer unfettered, but is more controlled allowing prosperity to grow, while at the same time focussing on our care of the environment, social care and supervision of corporate governance practices. Will we ever be weaned off this perpetual standard of prosperity and GDP growth, which is unsustainable in so many ways?
Why do we use asset managers?

It is worth just going back to point 1 for a moment, the point about the dividend cuts, and why I entitled this section:

Why do we use asset managers?

Many clients rely on income from their investments to fund their lifestyle. That may include ad hoc withdrawals or regular payments to top up pensions, pay for healthcare costs, pay for schooling fees, and general lifestyle costs. If this is the case, then relying on what has been the traditional investment type for income: bonds and blue chip equities, might be a difficult strategy post crisis.

Now, more than ever, there is likely to be a need to take income from gains in the asset prices, rather than exclusively income derived from those same assets. (Think about it as a property that is rented, but after expenses and taxes earns very little income. However, the property itself has gained in price significantly and you could access those gains to help top up your income! A bit like an equity release plan)

The importance will be to be in the right assets at the right times, to sell the gains when they have been made and secure them as a reserve to pay income payments. If you imagine that most of the major companies could be cutting their dividends to hoard cash to survive this period, while in addition interest rates on cash are likely to be cut even further and the interest rate on bonds are equally likely to fall due to easy access to government cash, then where else can we turn to generate the cash we may need? We must turn to the gains in the prices of the assets that we hold as an alternative way to generate income. This is where the expertise of asset managers comes into play. They research the market, and aim to be in the right geographical and corporate sectors at the right times and look in depth at company balance sheets to predict their future.

It’s going to be a tricky time ahead for many people and relying on tried and trusted methods of generating income that have served you well in the past may not necessarily work in the near term.

I am happy to say that all our clients are with asset managers who we trust to manage our clients money and make sure they have the income they need in the good times and the bad.

Investment Talk

By Gareth Horsfall - Topics: investment diversification, Investment Risk, Investments, Italy, Stock Markets
This article is published on: 9th April 2020


Let’s talk about our money for a moment. I know it has been the last thing on anyone’s lips in the last few weeks, but as the spread of the virus slows and when life slowly gets back to normal we will start thinking about our financial situation again, and rightly so.

As I am sure you will have noted, in the last few weeks the stock market tanked, strangely predictable in its unpredictability. That probably makes no sense at all (and I am sure the editor of this Ezine will question me about it!) but the history of financial markets shows us that the crashes come from unforeseen events which incite a huge sell off. At the time of writing a rebound in various markets appears to be taking off. How long it will last is anyone’s guess. However, a longer and sustained rebound will come quite quickly and so it is important to remain calm, stay invested and benefit from the upside as well.

(As an aside, I would ask that you start to look at your account balances now. We have a tendency to not want to look at our investments during the difficult times and whilst I agree with this at the height of the crisis, when the dust settles, and it is starting to from a financial market perspective anyway, I always coach that it is important to check your money. If nothing else it helps us to understand the phases of investments and how they are nothing to worry about. We can’t always have good news!)

We can see from the examples below what happens after market crashes and why sticking with the plan is more important than trying to time our way out and back in again.

A few examples from previous financial crises:


The collapse of the subprime mortgage markets triggered a recession and made 2008 the poorest year for stocks since 1931. The US market fell 10% in June 2008 and fell 10% again in October 2008, losing 19.12% for the year. On March 9, 2009, the major U.S. indices closed at 12-year lows. Then, the market took off for one of the greatest rallies. From the March 9 2009 lows to the end of 2009, the US market soared 64.83% while the NASDAQ (Tech stocks index) gained 78.87%.


Was much the same. After the four-day closure of the stock market following 9/11, the US market lost 14.26% in a week. But what happened next? A huge gain. The market rebounded 21% in less than three months.

There were more challenges ahead because on October 9, 2002, the US market fell again but by Halloween, a period of only 22 days, it gained 10.6%.


The US market gained 26.4%, and the Nasdaq 50%.

If we go back further the story is always the same. When the markets crash, reference is almost always made to October 19th 1987: Black Monday. (This time was no different.) The US market lost 22.6% in one day! Then the recovery kicked in. During the next two trading days, it gained back all of the loss ending up 2% positive for the year.

If you had invested in the US market a week before Black Monday, you would have lost 30% on your investment in the crash … but if you held on, your investment would have gained 462% over the next 20 years.


With investors fretting over rising inflation and the energy crisis, the US market lost 30% of its value during the first three quarters of the year, but then it suddenly gained 16% in October.

Between 1982 and the year 2000 the US market made a 1,500% gain. This is why we stay invested through the downturns. This is what the market is capable of achieving. There are periodic rollercoaster rides, but these are normal and they should be expected. Even with these nailbiting rides history is definitely on our side.

Take care of yourself

By Gareth Horsfall - Topics: Italy
This article is published on: 23rd March 2020


Gareth is the Manager of the Italian Office. He writes a regular ezine and below you will find his latest message.

It feels decidedly bizarre to be writing to you in these unprecedented times. I am really struggling with what to write about. Concentration seems intensely difficult. I must have re-written this article about 4 times to date because what I write either seems irrelevant, or even just a little patronising. Money matters don’t seem quite as important right now and although I know that those same money concerns will reappear when we eventually get back to normal, my stories, my facts, my ideas just don’t seem right at this moment in time.

But, I thought that I must write to you, maybe just to relay my experiences to date of the coronavirus and some of my own concerns.

I should start by telling you that I think I may have been infected by the virus.

Three weeks ago my family and I went on a settimana bianca in the north of Italy with 3 other families. In retrospect it was an absolutely crazy idea. At the time the lock down was just being imposed in the Veneto area and we thought, in our wisdom, that we would bypass it. We even convinced ourselves that the clean mountain air and outdoors would do us the world of good. What we hadn’t quite calculated was the proximity to people on the cable car and ski stations and also in the hotel. Two of the men from two of the other families fell ill when we came back. The first had a test done quickly and discovered that he was positive; the second needing to be taking to hospital a week ago due to respiratory difficulties. He was discharged the same day but told he was also positive. Both are now fine. My wife and I both started with very mild flu like symptoms about a day or so after returning, achy bones and, oddly for me, light headaches. Thankfully that has all passed now and we feel fine. We never got tested but can only assume that we also got this virus.

However, the virus itself is less of a concern for me personally. My thoughts always return to the long term economic damage that this will do in Italy in the long run. I won’t go into a discourse in this E-zine, but I do keep thinking that there must be some point where the government will have to accept that the long term economic damage will be greater than the consequences of the virus itself. That is a scary thought, mainly because of all the vulnerable people who could become infected. We have a very close uncle of 77 years old, a Nonna in the family of 92 years old, my own mother in the UK of 71 years old and my suocera of 68 years old, also in the UK. We also have a close friend in the north of Italy whose father has been admitted to hospital with coronavirus. This is a very unsettling time.

The 92 year old grandmother is worth a mention here, because we say that these are unprecedented times, but I spoke with her on the phone the other day only to discuss some of her experiences during the war years. She lives in Southern Italy. She told me about the times when her father (a typewriter mender) would go and trade his services in local businesses in exchange for food: prosciutto, a formaggio, bread etc and then often the soldiers, who themselves famished, would steal everything that the household had. They had to learn to hide the food in secret places around the house. At the same time, tuberculosis was running rife through communities with no access to any pharmaceuticals and with quite basic living conditions. She explained that she lost a number of good, and young, friends during this period. So no matter how bad we have it at the moment, this puts it all into perspective, without wanting to down play the seriousness of the situation.

I don’t want to write anymore in this E-zine other than to say that, after much reflection, I will continue to send them. I will stick to my main theme of matters relating to money and living in Italy. I hope they serve, either as useful information or at the very least a distraction from what we are going through. I can’t say how frequent they will be since trying to manage life in close quarters with the family is probably the hardest thing about the whole situation, but my promise is that I will write with some more E-zines.

In the meantime, I want to wish you the very best health wherever you are. If you are ‘vulnerable’, please take care and take precautions. We may have some way to go yet and the psychological toll might be more taxing than the physical. Either way, we can get through it stronger than before.

It has also been my intention since the lock down in Rome to call all my clients and speak on the phone and find out how you are. I am slowly getting through the list but my time is governed by the home office situation, so if you read this and you haven’t heard from me yet then please just drop me a quick email (gareth.horsfall@spectrum-ifa.com), whatsapp message or text (+393336492356) and tell me that you are your loved ones are all in good health. I would really appreciate it!

I look forward to the end of this and getting out and about again to visit you, so we can cheer our survival of this lockdown period together over a nice glass of Italian wine! (We will need to support our local Italian businesses, and cantine, more than ever after this)

Stay Safe

By Gareth Horsfall - Topics: Italy
This article is published on: 11th March 2020


As I write this E-zine financial markets are entering free fall due to the events surrounding coronavirus in the last few weeks, no more so than in Italy.

It certainly seems a very difficult and strange time to be living in, and clearly is spooking the financial sector. However, in this E-zine I want to offer some rational thought about this and why this is neither a time for panic nor something that we should think is out of the ordinary. It is certainly unprecedented from a health point of view and I hope you can remain safe during this time, but it is just another ‘unpredictable’ event from the perspective of our money and will have the short term effect of scaring investors.

We should all think back to the events of 2008 / 2009 and remember the thoughts and feeling we had when the world’s media told us that we were heading into a financial crisis of unforeseen proportions and that Armageddon would prevail. This is no different, from a financial point of view, and should be thought of no differently. It will throw up opportunities for those who are sitting on cash and should be a time of reflection and restraint for those of us who are fully invested.

I would like to add that I do not wish to minimise the effects of this virus in any way. I understand that there could be many at risk, myself included: I have suffered from asthma all my life, and we also have members of the family who are at very high risk of developing severe problems from the virus if everything we are to believe is true.

Equally, what I am about to write should in no way be taken as a conspiracy theory and born out of superstition. I am going to write based on historical facts and reflect on the behaviour of humans. We have tended to exhibit and repeat the same patterns of behaviour in very similar circumstances throughout history.


This is the title of one of my favourite books written in 1841 by author Charles Mackay.

It is one of my favourite reads because it is a historical account of the typical behaviour that we. as humans, exhibit

repeatedly. There are many examples throughout history, which are discussed in great detail in the book and which I will come to in a moment, but let me ask you:

Just because all the governments around the world, all the doctors, all the councils and all the media say that coronavirus could be the greatest threat to mankind, does this make it true?

This might seem a rather provocative statement to be making, but it does bear thinking about for a moment. Some suggest that the coronavirus may be no more serious than the regular flu, although some estimates suggest it may be worse. The facts to date cannot prove either way. Clearly, given that we have no idea how it will manifest itself, it makes sense to adopt urgent measures but it may turn out to be no more than another SARS / MERS/ Ebola (interestingly Ebola virus kills 9 out of 10 people who get infected, but the alarm over that was nowhere near the panic over coronavirus). In addition, we have had panic surrounding mad cow disease, swine flu and avian flu. None of these have gone on to prove to be any more than a passing moment of concern and affected a small proportion of the population overall.

The book I have mentioned above is well worth reading, if you have the opportunity, and explains how as humans, we tend to exhibit behaviours which reinforce one another. In our case, the government creates the alarm, therefore the doctors must respond with equal alarm and response / preparation ( they are afterall paid by the government), the media equally react in an alarmist way because it helps them to sell their services, the people become alarmed and start stock piling because they fell under threat. The problem is that is is now hard, in a communal state of panic or enthusiasm, for one to stand out and say ‘maybe this is not the case’, because they are ostrazied or ridiculed and called out for being unreasonable.

But don’t just take my word for it.
Let’s look some of the evidence:


Merely 10 years ago we had a very similar experience, when financial markets collapsed after the bundled mortgage debt crisis that led us into the crash of 2008 / 2009. However, isn’t it interesting that leading up to this crisis, economists and central banks told us that the world was in permanent state of growth and could likely maintain 3% per annum; estate agents told us that property prices would keep on rising; even banks and financial institutions believed the hype and continued to offer highly risky investments to risk averse investors because they believed that stability was the new norm:

The Guardian 30th January 2007: Still going through the roof – the property boom goes on
Fortune 500: July 12th 2007: The greatest economic boom ever
Harvard Business School: 27th December 2007: Chimerica’ and the Global Asset Market Boom

No one could challenge the norm at the time, for fear of being branded the one who wanted to end the status quo. The same logic applies to financial exuberance as it does to fear about a global pandemic. Just because everyone says it will be this way doesn’t necessarily mean it will be (if you haven’t seen the film, ‘The Great Short’, then I would suggest it as a great example of the treatment of those who go against the masses).


For those of you with a memory of the events surrounding the financial market collapse of 2000, you might remember that running into the collapse we were told that the internet would change our lives forever and in ways that we could not imagine. The theorists were absolutely right. But unfortunately, they had not thought to add a timeline to that prediction. Financial market exuberance took over followed by collapse. At the time economists, central banks, financial institutions and pundits in the media bought into the same rhetoric, that the internet would reshape our lives immediately. Little did they know that it would take about another 10 years for the effect to happen. Just because everyone says it will be this way doesn’t necessarily mean it will be.


In the mid 1400’s Europe was fixated with the idea that every calamity that befell a person was the cause of a witch. Here is a passage from the book:

“But in the early days of ‘little knowledge’ this grand belief because the source of a whole train of superstitions, which in their turn, became the fount from whence flowed a deluge of blood and horror”.

The writings are not a million miles removed from the fear surrounding coronavirus. In this case, just because everyone said it was true didn’t mean it was. More horrendous is that those who challenged the belief were deemed to be witches themselves and didn’t live to see their reality come true.


I won’t go into the historical account of how the Crusades came about, but we can reflect on a passage from the book, which in some ways mirrors what we see today:

” Fanaticism and the love of battle alike impelled them to war, while the kings and prices of Europe had still another motive for encouraging their zeal (in the case of the Crusades it was money and land grab). Policy opened their eyes to the great advantages which would accrue to themselves…….Thus every motive was favourable to the Crusades. Every class of society was alike incited to join or encourage the war; kings and the clergy by policy, the nobles by turbulence and the love of dominion, and the people by religious zeal……skillfully directed by their only instructors”.


This phrase is to illustrate the power of the word to spread far and wide and for superstition and hypothesis to become fact:

“And first of all, walk where we will, we cannot help hearing from every side a phrase repeated with delight……by men with hard hands and dirty faces – by saucy butcher lads and errand boys – by loose women – by hackney coachmen, cabriolet drivers, and idle fellows who loiter at the corners of streets….it seems applicable to every circumstance, and is the universal answer to every question; in short, it is the favourite slang phrase of the day, a phrase that, while its brief season of popularity lasts……throws frolicsomeness over existence and gives them motivation to talk as well as their more fortunate fellows in a higher stage of society”.

Expat Money and Finance Articles


So, to bring the subject of this E-zine back to money matters for a moment I would like to write that what we do and how we act now is of utmost importance to the long term health of our personal finances.

Most people will be in one of two situations right now. The first are those who, for whatever reason are sat on cash which available for investment. Whilst financial market collapses might seem the worst time for investment they are quite the opposite. They are the greatest opportunities. The opportunity to see substantial gains on investments when the volatility settles. It is in no way easy to invest when market indicators are all red and the financial media are professing Armageddon, but they are wrong. I know this from experience because I had the fortune to have some cash in 2008 when the financial crisis happened. You have to get through the volatility and the psychological reluctance, but long term returns on most assets during these times are substantially greater than at other times.

However, a word of caution. Financial crises can create imbalances in certain sectors. It is wise not to just jump into any asset during this time, but to invest in a well balanced portfolio based on your own attitude to investment risk.

The other class of investor is those who are fully invested (I include myself in this category). We are investors who have been invested and should remain invested during these periods (not accounting for anyone who must disinvest because of cash needs). Panic is not an option. Level headedness must prevail. And if you are unsure of what to do then you can always pick up the phone and speak with me. This is my 5th financial market crash in my career. I have coached many clients through periods like these and suspect I will have to coach many more, so if you are in doubt then please do get in touch and we can talk about how it affects your personal situation.

If you are a client who has invested capital through one of our selected group of asset managers then please feel comforted that they have everything under control and have made provisions for these unforeseen events (i.e. investing a proportion of the assets in gold and other low volatility safe haven assets). What we are going through is quite normal and I suspect will be something we look back on with great interest in the not so distant future. In the meantime, if you yourself, or anyone you know is at risk from the virus please take all measures to stay safe.

The Spectrum IFA Group Conference 2020 – Athens

By Gareth Horsfall - Topics: Italy, Spectrum-IFA Group
This article is published on: 28th January 2020

The Spectrum IFA Group Conference 2020 - Athens

This year The Spectrum IFA Group annual conference was held in Athens. I attended it from the 23rd to the 26th January. As usual we had 2 full days of conference and a little time to ourselves as well. The time to myself this year proved enlightening as you will see from the image above. This is 100% Greek graffiti. I happened to stumble across it during a lone walking tour early in the morning, not so far from the Roman Agorà. It certainly gave me a chuckle, but also give an insight into the mentality of a certain sector of Greek society (whoever they might be), although it’s no surprise given their ongoing economic malaise at the hands of the EU.

Graffiti aside, the conference was full of the usual morsels of information (some more controversial than others) flowing from the investment and financial sector, but we were also treated to some much more interesting information on a bigger theme which is more likely to have an impact on our lives and the way we invest in the future. In this E-zine I will touch on the morsels, and the big idea that is circulating in asset management circles.

So let’s start with the appetizers:


If you follow the news you will know that the impeachment of US President D. Trump is underway. Whilst it was felt that this is uninteresting for investment markets, what is stranger is the opinion that Trump has actually been good for the US economy, employment and corporate profits. This is indisputable regardless of your opinion on his moral values. I can recall a conversation I had with a female taxi driver in Rome just before Christmas who was also telling me something similar. She said that no matter what you think of him, he has pretty much lived up to the promises he made to the US voting public. Love him or loath him, does this mean he could be in for another term? We will find out later this year.

Conversely, the financial markets are much more concerned about a US future led by Bernie Sanders or Elizabeth Warren. This would likely lead to periods of big instability in the financial markets and in our investment portfolios. It begs the eternal question about morals versus money!


Take no notice. They don’t matter. The fact that Trump can tweet about trade wars and the markets hardly take notice anymore just shows that the ongoing details of the trade spats between nations has little effect on our investments. Trade Wars will take 5-10 years to resolve and so have very little bearing on our investment objectives. However, this doesn’t mean to say that we shouldn’t be mindful of them, for example too much exposure to companies who are heavily invested into Chinese imports are potentially companies to avoid or have a minimal allocation to.


Most of you know my personal position on Brexit (I am a reluctant remainer, just to be clear!), but if you are an ardent remainer you may not wish to read on.

The financial marketeers feel that the general election result for Sig.Boris will bring a period of stability to the UK. Most of the asset managers said that they had been increasing their allocation to UK companies significantly since the vote. They are also expecting to see that he will have to follow through on a number of election pledges which could mean massive infrastructure investment and a lot more spending. This will create big opportunities for UK companies as they fall out of the EU.

US companies are also very positive about the UK’s prospects (quelle surprise!). To give you an example, the UK market is the third most important for Estee Lauder, the cosmetics firm, behind the USA, NO 1 and China NO 2. They are keen to invest and grow in the UK, despite Brexit.

And for all the talk of companies upping and offing to the EU, in reality companies such as Packard UK will maintain their base in the UK, but also open EU operations to ensure continuinity across their EU markets.


The big question for the EU is who is going to pay the bills moving forward? When the UK leaves the EU it will leave a massive funding gap and smaller less economically prosperous countries will have to fill the gap. How will this work and is it a sustainable model? Only time will tell.


It may not surprise you to know that the big theme to this years conference was ESG investing. You may be wondering what that is? It stands for Environment / Social / Governance investing. We should also add healthcare into the mix. But, this is generally known as ethical investing, sustainable investing, environmentally friendly investing, green investing, or any number of other terms. But one thing is clear. This is BIG and it’s here to stay.

This is going to be a theme that is everywhere. There is not one person that I talk to who is not worried about the amount of plastic they use, or the slow pace of adoption into circular recycling and a society based on renewables rather than throwaways.

But it’s coming, and expect the pace to pick up. The general consensus of opinion was that any business or sector that fails to adopt, or adapt to the challenges we face in the coming years will very likely go out of business. Consumers are being selective about who they do business with and are making choices based on how company policy sits with their personal views. Equally investment managers have realised this trend are are also aligning their asset management styles with those of their customers, because they can see that prospective investors will avoid investments based on how they match with their ethical views. This in itself could be the biggest catalyst for change that we see. Asset managers are the worlds largest allocators of capital in the world: investment funds, pensions funds, sovereign investment funds etc and now they are starting to look at not just where they place money, but question why they do it. This could be the catalyst we see for real change.

Let’s talk of some examples where real change is taking place:


Consumers and employees are the real capital of any business. Maximizing shareholder returns is now under the spotlight. People are making choices based on how businesses treat their customers and also their employees. Happy employees make for higher profits and more prosperous businesses. To give you an example, I rarely fly Ryanair anymore ( unless I am forced to do so). I struggle with their budget approach to customer service and lack of employee care.

Similarly there is a company in the US called Clorox. They make a range of household cleaning and consumer goods. They recently embarked on a cost cutting exercise and looked to reduce the administration budget by 10% with the introduction of new technology and artificial intelligence into their business. That would normally mean a cull of 10% of the admin workforce but rather than make them redundant Clorox chose to re-employ them into more innovative jobs and to use the human capital in a more productive way. In this way they are being seen as a company with a social conscious and become more investable.


Consumers and employees are the real capital of any business. Maximizing shareholder returns is now under the spotlight. People are making choices based on how businesses treat their customers and also their employees. Happy employees make for higher profits and more prosperous businesses. To give you an example, I rarely fly Ryanair anymore ( unless I am forced to do so). I struggle with their budget approach to customer service and lack of employee care.

Similarly there is a company in the US called Clorox. They make a range of household cleaning and consumer goods. They recently embarked on a cost cutting exercise and looked to reduce the administration budget by 10% with the introduction of new technology and artificial intelligence into their business. That would normally mean a cull of 10% of the admin workforce but rather than make them redundant Clorox chose to re-employ them into more innovative jobs and to use the human capital in a more productive way. In this way they are being seen as a company with a social conscious and become more investable.


I touched on the company Estee Lauder above, but they are also worth mentioning in terms of their record on plastic reduction and environmental impact. 18 months ago Estee Lauder had no view on plastic in their business or the environmental impact of their business on the world. Today they have a permanent board member responsible for monitoring and exploring every aspect of their ESG footprint ( Environmental / Social / Governance) and they have made the decision to move all their plastic products to glass containers.

We can also talk about Rentokil. Not a company with the best ‘green credentials given its use of chemicals and record on non-humane disposal of pest animals. But, Rentokil have understood the changing trends of consumers and the CEO has put in place a process to find 100% non toxic chemicals to eradicate pests. He also wants to find humane solutions for the treatment and disposal of pest animals and insects. However, this comes at a price and typically it costs 3 times more for these solutions…is the customer ready to pay this price yet? This is the kind of journey that a company like Rentokil has to monitor and adapt to.


The social aspect of investing has also become a prominent factor in a company’s’ investability. This may have less environmental credentials, but the investors are now looking at products where companies have taken time to consider the true purpose of a product and alter it accordingly.

To explain this we can use the example of the US households goods company Clorox again. They have a wholly owned subsidiary of the business which is a charcoal maker in the USA and has a market share of approximately 50% share of the entire US charcoal market.

A few years ago they asked themselves, What is the purpose of charcoal? One might say it is for cooking, heating, etc. But they found that its purpose is to facilitate social gatherings. The biggest users of charcoal in the USA are age 25 and under. Charcoal’s primary purpose is social gatherings for millenials. So, Clorox conducted research and found that most people have a beer when they BBQ and that it takes, on average, 13 mins to drink. They went away and adjusted their charcoal recipe so that it came to the optimum cooking temperature after 15 minutes. Sales have rocketed. They showed that they were thinking more about the reason for their product and adjusting it to their clients needs and tastes.

Lastly, let’s take a look at the:


and then a short word of warning

The world is aging rapidly and countries around the world are going to have to adapt to older populations. The Italian healthservice, the NHS and many other governmental run health services are going to struggle to cope with the demands from an increasing number of patients in the next 10 years. Technological solutions will be required to meet these needs and these solutions are coming. Innovation is happening: robots and artificial intelligence are already taking the place of surgeons and are proving, in a lot of cases, better than human doctors at performing basic operations. Virtual reality is also a development which might mean a doctor can work in many places at the same time.

An example of a company spearheading development in this area would be the Smith and Nephew, leaders in global medical technology. They have developed wound dressings that can last for 3 or 4 days and notify the nurses when they need changing. This is time saving for nurses to concentrate their time on more important and potentially more urgent matters.

This is just one example, but one where rapid change is already taking place.

And lastly a word of warning: BUBBLES

Like any trend, but especially investing trends, they can find momentum and then become ‘too’ popular. This could also be the case with ethical investing. It has seen massive interest in the last 12 months and whilst it is recognised that these trends are here to stay, because consumer behaviour is changing, it could create bubbles in investment markets. So, whilst it is impossible to say right now what will happen, it is not outside the realm of possibility in the next couple of years that these trends start to take hold and more and more people pile into this sector.

However, you can avoid the worst of this, even if you want to be a part of it. Simply avoid anything too good to be true, don’t invest in anything without a track record, use professionals to guide you and avoid investments that merely have a trendy sounding name without doing some research first.

Change is coming, and probably faster than we might think.

2020, here we come…

By Gareth Horsfall - Topics: BREXIT, Italy
This article is published on: 6th January 2020


This is the start of a new decade and it will surely bring fresh challenges for all of us, but there is much to look forward to as well.

Climate change is constantly being talked about, we can look forward to a reduction in single use plastics from 2021 in the EU, electric car sales are showing the highest growth in numbers, our current model of economic growth is under question and more focus is being placed on corporate welfare of customers, employees and ecological footprint. In addition, technology is bringing about massive disruptive change to old industries who have had their feet under the table for too long. This is not all without serious challenges but if we work together we can get the results that we need for the benefit of everyone, no matter which side of the political spectrum we might sit on.

My biggest lesson over the last decade

We can’t expect everyone to agree with us about everything. Brexit has been an exponentially steep learning curve for me, one which I have learnt alot from: Tolerance more than anything, but also challenging norms and preconceived ideas. I also learnt that illness is the most democratic thing of all: it spreads regardless of money, age, sex or political views.

My resolutions for 2020

(I make them once a decade)

I aim to reduce my use of social media massively to avoid any influence from fake news (If Sig. Zuckerberg won’t regulate it, then I am afraid I won’t use his platform as much), to read alot more books, try and understand more the people who have differing views from myself, attend a Salvini rally at some point (this is a strange one, but I attended a Sardine manifestazione in December 2019 and I wanted to get a balanced view, so committed myself to attending a political rally of Salvini – watch this space), continue to reduce plastic (Oh my god, how hard is that in Italy), eat less meat and maintain a healthy lifestyle.

And on those bombshells, I would like to wish you first and foremost the best health, and also happiness for the next decade.

Happy New Year 2020

My next article ‘8 reasons to be wary of yourself in 2020’ will be released shortly.

Political shock in the UK

By Gareth Horsfall - Topics: Currencies, Italy, sterling, UK General Elections, United Kingdom
This article is published on: 13th December 2019


Dear Readers of my articles

I am writing you a very short email today after what appears to be somewhat of a political shock in the UK. I will refrain from further comment until I have had time to let things sink in and I can discuss possible financial consequences in a rational manner.

However, where one loses another gains, as the saying goes, and one of the fortunate consequences of this vote in the UK is that it will bring, I think, short termed optimism and bear favourably on pounds sterling. I doubt this will continue as the reality of leaving the EU strikes home once again, and let’s not forget that a NO Deal scenario is now a real possibility again.

My point is that as I write this GBP: EUR has bounced to 1:21. If you have money in GBP and you need to convert to EUR you might be staring at a very favourable rate. I am not making any assumptions on where it will go during the course of the day, weeks ahead or even months, but compared to the last few years the exchange rate is quite attractive for sterling conversion to euro.

It was predicted that this would happen after a Tory majority win, so take advantage where you can.

Enjoy the day ahead as news comes in and we start to find out what the future holds for UK politics.