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Investment options

By Jozef Spiteri - Topics: investment diversification, Investment objectives, Investment Risk, Investments, Malta
This article is published on: 18th January 2022

18.01.22

Trust in the financial sector

Choosing investments can be daunting to someone who does not have a good understanding of financial matters. It is normal to feel intimidated when facing something you don’t understand, and it is a reaction many people have when considering investing their money.

For these people, the ideal investment is often something they can see and touch. Such investments are usually the purchase of property to let, or the establishment of some sort of business selling goods or services. Done correctly such ventures can be very profitable, but these types of investments require a lot of time and money, so they might not be suitable for most people.

An alternative is investing in financial markets, but how can you overcome the mental block when attempting to allocate your money? The best first step is to consult an adviser who will walk you through the key points of such investments, explaining the potential risks and also rewards of different investment options, and who will take the time to come up with the correct solution for you.

investment options

However, the most important step to get more comfortable with financial markets is to actually start investing. An analogy I like to use is of a person who has never been swimming, fearing that something terrible would happen if they were to get into the water. Typically, they would start by dipping their toes and legs in, getting a feel for this un-chartered territory. Once they feel comfortable, they will continue to walk further out, until eventually they will be completely at ease in the water. This is the approach new investors should take when looking to enter this “new world”.

If you are feeling confused or overwhelmed with all the different investment options available to you, feel free to reach out to one of our advisers. In the initial meeting we will be able to help you understand better what will suit you best and can answer all the questions you might have. All initial meetings are free of charge and there is no obligation to proceed with an investment.

Investment diversification

By Jozef Spiteri - Topics: investment diversification, Investment objectives, Investment Risk, Investments, Malta
This article is published on: 12th January 2022

12.01.22

A word which seems so simple, a concept that many think they can easily master, but do you fully appreciate what diversification means? If you check the meaning of diversification, you would find that in business terms it is usually the act of varying the range of products or services offered, or broadening the field of operations. In investment terms it has a similar meaning. Diversification involves spreading your money across different assets and asset categories.

Most of the time when people tell me that they are investing and I ask them if they have Investment diversification, I am met with a resounding “Yes, of course”. They then might go on to explain what they invested in and it is usually things which they would have come across on social media or heard about from another “investor”. These portfolios might comprise shares in a few US companies, a couple of US bonds and possibly some cryptocurrency for a touch of risk. Such a portfolio would seem OK to someone who had just begun investing some spare cash, but is it diversified?

Such a portfolio is not really diversified at all, and I will explain why. Starting off with the first part which is an investment in a few different shares. Firstly, they are all from one geographical region, meaning if something dramatic happened in US stock-markets, they would probably all be affected to some extent. Secondly, inexperienced investors often buy shares based on something they have read online or something they have heard from a friend or colleague. These investments are typically in growth stocks, in other words shares in companies which are perceived to have strong earnings potential and growth prospects, but often with a correspondingly high share price. Investing exclusively in this type of company may prove successful but also carries significant risk, as the expectation of highly profitable growth (sometimes reflected in an inflated share price) may not be realised for many years, if at all. This is why it is sometimes sensible to include more mature company shares in a portfolio, or possibly shares in a company paying good and sustainable dividends.

investment diversification

Moving on to the bond part of the portfolio, often this would be one or two bonds issued by the US government, maturing in say 10 years. It might also include a corporate bond to add a little bit of diversification. But how much attention has been given to the financial strength of the company issuing the bond or the bond’s yield to maturity (how much is received in regular income up to the date the bond matures). These are just a couple of basic questions that should be asked when considering direct investment in a corporate bond.

This brings us to the cryptocurrency portion of the portfolio, often consisting of holdings in popular names such as Bitcoin or Ethereum, or in a new ‘crypto’ trending online. Although I have nothing against a small allocation to cryptocurrency, it should always be treated as speculative with the likelihood of volatility and a high risk of capital loss. I sometimes question whether people investing in cryptocurrency understand the basics of this asset class, including its regulatory status and its ability to function as a currency. To read more about cryptocurrency – click here

One question all investors should be asking about diversification is how to achieve maximum returns with minimum risk. Or, put another way, how to make the most of their money without jeopardising their financial security. A well-diversified portfolio should include exposure to a range of asset classes, for example shares, bonds, property, commodities and cash. Investments should also not be restricted to a single country or geographic region, nor to a single theme or economic sector.

In practice, most people do not have the time or knowledge required to build a well-diversified portfolio which achieves the right balance between risk and reward, between capital growth and capital preservation. At Spectrum, on behalf of our clients, we therefore focus on identifying professional investment managers who specialise in maximising returns from efficient portfolio diversification.

If you have any questions regarding asset diversification and investment returns, our advisers are available to help. We do not charge fees for initial consultations and you have no obligation to use our services after meeting us. Please get in touch to learn more.

Cryptocurrency versus Regulated Funds

By Jozef Spiteri - Topics: Cryptocurrency, Investment Bonds, investment diversification, Malta
This article is published on: 10th January 2022

10.01.22

Patience is a virtue, but in today’s world this is sometimes forgotten as people try to do as much as possible as quickly as possible. This approach is often also applied to investing – trying to get rich quick – but this can result in flawed investments which may result in losing money. An asset class which has been used this way over the past year is cryptocurrency, with its rollercoaster ride making and breaking fortunes.

Still a relatively young asset class, cryptocurrency first gained traction with the Bitcoin boom in 2017 and were again very much in the news in 2021. The value of Bitcoin shot up making those who had held the coin for years very rich. As often happens, the opportunity attracted much attention, leading to the increase in popularity of alternative coins such as Ethereum and Litecoin, and the creation of numerous others.

But what is cryptocurrency? Cryptocurrencies are digital currencies which permit automated transaction recording and record maintenance by a decentralised system, using cryptography, as opposed to using a centralised, regulated authority to keep the accounts. They are based on blockchain technology, which is an important innovation in itself with potential uses in a multitude of applications across all industries. But a key point to remember before you buy cryptocurrencies is that they are currently unregulated by any authority, which means that their value can be manipulated and safety cannot be guaranteed. This is the main reason why most financial advisers rarely recommend this asset class to their clients.

cryptocurrency

So, what do financial advisers prefer to recommend to clients? International financial advisory firms, such as Spectrum, have access to a wide variety of providers offering regulated funds to create a fully diversified portfolio across a range of asset classes. One such example is Prudential International’s PruFund range of funds, one of the largest and most secure investment portfolios available to expatriates globally – (watch the video explanation here)

An advantage of this well diversified investment is what is termed as its ‘smoothing’ effect. Simply, this means that by being invested in such funds you will not experience the full extent of stock-market highs and lows. The smoothing feature protects investors from the extremes of market volatility, providing investment growth that is smoother and steadier.

The most important requirement for investment success is patience. An investment portfolio should therefore be created with a long-term outlook, prioritising assets that are regulated and in line with your risk profile.
Please contact us to learn more about investing patiently and successfully.

Do I need a financial adviser?

By Jozef Spiteri - Topics: Financial Planning, Financial Review, Malta
This article is published on: 30th December 2021

30.12.21

What exactly does a financial adviser do?

Do you have a good idea of what a financial adviser does? Some people think we are accountants, others think we are regular bankers or even stockbrokers. Well, I can start by saying that we are none of the above and here I will briefly outline what we actually do.

A financial adviser is quite simply a professional guide and planner for your finances. We take a broad view of your personal and financial circumstances, looking at your current position together with immediate and longer-term needs and goals. During an initial consultation, we try to get to know you, to understand your priorities and plans.

Once we have a clear idea of your intentions, we then move on to examine your existing finances, including assets, liabilities, income, expenditure and how much money should be held in reserve for unforeseen expenses. Protection planning will also be addressed – do you have sufficient life insurance to protect your family and is your income safeguarded against serious injury or illness?

We then consider how much should be set aside for long-term investment and retirement, whilst exploring the most suitable solutions for your circumstances. As part of this exercise we complete a questionnaire which helps determine your investment objectives and attitude to risk, allowing us to propose an appropriate investment strategy. This might focus on capital growth, wealth preservation, generating a regular income, or a combination of all three.

The final step is implementing the financial plan by completing application paperwork and arranging transfer of funds to the institution(s) responsible for managing your investments.
Beyond this initial advice we arrange regular updates and review meetings, providing ongoing service to ensure that our original recommendations are always aligned with, or where appropriate adapted to, changes in your circumstances.

This is a short summary of our advice process. Quite straightforward, right?

Jozef Spiteri the Spectrum IFA Group

We believe in building long-term client relationships and have been doing so since our business was established in 2003. An initial meeting with a Spectrum adviser is free of charge and without obligation. Please get in touch to learn more about what we do and how we can help you.

Interest rates and Inflation

By Jozef Spiteri - Topics: Inflation, Interest rates, Malta
This article is published on: 19th December 2021

19.12.21

Taking simple steps to increase and protect your wealth

Interest rates and inflation, both terms we are familiar with, whilst not always appreciating how closely the two are connected, or that both affect our immediate and longer term financial security.

When we hear about interest rates, we might think of the bank. This is correct, but let’s clearly define what the term interest rate means. For savers (as opposed to borrowers) an interest rate can be seen as a percentage-based payment which the bank (or indeed any other savings institution) pays us for holding our cash. This means that when we put our money in a bank account, the bank compensates us financially for having placed our funds with the bank. Simple, right? Inflation can be a slightly more difficult concept to understand, but it is something we experience daily. Inflation refers to the general increase in prices of goods and services over time. This happens for a number of reasons, which won’t be examined here. The important point to understand is that inflation, whether gradual or accelerating, means prices are going up.

How then are interest rates and inflation linked? Well, the connection is quite straightforward. As mentioned, the bank is paying its savings customers an interest rate, so let’s consider the actual value of that interest rate. Most likely the rate you have been receiving over recent years has been no higher than 0.5% per annum. But inflation has been averaging around 2% per annum and has increased substantially over the past year or so. What does this mean? Assuming interest at 0.5% and inflation at 2%, the money in your bank account is losing 1.5% of its value every year (2% – 0.5% = 1.5%). This means that by keeping funds idle in a bank account you are actually destroying the real value of your money. The longer the cash is left there, the more value it loses.

Understanding inflation

Now that you’ve read the above, you may be asking yourself if there is a way to avoid destroying the real value of your money. That is where companies such as Spectrum can help. After reviewing your circumstances and going through a risk profiling exercise, your Spectrum adviser can help you build a suitable portfolio of diversified assets with the aim of getting your money working harder. A typical ‘balanced-risk’ portfolio, for example, has achieved annualised returns of 4% to 6% over the medium to long term. Of course past performance is no guarantee of future returns but with sensible planning it is entirely possible to overcome the negative effects of inflation – indeed, investment success and achieving positive real returns generally rely on such planning.

An initial meeting with a Spectrum adviser is free of charge and without obligation. This means we can assess your circumstances and answer your questions. It is up to you to decide whether to take things further. We would be more than happy to meet you for a chat so we can show you how we can be of service.

With Care You Prosper

By Jozef Spiteri - Topics: Malta
This article is published on: 16th December 2021

16.12.21

For many, the benefits of financial planning might seem to not go beyond financial stability. Some might think that investing some savings will only result in a more secure financial future, however a recent study carried out by HSBC has shown that financial planning can actually provide additional benefits. They found that people who make use of the services offered by financial advisers tend to benefit from a better mental wellbeing.

Receiving guidance from financial professionals to meet long term goals seems to take a great weight off investors. This is because having to make such plans on their own can often be overwhelming and in the end, not particularly successful. A good adviser is well aware of the importance of a long-term relationship with clients and will have frequent contact. The ability to interact often will help consumers iron out any doubts that come up as time goes by, increasing trust between the adviser and client.

The study carried out by HSBC Life UK found that out of 3000 UK adults, 72% of those who review their financial position at least once a year benefit from average or above average mental health whilst more than 50% of those who don’t do this tend to suffer from below average mental health. Similar numbers were observed for people holding a retirement plan as opposed to others who did not.

This is something we experience first-hand at Spectrum. Clients are at ease knowing that we are there whenever they have a query. They also like to know if they are on track for financial security, particularly when they look ahead into retirement. We can use sophisticated cashflow forecasting tools to clearly illustrate their cashflow well into old age. This is very popular because most clients tend to get lost when they are just seeing numbers in front of their eyes.

The Spectrum IFA Group

Ensuring that our clients have peace of mind is of utmost importance to Spectrum advisers and that is why ongoing service is a key priority. Clients see the value of our active, ongoing service and support; good financial planning extends beyond just the original advice given.

If you would like to discuss the steps you need to take to have a more stable financial situation going forward, feel free to reach out to us. There is no obligation to proceed with anything when meeting us for an initial discussion. We just hope that we can be of service to you.

Transferring Irish Pensions Abroad

By Craig Welsh - Topics: Malta, pension transfer, Pensions in Malta, UK Pensions
This article is published on: 7th December 2021

07.12.21

Irish expatriates, or indeed anyone who has previously worked in Ireland, may have accumulated Irish pensions along the way. If it’s unlikely that you will return to the Emerald Isle, it may be worthwhile looking into moving these pension pots.

At Spectrum, we can help you with that.

First, there must be a bona fide reason for wishing to transfer those pensions away from Ireland. It cannot be done just to circumvent Irish taxation. Professional advice from a regulated adviser should be sought.

You may be able to transfer your Irish pension to either a Malta QROPS (Qualifying Recognised Overseas Pension) or a UK SIPP (Self Invested Personal Pension). And no, you don’t have to be living in either Malta or the UK to do so. Moving them can give you far more flexibility by allowing ‘income drawdown’ and avoiding the need to buy an annuity.

Maybe you have more than one pension scheme in Ireland? In that case, you might benefit from consolidating them into one pot. Again, that makes things a bit easier to manage; we can then help you manage the investment side too.

retire

So, a bit more detail;

  • Drawdown option; no need to buy an annuity. Withdrawing money from an Irish pension can be complex and inflexible, with some pretty complicated rules. For instance, you will find it difficult to access an Approved Retirement Fund (ARF) or an Approved Minimum Retirement Fund (AMRF) if you are non-resident in Ireland. And without an ARF / AMRF you will most likely have to buy an annuity, with no ‘drawdown’ option. Transferring out means you can access lump sum and drawdown options with no requirement to buy an annuity
  • Pension benefits can be accessible from age 50 upon a transfer, and a lump sum of 30% could be taken. How the lump is assessed for taxation depends on where you are resident, so again, advice is essential
  • Easier to manage when you live abroad. UK SIPPs and Maltese pensions are a bit easier for ‘expats’ to manage. In Ireland you must firstly transfer €63,500 to an AMRF/Annuity, unless you are receiving €12,700 p.a. in lifetime guaranteed pension annuity. On the other hand, UK and Maltese products have no annuity requirements
  • No Irish taxation. Even if you live abroad, income from your Irish pensions will be taxed at source, as income in Ireland. Withdrawing from a UK SIPP or a Malta QROPS instead means that this income can be paid gross, with no tax at source. This depends on where you are resident however and if a double taxation agreement (DTA) is in place. Again, professional advice should be sought
  • Death benefits. Irish pensions, once in payment, are liable to Irish inheritance taxes (CAT) on death, even if you are no longer resident there. With a Malta QROPS there is no Maltese inheritance tax on the remaining pension pot, although tax may be payable in the country of residence of the deceased or beneficiaries

Basically, transferring out could make your life easier. Each situation is different however, and a full review of your circumstances should be carried out.

If you do have an Irish pension and do not intend to return, please feel free to contact us at Spectrum for a no-obligation, initial discussion where we can explore your options.

Bad experiences with financial advice

By Jozef Spiteri - Topics: Malta
This article is published on: 1st December 2021

01.12.21

Within any sort of market, people have different experiences which contribute greatly towards how that person feels about that specific market, or a vendor within that market. One might think that the feelings and emotions which a person experiences in everyday markets might not apply to the financial markets. However, opinions about financial services and products can be formed in a similar manner to any other common market.

I can explain this quickly using the fruit analogy, a market which most people can relate to. In this market, consumers can choose from a number of different vendors, selling similar products. Even though products might seem to be pretty much the same, individuals still tend to have their preferred fruit sources. How can this be? Well, preferences are formed through experiences and opinions of people surrounding that individual. If you have a negative experience purchasing fruit from a particular vendor, you will probably avoid going back to that seller and look to take your business elsewhere. Similarly, you might avoid purchasing fruit from a store if you hear negative feedback from someone else. This human behaviour is very similar to what goes on in the financial market.

Financial services is home to many financial advisers offering a vast range of products, and, unfortunately, some customers might not get the satisfaction they would have expected prior to investing their money. This can either be poor investment performance, or irregular service from the adviser. For example, the original adviser may have left the firm and the ongoing service is unsatisfactory.

Professional Introduction For Client Assistance

Fortunately, just like in the fruit example discussed earlier, investors are actually able to move their business from one adviser to another if they are not satisfied.

Some clients may not be aware that they have this option. Often, people keep the original investment in the hope that performance improves. Whilst some patience is recommended when taking a long-term view, regular contact and discussion with the adviser is essential. Clients should do some research and be prepared to look for an adviser who will listen to their needs and offer the level of ongoing service they require.

This is something which the Spectrum IFA Group understands. The group has a dedicated fund research team who use a strict research process before recommending suitable investments for clients. Criteria includes, among others, performance, regulation and liquidity, ensuring clients are as protected as possible. Clients also receive regular updates and reviews of their financial goals.

As regulation continues to evolve, advisers must keep up with rapid change. Brexit has also had a big impact for expats in Europe who were still using British advisers who no longer have the necessary licence to advise these clients.

Spectrum advisers are all living in the region in which they are advising, allowing advisers to have a much better understanding when dealing with clients either living there, or who are looking to move to that part of the world.

If you are looking for a fresh look at your financial planning, with a regulated adviser who can offer the level of service you deserve, please feel free to contact us, no obligation upon initial discussions.

Tax Efficient Investments Malta

By Craig Welsh - Topics: Malta, Tax Efficient Savings, Tax in Malta
This article is published on: 20th October 2021

20.10.21

This week, Craig Welsh celebrates 15 years as a Spectrum adviser.

Craig started out in the Netherlands, still looks after his clients there, and has now opened a Spectrum branch in Malta.

This short clip tells you a bit more about what you can expect from your Spectrum adviser.

Whether it is Brexit concerns, how to get a better return on your savings, QROPS / SIPP pension advice, or general retirement planning, The Spectrum IFA Group is there to assist expats in Europe.

Moving on from Brexit

Brexit created a number of well-documented issues for expatriates living in the EU.

Financial planning and wealth management were impacted heavily as the Withdrawal Agreement excluded financial services and specifically the passporting of advisory licences between the UK and EU. This means that many UK based advisers and institutions are no longer able to engage with clients living in the EU.

The Spectrum IFA Group is licensed across the entire EEA and can ensure that your finances are ‘Brexit-proof’, through access to secure, locally authorised, tax-efficient investment solutions.

In countries such as Malta, you have access to many flexible investment options backed by some of the UK’s largest and most well known financial institutions.

These products, issued from Dublin or Luxembourg, are both EU regulated and highly tax efficient. Tax efficient products, designed for expatriates, are available to Maltese residents.

As a result, you can still invest with companies whose names you know and trust, whilst ensuring compliance and tax-efficiency in the country you now call home.

The Spectrum IFA opens it’s Malta office

By Craig Welsh - Topics: Malta
This article is published on: 28th September 2021

28.09.21
Craig Welsh

The Spectrum IFA Group recently announced its arrival in Malta, opening a branch in the St. Julian’s business district. It will be managed by Craig Welsh, who is a partner, and who has been with the group since 2006.

Craig will be assisting expats in Malta with their financial planning, particularly around lump sum investment opportunities, UK pension consolidation (where appropriate), Brexit issues, and general retirement planning.

Have a look at this short clip explaining a bit more about Spectrum and how they help their clients.