Discussing investment risk
By Spectrum IFA
This article is published on: 11th July 2014
When talking to clients, Financial Advisers are required to consider investment risk. There are many risk profiling tools available for advisers to help understand a client’s attitude to risk but what happens next?
When I joined the industry, understanding risk was much easier than today.
Cash in the bank was considered low risk or even no risk at all. Government Bonds were considered slightly higher up the risk scale and Equities (shares) were higher risk again. Property was not considered risky and gave its name to an English expression, “Safe as Houses”.
In 2008 everything changed. Banks failed, Governments were under financial stress, Stock Markets fell. Do these events mean advisers should tell clients everything is high risk?
Banks are being recapitalised and in the European Union, Governments guarantee the first €100,000 of a bank deposit.
Two caveats to this, the type of account;
- not all accounts carry the guarantee and
- the guarantee is by banking group, not individual bank. If a depositor has money in 2 banks but they are part of the same group, then only €100,000 is protected.
We are all feeling better about the strength and security of banks so that is the good news. What about the deposit rates we are being paid? Is there an inflation risk we should be concerned with? If inflation is running at a rate greater than the deposit interest we are being paid, we are losing money in real terms aren’t we?
We have also seen Countries in financial difficulty and even being bailed out. Is it therefore always sensible to hold Government Bonds? What hap¬pens to bond values if interest rates rise? Is there a risk the value of Bonds would fall.
We have seen volatility in Equity markets with some large companies having financial difficulties. At the same time some companies are doing very well, are cash rich and are paying good dividends. Regulators tell advisers we need to understand our client’s attitude to risk and provide solutions to our clients that match those attitudes. The regulators do not yet tell us which asset class¬es represent high risks or low risks. Is it therefore good advice to tell a cautious investor to leave their money on de¬posit at a bank? Almost certainly not. How do we advise a client who wants no risk and a return in excess of inflation? It’s not an easy job.
Our feeling is that the only advice we can offer is to spread the risk, diversify in terms of asset classes, pay attention to liquidity and fully understand any product or portfolio. Now is certainly not the time to have all one’s eggs in one basket!
This article is for information only and should not be considered as advice.
This article appeared in Trusting #6 and was written by Michael Lohdi, Chairman of The Spectrum IFA Group
More on risk and investing in different assets
The Spectrum IFA Group attends the Fund Forum International in Monaco
By Spectrum IFA
This article is published on: 27th June 2014
Since its launch in 1989, FundForum International has grown in tandem with the fund management industry on its journey from small regional performers to dynamic global industry. FundForum International has built up a formidable reputation as the world’s leading asset management event for both cross-border and boutique players, bringing all the top performers, global leaders and industry trailblazers together every year to discuss the most pressing issues concerning their market. It offers delegates an unsurpassed level of networking with the most well-respected industry heavyweights from across the globe.
Michael Lodhi and Peter Brooke from The Spectrum IFA Group attended numerous key note speaker sessions. Commenting on this recent event, Peter Brooke says “Keeping a close eye on the global fund management market is vital for Spectrum and in turn our clients. This forum allows us to talk to a wide variety of funds managers and gain further insight into their strategies. This year the emerging markets, frontier investments and especially Africa got a lot of attention.”
This year’s conference also had a more positive slant to it than previous post crisis years The main issues are no longer the market crisis, but how the turbulence changed regulations for the industry. In his opening comments Tom Brown, Global Head of Investment Management at KPMG, said “The industry is in good shape. Investors are investing. The markets and the economies seem to be growing. And asset-management businesses are feeling optimistic and positive about the future.”
There was still very much a focus on how we as an industry (advisers and fund managers alike) need to engage with our customers to help them invest for their long term financial health. Demographics aren’t changing, we live longer but save little and won’t be able to rely on government. This is a major issue for many millions of us. Fortunately this is also a big opportunity for high quality companies to work closer with their clients to fill this enormous gap
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The Spectrum IFA Group at TED Event
By Victoria Lewis
This article is published on: 17th June 2014
Victoria Lewis, one of Spectrum’s advisers in the South of France and Paris, was recently nominated to participate at a TED event (www.ted.com) in Grenoble.
“It was an honor and a privilege to be nominated as a Speaker by TED, especially when I discovered one of the other speakers was a Nobel Prize winner! I was asked to speak about the global pension situation and the problems faced today by those people wishing to retire early.”
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“TED imposes strict rules on the talk format and each presenter must speaker for 18 minutes. There was an international audience of 300 people, many of whom were executives from international companies, entrepreneurs, scientists and university undergraduates. Fortunately, there was time during the event to answer specific questions from the audience and it was clear that most people had a real interest in improving their financial well-being. “
What’s TED?
TED is a nonprofit organization devoted to ‘Ideas Worth Spreading’. Started as a four-day conference in California 25 years ago, TED has grown to support world-changing ideas. The annual TED Conference invites the world’s leading thinkers and doers to speak and their talks are then made available, free, at TED.com. TED speakers have included Bill Gates, Al Gore, Jane Goodall, Sir Richard Branson, Philippe Starck, and UK Prime Minister Gordon Brown. TEDTalks are posted daily at TED.com.
Residency & Tax Returns in France
By Spectrum IFA
This article is published on: 4th June 2014
During May, I always receive lots of questions from people about French income tax returns. The most common ones are – should I complete a French tax return, do I have to declare that tiny bit of bank interest on my savings outside of France, do I have to declare dividends even if these are re-invested? If you are French resident, the answer to all of these questions is “YES”. In addition, depending upon the value of your assets, you may need to complete a wealth tax return.
Whether or not French tax returns should be completed is always a popular subject at social gatherings of expatriates and I have heard many people say that they “choose” not to be French resident. Well French residency is a fact and you only have to satisfy one of the following conditions and you will be resident in France:
- France is your ‘home’. If you have property in France and in another country, but the latter is not available for your personal use (for example, because it is rented to tenants), then France is your home.
- France is your ‘centre of economic interest’. Generally, this means where your income arises. In addition to pension, salaries, etc., this can include bank interest and other investment income.
- France is your place of ‘habitual abode’. Notably, no reference is made in the law to the number of days that you actually spend in France and this is where many people are caught out believing that if they do not spend at least 183 days in France, then they can decide that they are not resident. This is not the case and your place of ‘habitual abode’ is, quite simply, where you spend most time.
- Nationality. If your residency has not been established by any of the above conditions, then it will be your nationality that determines your residency, however, this is very rare.
So with residency established, when completing a French income tax return, you must declare all your worldwide income and gains, even if some of this is ultimately taxable in another country. If there is a Double Taxation Treaty (DTT) between France and the country where the income arises and that other country has the right to tax certain income, your French tax bill will be reduced to reflect this. If there is no DTT and you pay tax in the jurisdiction where the income arises, then this will result in you being taxed twice. Although France has many DTTs, this is not so with the popular offshore jurisdictions of, for example, the Channel Islands and the Isle of Man.
For those of you who have completed the French tax returns this year, if you had to complete the pink 2047 form, this means that you had foreign income and/or gains to declare. If this is for any reason other than pension income, earnings or perhaps property rental income from outside of France, then you may benefit from a discussion to check that you are not paying unnecessary taxes on any investment income. For example, it may be better to invest your financial assets in an assurance vie, which is more tax-efficient for French residency, when compared to foreign bank interest and dividends.
Inheritance taxes should also not be overlooked. As a French resident, you are considered domiciled in France for inheritance purposes and your worldwide estate becomes taxable in France (except for anything that might be exempt as a result of a DTT), where the tax rates depend upon your relationship with your beneficiaries. However, by investing in assurance vie, in addition to the personal tax-efficiency for you, this type of investment also has the advantage that you can create valuable additional inheritance allowances for your beneficiaries.
If you would like to have a confidential discussion about your financial situation, please contact me by telephone on 04 68 20 30 17 or by e-mail at daphne.foulkes@spectrum-ifa.com.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter
Le Tour de Finance – a winner again
By Spectrum IFA
This article is published on: 1st June 2014
Last week, my colleague Rob & I presented at two of the South West France venues of Le Tour de Finance. This is a tour that travels around France, where we bring ‘experts to expats’. Now in its fifth year and due to the popularity of ‘Le Tour’, the events take place around the country in both spring and autumn.
Rob and I did a ‘double act’ and gave a presentation on The Spectrum IFA Group, which covered our processes and the products and services that we provide to clients, as well as highlighting the importance of our independence and how we are regulated in France by the French authorities. We also discussed client concerns (tax-efficiency, inheritance tax planning, securing pensions, protection of capital and continuing issues about the security of banks in the Eurozone).
SEB Life International and Prudential International presented on the topic of assurance vie, explaining the tax-efficiency of this type of investment, both personal and for inheritance planning. Each of the companies outlined the unique features of their own products and it could be seen that the products complement each other, one or the other being more suited to a client, depending upon attitude to investment risk.
The Standard Bank provided details of its structured product offerings that are currently available. There are different terms available and there is an element of linking to stock market performance with this type of investment, but all provide a guarantee that at least the original capital invested will be returned at the maturity date. For our clients who invest in these Standard Bank products, when used in conjunction with a particular life company wrapper, the clients benefit from an extra bonus, which is provided in addition to the capital guarantee.
Currencies Direct presented the various options open to clients who wish to exchange currency, whether this is for regular payments or for ad-hoc exchanges perhaps for larger purchases, for example for property. It was very interesting to see how much could be saved by using Currencies Direct, rather than a retail bank. Unexpectedly, as the Sterling Euro exchange rate jumped by more than a Euro between one day and the next over the two days when Rob and I were at Le Tour, currency exchange proved to be more topical than any of us were expecting.
Exclusive Healthcare Insurance presented on the range of products that they can offer clients. This included a range of seven different mutuelle plans that top-up the basic French health cover, which are designed to meet the needs of the different income groups of French residents and the variation in medical costs from region to region. Like all mutuelle insurance in France, there are no underwriting conditions and pre-existing conditions are covered. The company also outlined a different product that provides full private medical insurance, but which is subject to underwriting conditions. However, since the UK will stop issuing Certificates S1 to early retirees from July this year (i.e. for those who are not receiving UK State pensions), this might be a viable option for those who may be affected.
There was a presentation on French succession planning from Heslop & Platt, which is a firm of UK solicitors that are specialists in French law. As many of our clients maintain a connection with their former home country, the importance of ensuring that there is no conflict existing between the wills made in the different jurisdictions was highlighted. In addition, the forthcoming EU rules on succession were outlined and it could be seen that there would still be a need in France for inheritance planning the ‘French way’ to avoid the French inheritance taxes that will still exist even when the EU rules are in operation from August 2015.
New to Le Tour this year was PetersonSims, a firm of chartered accountants based in France, which also specialises in expatriate tax issues. A presentation from their Tax Director demonstrated how much money they could save clients, just by making sure that French tax returns are completed correctly and relief from double taxation is obtained.
If you did not make it this time to Le Tour de Finance, keep in mind the next local events which will take towards the end of June. On the other hand, if you would like to have a confidential discussion now on your financial situation, please contact me by telephone on 04 68 20 30 17 or by e-mail at daphne.foulkes@spectrum-ifa.com.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or the mitigation of taxes.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter
The Full Spectrum
By Spectrum IFA
This article is published on: 26th May 2014
Having recently started working for the Spectrum IFA Group I thought it time I start a weekly Newsletter covering issues important to all of us, one way or another. Especially for expats who have made Italy their home/spend much of their time here. The main thrust/focus of my Newsletter is to impart in an easy-to-understand, but not too lengthy outline, important matters and up-to-date information to expats residing in my area on matters such as investments, tax and general financial planning issues. And being part of the Spectrum Group means I also have access to professionals in various fields of expertise.
So, taking the above into account, I thought a very good and apt place to start would be to give a broad overview of current happenings in world markets, as we are all affected one way or another, especially with the speed at which events are communicated.
Probably 95% of people I have assisted or advised has had or still has capital in the markets in one way or another. There are many ways this could occur, viz a Pension Fund, a Money Market Fund, an Insurance Policy, Unit Trusts (Mutual Funds) or direct Share Investment.
Markets go up and down, and likewise interest rates. And then we have inflation to factor in. We may not be affected by these movements in the short-term, but are almost certainly going to be in the longer term (five years onwards).
Hence the extreme importance of reviewing your finances on a regular basis, at the very least once a year, in order to ensure your investment aims and objectives are still on course. We are all told to have a thorough medical check-up once a year so as to ensure all our parts are functioning correctly. And we are willing to pay for this because we can appreciate the need – after all, we want to be on planet earth for as long as possible.
Likewise the common sense of having a proper financial check-up at least once a year. And in most cases this involves no fee but at the end of it one wants to walk away knowing everything is alright but, if not, then to be able to change the doctor’s prescription! And this gives us peace of mind.
Unfortunately many are the cases where we come across people who consult an advisor, but then forget to review or the advisor disappears and they fail to take remedial action to consult another.
There is so much “doom and gloom” about these days, so it is wonderful to read of or hear about news filtering through regarding the economies of the UK and EU which are quite positive, and this augers well for investors who have experienced a bit of a bumpy ride over the last 18 months and which offers potential for new would-be-investors or those who have been waiting. Matthias Thiel, market strategist at Hamburg-based M.M. Warburg, which is bullish on southern European assets. “The recovery story is playing out as expected,” he said.
The European Commission had, inter alia, the following to say in its Economic Forecast for EU countries……
- United Kingdom: Recovery takes hold, fiscal imbalances still sizeable
- Italy: A slow recovery is underway
- France: Recovery remains slow amid sizeable budget deficits
- Germany: Accelerated growth in the offing
- Portugal: Gradual economic recovery
- Greece: First signs of recovery
- Spain: The recovery becomes firmer while the re-balancing of the economy continues
It is very important to remember that markets experience upturns/good times (good times) as well as downturns (negative periods).
And economic experts never all agree! So when times are prosperous, out of, say, 100 experts, a third will have a certain view or opinion, a third exactly the opposite, and the remaining third will be neutral. And all will have convincing arguments to prove their respective outlook. But true, experienced economists, when asked what they think about a certain economic outlook will be honest enough to simply say “I do not know!”
Economies throughout the globe are all intrinsically linked together, and what happens in one country can impact on another, even if they are miles apart. Like that old adage “If America sneezes we in UK or Italy catch cold.
So, in conclusion, there is much to be positive about but with it comes a caveat: Do not put all of your eggs in one basket but spread your resources across the various asset classes.
In my next Newsletter we will focus on the different asset classes and what it means to diversify.
Until next time, ciao!!
Should I use a Financial Adviser?
By Peter Brooke
This article is published on: 24th May 2014
Creating a financial plan is NOT a complicated thing to do; it is an audit of where you are today, financially, and where you want to be at different stage of your life. This requires creating a list of what you have, earn, own and owe and agree with yourself to put something aside to cover different goals for the future.
If we don’t have goals in life there is probably little point in getting up in the mornings; unfortunately most things cost money and so having financial goals is also an important part of life. Money doesn’t buy happiness, as we all know, but it does buy some choice and, to some extent, some freedom. I have met yacht crew who have worked for 20 years without implementing a financial plan and want to leave yachting; as they have no pensions and minimal savings or investments they are left with a simple choice… live on very little or keep on working… I see this as a loss of freedom, and so do they.
So we can agree that having a financial plan, however simple, is a very important thing to have but why have (and pay) someone to help you bring this together?
The process – though doing a plan is quite simple a financial adviser will ensure that all areas are discussed and re-examined so nothing is left out. All of the horrible ‘what if’ questions should be covered:
Implementation – a good adviser will have access to thousands of products from to use with different clients who have different needs. The more choice available the more assistance you will need in choosing the best ones, but also the more independent the advice will be. A small advisory firm is likely to have only a few products to choose from and so will display less independence.
Professionalism – if we are ill we go to a doctor; they have qualifications to diagnose our problems and help to put together a plan to make us better. Likewise with a lawyer. A financial adviser should also have qualifications in his or her trade too. Some advisers also specialise in certain areas, like investment or protection etc.
Regulation – like a Doctor or lawyer a financial adviser will be regulated by a government body and will have to display a certain competency and have insurance in order to practice.
Knowledge – qualifications don’t guarantee knowledge, a good adviser should continually improve their knowledge and should be able to prove this through their ability to explain complex issues.
Humanity and perspective – most importantly you need to trust your adviser, this person or firm should be your trusted adviser for most of your life; they need to be able to empathise with the different situations you will find yourself in over the years. They should be able to draw on experience from other clients to help solve issues you face too; they should be able to offer perspective on the decisions you make.
This last point is the hardest to prove and is probably best achieved through a combination of your own ‘gut instinct’ and referrals from friends and colleagues. Do your own research on the all of the above factors, ask around and keep asking around until you have a short list of advisers to meet… then follow your own feelings as to whether you can trust them; the relationship should be a long term one and you will end up telling them a lot of very personal information over time.
This article is for information only and should not be considered as advice.
This article appeared on the FEIFA website. The Spectrum IFA Group is a member of FEIFA. (The European Federation of Financial Advisers and Financial Intermediaries)
Le Tour de Finance in France
By Spectrum IFA
This article is published on: 22nd May 2014
After a hugely successful run of events in Italy and Spain, Le Tour de Finance has come home to France for a run of 9 events throughout the country.
The first 5 legs of le Tour are taking place from 20th – 23rd May. The final 4 events are taking place towards the end of June from 17th – 20th.
These informal events are a great opportunity for expats of all ages to get those unanswered financial questions clarified in plain English.
The range of professional speakers is varied and will cover a multitude of subjects from; Pensions & QROPS, Currency Exchange, French Wills, Tax Efficient Investing, Estate Planning & Tax Advice in France.
These sessions are free, you’ll get to meet other expats in your area and can finish the morning with a complimentary buffet.
For further details on future events please click here.
Swiss British Classic Car Show in Morges
By Chris Eaborn
This article is published on: 20th May 2014
On the doorstep of our two Swiss-based advisers, Chris Eaborn and Robbin Davies, is the lakeside town of Morges on Lake Geneva, where for the past 21 years The Swiss Classic British Car Meeting has built to become one of the leading classic car events in Europe.
The brainchild of one man, Keith Wynn, a British expat, it attracts around 1,500 classic and special interest British cars and around 20,000 spectators every year. The event is non-profit, fuelled by Keith and other supporters’ love of some of the most evocative names in automotive history, and the thrill of seeing them driven to the event and displayed along the shorefront for all to enjoy.
The Spectrum IFA Group is a main sponsor and proud to be associated with such a delightful event that brings many visitors to the region and is so popular with the community in which we have many clients.
Entry is free to both drivers and spectators and the location is easily accessed in 20 minutes by train from Geneva Airport.
Maybe you fancy an excuse to visit Switzerland and at the same time visit the show this year on October 4th?
For details of the event, and helpful planning tips such as hotels and transportation, visit www.british-cars.ch
Why expats should be wary of new pension rules
By Spectrum IFA
This article is published on: 16th April 2014
There are tax implications for Britons overseas who choose to cash in their pension money under new rules announced in the Budget.
British expatriates with UK pension pots who believe they can cash them in tax free from next April are in for a disappointment, according to pension experts.
Rob Hesketh from The Spectrum IFA Group comments in a case study within this Telegraph Newspaper article, please click here to read more