Misinformation, not just a problem for politicians?
Oh my, what to talk about this week? Whatever you do, don’t invest in opinion polls. Amazingly, we already have a new government; non-committal about staying in Europe, but firm on staying out of the Euro, and we have an EU country, Greece, firmly committed to staying in Europe, but possibly about to be forced to leave the Euro due to profligate bankruptcy. Actually not only bankruptcy, but the next stage on from that; running out of friends, or in fact anyone, who will now lend them money. This is beginning to look like a one way street for the Euro, but beware. Nothing is ever as clear cut as it seems.
Misinformation. Clearly a problem for politicians, but a big problem for us too. What I want to talk about today is the worrying number of new clients that I’ve seen so far this year who have previously accepted financial advice that is clearly flawed. If you took advice on investments before you came to France, or maybe have sought advice from unregulated sources since you got here, you may well be the proud owner of an offshore bond. If this sounds like you, then please keep on reading. You have the wrong investment for successful tax efficiency in France, and it can have severe consequences.
Don’t get me wrong, there is nothing illegal about holding a Jersey or Isle of Man domiciled bond in France, as long as you declare it to the ‘fisc’, but you may well be in for a nasty surprise when you start to draw money as regular income or one-off cash injections. And whatever you do, don’t die. Not that it will bother you too much at this point, but it will only add to the consternation of your beneficiaries if your local tax office turns its nose up at your non-European, definitely non assurance vie bond.
If your bond is not a true assurance vie, it will not be set up to jump through the tax hoops that the French tax system presents. How do you tell if your bond will be able to jump through the hoops? Well, you’re off to a good start if you talk to a regulated and approved adviser registered in France, who offers you an assurance vie. This must be compliant. Anything else, and you should start to worry. There are a few ‘litmus’ tests you can use. The first is elementary geography. Is your bond issued in Europe? If not, forget it. You do not have an assurance vie, or anything like it. Secondly, ask your bond provider if he will be able to give you certified tax information to enable you to make your French tax return. Unless you can be completely satisfied that you will be told exactly how much of your withdrawal is taxable, in Euros (even if the bond is in sterling), you have a problem, and you have the wrong bond. You will pay more tax on the gain and you will lose out on various other benefits than if you had structured the exact same underlying investments inside an assurance vie. You have, in short, been badly advised. This is not necessarily through deceit or bad practice, but almost certainly through ignorance; both of the French financial system and of its products. Most likely the advice will have come from a UK IFA trying to keep a grip on a client moving abroad, or an international IFA operating outside of his usual area.
Help is available. Spectrum financial advisers are registered and regulated in the countries in which we work. Unlike back in the UK, we do not charge for our advice or time. Taking advice from registered advisers is a no-lose situation. You will get good advice; you won’t be hassled or coerced into doing anything at all that you’re not entirely comfortable with, and you won’t be charged.
A good way to meet advisers is to attend a financial seminar, such as those currently taking place under the ‘Le Tour de Finance’ banner.
You must, in short, satisfy yourself that your financial adviser is qualified to advise you about the conditions that exist in the financial regime in which you are going to live and pay taxes. There are various loopholes that allow non France-based IFAs to operate here from a number of European countries. Please make sure that you choose an IFA who lives and works in your local community.
You have two such advisers writing for the ‘Flyer’ at the present time. Why on earth would anyone in their right mind rely on an IFA in Chipping Sodbury or Crete to advise them on the most important financial decisions of their lives?