I wrote this article because during this Easter period we decided to stay in and around Rome. We took a number of long bike rides around the city and along the Tiber and I could not help but notice the spring green of Rome, once again.

It’s an amazing sight and one that I feel grateful for. It also reminded me that whilst the investment markets are still recovering slowly and tentatively from last year’s sell off due to the Ukraine/Russia war, they are cyclical by nature and whilst, as humans, we will always tend to run from one crisis to another, there will inevitably be times of abundance and plenty.

My experience of olive trees through my clients

You may have olives’ trees that you tend to in your garden or land, in Italy. I know that many of my clients do, and take great satisfaction in looking after them year in year out to harvest the precious oil that comes from them but, listening to the tales over the years, I can make many comparisons with investment markets.

The ‘Ulivo’ goes through the seasons of the years but never appears to bear fruit in a linear way. In fact, many of you tell me that some years the ‘Ulivo’ may not produce any fruit, other years it is plagued by the ‘moscerino’ (little fly), other years there isn’t enough frost or too little frost and some years you get a double harvest. In other years your friend with the neighbouring field, facing a different direction, has a bountiful year, whilst you have none. None of it seems to make any sense. All variable factors under which you have no control but you accept as part of your nurture for the ‘Ulivo’.

It seems that like every living breathing organism, the ‘Ulivo’ will provide what is needed, but not necessarily in the way you would always want it to. A defined amount of litres of oil each year, just enough to feed my family and friends would be fine. No such luck!

It is easy to forget that the component parts of investment markets are in fact living breathing human beings. Every company, government or supranational is run by people who are subject to folly, excess, corruption, huge advances forward, amazing decisions which benefit everyone, building and growing enterprises and generally trying to find a healthy balance.

Just like the ‘Ulivo’ the investment markets go through their cycles of life according to many variable factors of which we have no control. Flowers blooming (markets rising), leaves falling (market falls), harsh winds (the volatility), buds sprouting (opportunities presenting themselves) and then the cycle repeats itself. Your portfolio goes through its own cycles of life.

I have seen in the past that people new to Italy, and the ‘Ulivo’, have talked of uprooting an old tree (with those amazing architecturally contorted trunks) because it’s old and no longer bears fruit, only to be told by someone with more experience that it just needs to be trimmed in the right way, at the right time of year and creating that hollow space in the middle of the tree so the light can shine through (the equivalent of a review of your portfolio) only for the tree to once again bear fruit when the conditions are favourable for it to do so. This is not to say that dead or dying plants should not be replaced. If they have served their purpose and need to be replaced with a younger healthier variant then so be it.

There are so many similarities between our investment portfolios. The timescales and the variables may differ (wars or winter / inflation or summer) but the ebb and flow, the rises and falls and the seasonal changes are ever present.

The coming years may be lean years, or could provide us with way more then we could ever want or need. Ours is not to know, nor have any control over the variables, but only to do the best we can to make sure that we look after what we have.

If you find it difficult to stick with your investment strategies and would like to get busy trying to chase market returns (I include myself in this group, but am trained enough to know that it doesn’t generate higher returns), the research shows that it has no better effect than generating higher transaction costs and other fees associated with switching investments frequently. The only thing you can be assured of is lower investment returns as a result.

Patience is key! Live the seasons and wait
for abundance to once again raise its bountiful head.

Let’s talk cash!

OK, now that I have my hippie moment out of the way, we can get back to talking about financial things again. So, let’s talk about cash that you might have sitting around and finding a better home for it.

Unfortunately, as many of you find out, once you leave your home country and become resident in Italy, you are almost instantly excluded from taking out new financial products in your home country and instead need to look at what other offerings are available to you here. This means often looking at what Italian or EU based banks can offer, and principally in EUR.

A number of people have mentioned to me recently about the savings rates available in the UK, nearing 5% in some cases and wondering whether they can achieve anything similar in Italy or the EU. The answer is that there seems to be very few, and where they are available the interest rate varies between 2.5% and 3% gross max for 1 year deposits, rising as much as 4.5% if you are willing to lock your funds up for 3 years. In addition, you have to look out for accounts which are ‘vincolati’ i.e. they have terms and conditions attached. These may be as simple as locking you in for a specific term (fixed deposit) or requiring you to open a current account and transfer your basic banking to them as well. In true form things are made a little more complicated than somewhere like the UK.

Italians, of course, are akin to also looking at their home country government bonds which are currently paying around 3% interest gross at the moment. having dropped from about 3.38% gross around the beginning of March.

One advantage of investing in government debt directly is that it offers an attractive tax rate at 12.5% rather than the 26% for other financial instruments.  Placing cash monies into short term Italian or EU government debt, if you are seeking better EUR returns on your cash, might be a useful alternative to seeking out a higher paying deposit account. (Bear in mind that if you want your capital back at the end of the bond period then you need to wait until  bond term matures. Selling early could mean a capital loss). Of course, if you are seeking better returns in other currencies then you can buy government debt in that country instead.   Government debt, wherever it is purchased still attracts the 12.5% tax rate on interest in Italy.

If you are simply looking for a deposit account then you could do no better than compare rates on facile.it or confrontaconti.it 

The only way to purchase government bonds is through an exchange mechanism such as an investment platform.  In Italy, investment and banking are highly institutionalised so speaking with your bank might be the best way to approach it if you are new to this kind of investment.  Otherwise, a quick online check with throw up some other solutions.

Inflation considerations

Whilst these rates offer considerably more than the last decade it is indicative of the bigger and more aggressive trend upwards: inflation.
For perspective, the USA and UK are experiencing inflation ( measured by the Consumer Prices Index) at around 9% and 10% respectively. Italy is currently on 7.7% inflation year on year.

So, regardless of how much you might make on a deposit it is always going to be well below the rate at which the spending power of your savings is being eroded year on year. You may know my thoughts on the matter already, as I have mentioned it in previous E-zines, but I think inflation is here to stay, and I am deeply suspicious of the opinions that it will fall back to 2 or 4% within a year or so. There is so much debt in western economies and the only way to rid ourselves of it, and bring back economic stability to the west is to inflate it away. That could mean more medium term pain.

In summary

If you have cash lying around in deposit accounts, cash which you may need for an emergency or just need to live on, then seek out better interest paying accounts. A good strategy is to keep approx. 6 months cash on hand and then stagger your further 6 months cash needs in 6 month deposits, 12 month,18 month etc. In this way every 6 months you have a maturing deposit when your cash starts to run out. If you don’t need the cash then you just roll it over into another longer term deposit.

But whatever you do, don’t keep all your life savings in cash hoping that a higher interest rate will protect you from rising prices. It won’t!

So what can expect from 2023?

Working with The Spectrum IFA Group means that I am invited each year to their annual conference where we are invited to listen to a number of fund / asset managers who can give us some insight into what has happened and also where things might be heading. This conference was a special one because it was the 20th anniversary of the The Spectrum IFA Group and so the event was held at Gleneagles in Scotland. Apart from the cold (average -2 degree), the conference went well and I managed to scribble some notes from the various speakers, my favourites being David Coombes from Rathbones Asset Managers, Rob Gordon from Dreihaus/VAM Investment funds and Rob Clarry from Evelyn Partners.

(Disclaimer: It should be noted the views expressed here are my own. The information collected has been interpreted by me and can only be taken as such. To protect the names mentioned above none of this article should be taken as advice, recommendations or an offer of solicitation from the fund/asset managers themselves or the companies they represent).

“Heads of State don’t have a clue what they are doing…yet they think they can predict the future”

This was how one asset manager (who shall remain unnamed) started his presentation. The point being that if we are basing our investment ideas and knowledge on economists, central banks or governments themselves, then it is almost certain that you are going to get it wrong.

But don’t just take my word for it, let’s looks at some investment examples that didn’t go well in 2022, and which prove the case:

1. Wind Power is the future…but is it? It produces only when the wind blows, it is significantly more costly than traditional energy sources. The amount of ecological damage to build wind turbines in terms of resources required and to install them probably far outweighs the benefits if you place it against other alternative energy sources. In addition, the blades have a lifespan of approximately 10 years then they need to be replaced and buried somewhere because they cannot be recycled. Yet, faced with all these facts and a sector heavily subsidised by government money, a Danish wind power company: Vestas, which has never turned a sizeable profit was worth more than Apple at one point.

2. Cryptocurrency: There is not a lot to say about Crypto in 2022 other than a complete investment disaster. Bitcoin lost 60% of its value in 2022. A pretty high risk asset if ever there was one. Crypto was also plagued by the collapse of FTX with literal losses ( i.e lost and likely never to be found) assets of $1-2 billion. Hackers also stole $4.3 billion of cryptocurrency in 2022, an increase of 37% from 2021. Yet, governments tell us that government backed crypto-currencies are the future. I will stick with cash, thank you very much!

3. Tesla and Elon: How the darling of the investment world, and government officials alike, has been ousted from his perch. A bit like crypto currency Tesla lost 65% of its value in 2022. You might argue that he is changing the world with his electric vehicles, yet did you know that Volkswagen made more electric vehicles in Europe in 2022 than Tesla? So, who is changing the world? His move to Twitter should also raise eyebrows. A company worth $40bn on the world’s financial markets which has yet to show a profit and one which he also says will ‘change the world’. Remain a sceptic!

4. Inflation is transitionary: Governments also said that when the inflation train left the station in 2020, that, at best, it would be, quote, ‘transitionary’. i.e it would go away once post Covid supply chains returned to normal. I never believed this and wrote about it on a few occasions in the last couple of years. Let me tell you that inflation is here to stay…and would you like some numbers on that? Well David Coombes from Rathbones hazards a guess that inflation will continue at approx 4% in the US, 3-4% in the EU and 5-6% in the UK as an average over the next 3 years. I suspect those are headline ‘government’ declared rates. My guess is that real inflation may be somewhat higher. Protecting those savings and investments has never been more important.

Did you know that inflation needs to only run at 7% per annum for 10 years for the value of your money to halve. 2022 ‘true’ inflation was more like 10-15% across Europe, so that’s 2 of those 10 years taken care of already.

So with all this doom and gloom, what actually did do well in 2022?

Answer: The old, out of favour, industries of the past: BP, Shell, Lockheed, Schlumberger, Caterpillar et al.

Yep, those very same industries which no one wants to invest in any longer. They turned the corner and became the star performers of the investment markets. In fact, anything moderately related to ethical / sustainable / ecological investment had the hardest time in 2022. It was enough to test anyone’s ethical investment values!

However, the truth of the matter is that with interest rates likely to be higher in the next 5 years than they have been in the last 5 years, and the cost of debt being significantly higher, we may just see some of the older, cash rich industries doing quite well, and seeing some of the newer debt heavy companies struggling or even going bust.

Take Netflix. (It has become my go to TV channel!). Netflix’s business model is built on continual expansion of its subscribers and content. However, it has been heavily funded by cheap debt. How might it progress in a world where the debt it needs to make a new series costs 5 times more than before? I suspect it might survive this new world it finds itself in, but could it become a takeover target from a more established and cash rich company, like Disney?

Another example of one of those new, sustainable, ethical businesses, potential disruptor / game changer was Impossible Meat. For those that are not aware they are producing plant-based meat alternatives. In 2022 they saw their share price fall 96% as consumers turned away from their product. (I tried them myself and can’t say I was too impressed!). An example of governments pushing us towards more plant-based and lab made foods, not to forget bugs. But can they accurately predict the future?

So, the cost of servicing debt is certainly going to reshape the investment world again, yet there is one major theme which will shape the world in years to come: SECURITY and I don’t just mean military security, but also energy and food security.

Energy Security
Energy security is being driven by the war in Ukraine and the end of the reliance on Russian cheap energy. A perfect example of how energy policy is needing to change focus is Giorgia Meloni’s recent trip to Algeria to agree access to their gas fields, and export into Europe. Algeria has the 11th largest reserves in the world and have a gas surplus. Italy is trying to line itself up as an energy hub for Europe given that gas will likely now come in from the global south rather than the north, and Italy, it would seem, is ideally placed as a central Mediterranean country and its access into the EU. The only snag, which is not much talked about, is the fact that Algeria is a Russia ally and currently buys fighter jets from Russia and supports it in the war with Ukraine, so how the Italy/Algeria agreement will work is anyone’s guess.

Military security
Military security for the EU is still going to come from NATO (i.e US led military policy). It could be argued that the Ukraine war is not in the EU’s interests, in particular Germany, but they have to kowtow to NATO/US driven policy because the EU never could agree on building an army of its own to defend itself, and hence self- determination in terms of defence policy. There is no other real option and so the EU will very likely continue to arm Ukraine and stretch out the war if that is what US policy dictates, even when negotiations to end it might be possible. The order books of most armament / defence companies will be very full for some years to come.

Food security
This was an area which provoked more discussion from the fund managers. In particular how the West will need to develop to ensure that food is still delivered to our supermarkets.

A good example of a company that is innovating in the area of food security is John Deere. The agricultural machinery and tractor marker. They have already developed a fleet of unmanned vehicles which can plant, monitor and harvest. These machines are no longer human driven one-purpose vehicles. They are machines with embedded computers, checking soil temperature and microbe levels, adding fertilizer when needed and checking weather signals, determining when to plant, when to harvest etc, and all without any human intervention in the field. The biggest customers will ultimately be the biggest producers, namely the US, Brazil and Ukraine (you may be surprised about Ukraine being in the list, but a benefit of war for large industries is that they can take advantage of disaster capitalism. Large US and International agricultural companies have been able to take advantage of new laws liberalizing the sale of agricultural land in Ukraine. Previously, Ukrainian small farmers were protected and forbidden to sell their land to large agro interests. Now, big companies are moving in to take charge of Ukrainian land. On one hand the farms will benefit from economies of scale, but the small-scale sustainable farming model will struggle to survive).

Agricultural and food production will be a big investment theme in the coming years!

So, with all these themes in mind, the broad outlook for the future and investment, according to Evelyn Partners, will be determined by 4 main Megatrends.

• SHIFTING DEMOGRAPHICS
• CHANGING WORLD ORDER
• BUMPY ENERGY TRANSITION
• TECHNOLOGICAL REVOLUTION

I won’t bore you with details in each area, but here are some points around the subjects discussed:

SHIFTING DEMOGRAPHICS. Ageing populations, more opportunity for pharmaceutical companies and drug development, more use of online doctoring and diagnosis, roll out of robots in our hospitals and clinics (robot cleaners, robot secretaries, robot surgeons, robot beds moving freely from ward to surgery room without the need for people). It’s all coming and given that 80 out of every 100 people will be over the age of 65 by 2050 in Japan, and around 60 in 100 in Europe, it is difficult to see how our world will survive without increased development and innovation in the healthcare sector.

CHANGING WORLD ORDER. The US/China decoupling will continue and accelerate. Instead of globalisation, think ‘slowbalisation’. The war in Ukraine has driven a wedge between those, already weak, alliances. Russia, Iran, China, Saudi Arabia, India, (the BRICs+) and other countries are coming together to find ways to subjugate control over their regions and wrest control away from the US, especially in the use of payment systems in USD. The US will, of course, fight its corner, just look at its policies around the semi-conductor market which you will have read in my last E-zine ( ) What investment opportunities this will throw up is anyone’s guess, but the exportation of the US model of capitalism around the world, will slow and this could throw up new investment opportunities in new companies further afield.

BUMPY ENERGY TRANSITION. We are only going one way with energy policy, and that is more towards sustainable energy production; but, if you think we will be switching off the oil taps and shutting down the coal fields overnight, as many Eco groups would wish for, you will be very disappointed. (I will place a bet that in 20 years we are still using the same amount of oil as we are today, but that’s just a personal hunch. A lot of electric cars are going to need a lot of electrical energy from somewhere). A transition will happen but technology and storage of energy will need to improve, solar and wind power will just not make up our energy needs.

In addition, a little known point about the resources required for a sustainable energy transition: China dominates!

So, whilst the US imposes sanctions on China in the access to and production of semi conductors, China could retaliate with sanctions on the west regarding access to the materials needed to transition to our green economies. Yet, China needs to import 70% of its food from abroad as it is not able to produce enough to feed its population. The US is the biggest producer of agricultural products. So, from a bumpy energy transition we revert back to point 2, The Changing World Order. It will be an interesting time ahead for global politics.

TECHNOLOGICAL REVOLUTION. We have already seen so much revolution in this space since the year of my birth 1974 but the future will accelerate things even more. From next level automation in industry and daily life, 3D and 4D printing will become more the norm (I went to a fayre in Villa Borghese in Rome last Sunday and one stall was 3D printing some items on a wooden work bench) with the launch of 5G we will become even more interconnected, more reliance will be placed on cloud computing and storage of data, next-gen quantum computers, AI and controlled devices, cryptocurrencies, wearable devices…the list goes on.

And if that is not enough to scare you then check out the company recently purchased by Microsoft called ChatGPT. This is a learning AI application which can do just about whatever you want it to do. Think of it as an Alexa x 1milllion! It can provide you with any amount of information you need, ‘write newsletters’ – you just give it a subject and in seconds it will provide you with a written text on a certain subject, do maths, solve problems, write a website for you, some students are even using it to write essays at University. The scary thing is that it learns as it goes. Anyway, you don’t have to worry about my E-zine being written by ChatGPT; I don’t even think the best learned AI could imitate my crazy style.

And more food for thought
Rob Gordon (US citizen) from Dreihaus/VAM Investment funds thinks that Trump will win the Republican nomination again. But he thinks that Jo Biden, at 81 years of age when the election comes around, will win against Trump again.

David Coombes from Rathbones Inv Managers thinks that GBP will drift back into the range of 1.25/1.30 against the Euro within the next 3 to 4 years .

Lessons learned from this conference

This might sound like a sales pitch: something I try to avoid in this E-zines as they are written for information purposes only. However, whilst listening to our various speakers I became overwhelmed at just how complicated the world is becoming from a political, technological, economic and investment perspective. We can no longer ‘pick a stock’ and expect it will do well. Thought and research needs to be behind investment decisions. It’s easy to think that we can invest ourselves, be successful and then years like 2022 come along and there is nowhere to hide: stocks and bonds prices fall together, and then the only safe space is in some highly volatile areas of the commodity sector, which you wouldn’t normally play in. We need professional help and guidance to help us navigate these choppy waters head, but when there are so many changes afoot, it throws up the best investment opportunities. The investment managers and companies we use and talk to regularly are on top of these trends and can help you, our client, to get the best from your investments. The lesson learned from this conference: you are in good hands.

As always, if you have any questions about this E-zine or have any general financial planning concerns as a resident in Italy, or someone who is thinking of moving to Italy, then don’t hesitate to get in touch on email: gareth.horsfall@spectrum-ifa.com or on cell: +39 3336492356

So, it is with this in mind that I thought I would write something nice and Christmassy for you: Why it’s unlikely that China will invade Taiwan…..at least for the foreseeable future! What more could put our minds at rest this Christmas than a rational argument as to why China is unlikely to start another war in 2023 just when we have plenty of others to contend with.

OK, it doesn’t necessarily have a festive feel to it, I understand that, but I bought a book this year written by Louis-Vincent Gave who is one part of a company called Gavekal. They provide very high level statistical, political and economic analysis to businesses and governments around the world. They are quite famous in this area and their work is exceptional. The book is entitled ‘Avoiding the Punch: Investing in uncertain times‘. In it there is a section on exactly why China is unlikely to invade Taiwan, at least for now. Since this was a concern expressed by more than just a few clients this year (presumably given our Western media tendency to constantly be baiting us into believing that it is imminent),I thought it might make a nice E-zine to finish the year and give us some hope for 2023. As they say, knowledge is power…and I would add less angst!!! :0)

It’s all about semiconductors.
Yes, the whole business of China invading Taiwan and the USA threatening to protect the island, whatever it takes, is all about semiconductors but if, like me, you are wondering exactly what we use semiconductors for, the following should give you a quick answer:

Semiconductors are an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications.

In essence, they are now used in almost everything that we ‘need’ to run our daily lives. From your phone to computer to thermostat, clocks, TV’s, machinery in factories, the MRI machine at the hospital, wind turbines etc. We can’t live without them. So, for any nation state it is important to have access to the companies, and countries, that monopolise the manufacture of them.

Control of the market in chip making has for a long time been monopolised by the USA through the tech firm Intel. But, in July 2020, the US were taken aback when Taiwan Semiconductor Manufacturing Co (TSMC) announced that they had technologically leapfrogged Intel in the business of high-end chip making.

(The USA started a trade war with China over semiconductors in 2017/18 when they placed restrictions on the export of semiconductors to Huawei, ZTE and other Chinese companies which brought those companies to their knees).

Strangely, what might speed this process along (and a potential invasion of Taiwan) is America’s continued actions to strangle China out of the semiconductor’s market.  On 7th October 2022 the USA imposed new sanctions on China by restricting the supply of equipment and tools to any manufacturer of semiconductors in China.  Not only, but also any US person, green card holders and foreign national of the US are prevented from going and working in a Chinese semiconductor production facility without first obtaining a licence, therefore making it virtually impossible to do so.  (Strangling the ability for China to hire the talent to train their own engineers)

You might think this would slow China down, but it’s quite the opposite because as a result of these sanctions the Chinese government have now placed an even greater importance on the development of science and innovation in their economy.  The US sanctions have had the adverse effect of aligning Chinese business interests with the Chinese government itself.  Both are now convinced that they cannot rely on anyone but themselves and certainly must not be dependent on US (and its allies) sourced goods/materials.   Hence the Chinese government and Chinese businesses are collaborating to build domestic alternatives to imported technologies. 

The question of building a domestic semiconductor sector in China has moved from being a business decision to a matter of national security, and for businesses a matter of survival.  

So, you might be thinking what is the time line for China becoming self-sufficient in the manufacturing and technology surrounding its own domestic market for semiconductors?  The answer:  around 2030 according to various sources.  So, a Taiwan invasion, might be a few years off yet!  All the sabre rattling between the US and China is likely to be just that for some time to come. 

I prefer to start an article on a positive note but unfortunately have to start with a sad event that happened recently in our lives. My wife’s grandmother died on the 8th October at the ripe old age of 94. She was very ill in the end and as it has been said many a time for people in her condition, that it was a blessing in the end. However, it is obviously a sad time for the family. I will remember her fondly. I knew her for 18 years and she was a very Southern Italian ‘Mamma’ type. Always keen for you to take more food from the table (resulting in my first few years in Italy coinciding with a 5 kg weight gain – I can’t blame it on her – my ‘golosità for good food was more to blame!). She was also a great support for my wife and I when my son was born and came to live with us for a period to help out in the house and provide much needed help at a tough time for all new parents. I also had a few run-in’s with her, but nothing serious. All in the name of a good healthy relationship. As I said, she will be sorely missed.

But as always, when a family member dies we are left with a number of bureaucratic and administrative hurdles which need to be dealt with. In Nonna’s case, there are various bank accounts, US social security and ‘succession’ issues which now have to be worked through. Hopefully it won’t be too complicated as Nonna had very little left in her name when she died.

This is not always the case and in fact my experience is that the deceased tend to leave quite a lot more bureaucratic matters than perhaps they would have wanted to, and certainly than the remaining family members would have wished for. But, we can make some preparations, in life, for the ‘inevitable’ and leave the best parting ‘gift’ possible for the remaining family members.

The following article is one which I wrote first back in April 2018 (https://spectrum-ifa.com/preparing-the-folder/) and since then I have shared it again on a few occasions. It seems appropriate to share it again with you now, especially since we are 4 years on since that date, we have all lived through Covid and faced with some interesting times ahead, so it would seem. (I have also made some updates to the original article to take account of changing technological developments). I hope you find it useful.

This type of article is never an easy one to write. Ensuring that your papers are in order in the event of your sudden death is incredibly important when living in another country. It will provide you with peace of mind that your loved ones will not have too much difficulty in administering your estate and your family will be eternally thankful that you did it for them.

The big problem is that as ‘stranieri’ we often have documents spread across multiple locations. The office, a house in another country, with family members and in that old box that no-one dares look in – papers that look like they came from the Victorian age in alot of cases. But whose job will it be to track all those down?

The purpose of this article is to outline a proven way of organizing ‘THE’ folder to minimise problems in the event of your death.

So what is ‘THE’ folder?
It is a single file (digital or physical – preferably both) where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that you’re no longer around to help. It is really important to have it in place especially where one family member takes the lead with the family finances (typically one member of the household tends to dominate over money matters, but with the advent of shared technologies it is becoming more common to find that 2 or more family members are involved in the household finances). This includes paying bills, managing accounts and storing documents.

Is it worth the effort?
Yes, yes yes and yes. A time of loss can be stressful enough without having to try and piece together the deceased’s financial affairs. This can be a really difficult time. Don’t underestimate the kind of favour you will be doing to the executors of your estate if you have one place with all your financial and legal documents in an easy to understand format. You may not be around to hear their appreciation, but I can tell you, from experience, it will be eternal.

However, preparing ‘THE’ folder is much more than avoiding stress; if you leave behind an administrative nightmare you could delay access to inheritors’ access to funds and potentially cost a small fortune in legal fees.

According to an Independent financial adviser website in the UK (unbiased.co.uk – what is the probate process) the average time for probate to get settled is between 9 months and a year. In the USA the average time is also about a year. I also spoke to someone recently who confirmed that in their case it took over 1 year to deal with their parents’ estate.

So which is best…..physical or digital?
This comes down to personal preference, but I would always recommend both. Whether you choose to have a digital folder with all these documents in or not, you should at the very least have your documents scanned in case of fire or theft, and quite often companies will now accept scanned copies of documents instead of hard copies, if they can be certified or electronically signed.

With a digital file you can give access to a trusted individual who can access it in the event of your death. (Remember they will also get access during your life, so ensure they are a ‘trusted’ individual) A google file, for example, can be updated over time and which you and a family member have shared access to. This file can then be stored on your main computer, in the cloud or on an external hard drive. You can use a physical folder to keep all the same information together.

For what it’s worth, I decided to do both when building mine because my wife prefers paper and so is happier with hard copies of everything. I prefer digital. I have also shared the digital folder with some trusted family members.

So what should go in ‘THE’ folder?

Birth, marriage and divorce

• Personal birth certificate
• Marriage licence
• Divorce papers
• Birth certificate / adoption papers for minor children

Life insurance and retirement

• Life insurance policy documents, including beneficiary nomination forms.
• Details of any employer death in service benefits
• Personal pension documents (including any beneficiary nomination forms)
• Occupational / Final Salary pension details
• Annuity documents
• Details of any entitlements to state pensions

Bank accounts

• List of bank account numbers with account numbers, login details and passwords
• Details of any credit cards
• Details of any safety deposit boxes

(see my comments on passwords below)

Assets

• Property, land and cemetery deeds
• Timeshare ownership
• Proof of loans made
• Vehicle ownership documents
• Stock certificates, brokerage accounts, investment platform details and online investment account details
• Details of holding of premium bonds, government bonds and investment bonds
• Partnership and corporate operating/ownership agreements ( incl offshore companies)

The issue of which documents to throw away and which to keep is a common one. I always suggesting keeping everything if you are unsure
and then once a year with your financial adviser or legal professional have a clear out and keep the file tidy.

Liabilities

• Mortgage details
• Proof of debts owned

Details of gifts

• Dates and amounts / values (potentially helpful when calculating inheritance tax liabilities

(A word of warning here! If your estate is likely to be subject to Italian succession law on your death. [This might mean that you have lived in Italy for 10 yrs + before your death, as an example], then any gifts which have not been fully notarised may still make part of your overall estate and be subject to the provisions of forced Italian succession law. i.e the donee may have to give the money back and it be distributed between the rightful heirs according to Italian law, ‘should’ the beneficiaries request the funds.

Notarising gifts would normally need to be done where the benefits outweigh the costs of the action itself.

(Bear in mind that you will need to pay the notary costs of approx 5% on the value of the gift, plus any taxes and one off fees for the gift)

Income sources

• Making a list of all your sources of income, especially the ones which your family may not know about

Employer details

• A copy of your most recent tax return or accounts

Monthly expenses (so they can be continued after death or accounts closed)

• Utilities
• Insurance
• Rent / mortgage
• Loans
• Subscriptions / membership details

Email and social media account details

Essentials

• Wills / Testaments + details of the legal firm that helped create it, if relevant
• Instruction letter
• Trust documents
• Burial / Cremation wishes
• A copy of a living will, should you have ‘end of life’ instructions that you want medical professionals to be aware of should you be unable to communicate these due to severe illness or disability

Contact details

• List of names and contacts numbers for: financial adviser, doctor, lawyer/solicitor, accountant, insurance broker etc

How often should ‘THE’ folder be reviewed?
Firstly, it is sensible to note the date that it was last reviewed so that anyone using it has an idea of how up-to-date the details are.

Going forward, reviewing the file on an annual basis should be sufficient.

Online passwords
The issue of passwords has become infinitely more complicated in recent years because everything we access these days requires a password and it would be a full time job to document these and then keep them updated every time that one needed changing. There are now various Password Manager applications that you can buy to securely hold all your passwords. You can find some of the best HERE. However, if you are reluctant to use technology, which let’s face it could be hacked, then you are left needing to log all those passwords the old way…..writing them down!

And finally…
Be sure to tell someone about it. There is little point going to the effort of creating such a folder if know one knows of its existence or where to find it.

If you need help with putting your folder together or are unsure where to start then you can contact me for help on
gareth.horsfall@spectrum-ifa.com
or on my cell at +39 333 649 2356