Certainty and Predictability for your Investments
By Jonathan Goodman
This article is published on: 1st December 2014
The PruFund range of funds are designed to spread investment risk by investing in a range of different assets, such as company shares, fixed interest bonds, cash and property – from both the UK and abroad.
Prufunds are managed by Prudential Portfolio Management Group Ltd (PMG), dedicated multi-asset fund managers with a team of over 30 economists, investment strategists, analysts and mathematicians, specialising in different areas of the investment world.
How PMG Manage Your Money
PMG believes that investment success should be built on clear philosophy, demonstrable processes and a team based approach. They believe that this will not only deliver superior returns, but also provide greater continuity and dependability.
They believe in the importance of asset allocation and the key role that multi-asset funds play as an investment solution for many investors. They also believe that asset allocation is a specialist skill which should, to avoid conflicts of interest, exist separately from the other investment activities in any fund.
PMG takes many factors into consideration when managing your money.
They focus on:
- Minimising reliance on economic forecasting
- Looking for irrational behaviour
- Taking a long-term approach
- Fund management
- Asset-liability management
PruFund Growth Providing Smoothed Returns
PruFunds offer a unique smoothing process designed to help protect an investment from some of the daily ups and downs associated with direct investments, providing less volatile and more stable returns over the medium to long-term, in line with each fund’s objective and allowable equity parameters.
The Prudential PruFund smoothing process has two elements:
- Expected Growth Rates (EGR) applicable to each of the funds, normally applied on a daily basis. The EGR is the annualised rate that is normally used to increase the value of your unit price each day, and they are set quarterly by the Prudential Directors having regard to the expected long-term investment return on the underlying assets of the funds.
- Upwards and downwards pre-defined unit price adjustments are applied in line with fully transparent process requirements.
For more information on PMG and the PruFund range of funds or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.
Should I stay or should I go?
By Spectrum IFA
This article is published on: 25th November 2014
Quite frankly I’ve been struggling to think of what to write about this week, but then it suddenly struck me that there has been a recurring theme in a number of my client meetings recently. That theme put simply is, ‘Where will I end my days; in France, or in England?’ This isn’t a popular topic of conversation amongst vibrant, exuberant, middle aged expatriates, but we’re not the only people here. We are in the company of many seasoned expats who’ve been here longer than we have; seen it all; done it before we did, and are feeling a bit tired. Many of them are ‘going home’.
We should pay a lot of attention to this group, because we are going to inherit their shoes. We need to learn from their experiences, and take the opportunity to plan for the time when we will experience what they are going through.
Five years ago, when writing on a similar theme, I think I proffered the theory of the three ‘D’s as the principal reason to return to the UK: death, divorce and debt. I still think that they are valid causes, but I now think that there are many subtle variations to be taken into account, and the biggest addition to the equation is age. Age changes your perceptions; often for the better, but age often also brings insecurity and loneliness. Add to that illness, and maybe bereavement, and you have a powerful reason to examine your reasons to continue to live hundreds of miles away from a family that (hopefully) continually worries about you. In short, no matter how much we pooh-pooh the idea now, the chances are that we may eventually end up being cared for in our final years in the UK rather than in France.
OK, that’s enough tugging at the heartstrings. Why is a financial adviser (yours truly) concerned about where you live, and where you may live in future? The answer is currency, specifically Sterling and Euro. In a previous existence, I was responsible for giving advice to corporate and personal clients of a major High St bank regarding exposure to foreign exchange risk. The basic advice was simple – identify and eliminate F/X risk wherever you can. F/X risk is for foreign exchange dealers; it is gambling. Don’t do it unless you know what you’re doing, and even if you do, prepare to lose money.
On a basic level, eliminating exchange rate risk is easy. Faced with a couple in their 50’s relocating to France with a healthy investment pot behind them and good pensions to support them in the future, I will always ask ‘Where do you intend to spend the rest of your days?’ The answer is usually an enthusiastic ‘France, of course. We have no intention of going back to the UK. In fact wild horses wouldn’t drag us back.’ I know this for a fact – I’ve said it myself.
The foreign exchange solution is simple. Eliminate your risk. Convert your investment funds to Euro (invest in a Euro assurance vie). Convert your pension funds to Euro (QROPS your pension and invest in Euro). Job done! Client happy, for now! But what happens 25 years later, when god knows what economic and political shenanigans have transpired, and the exchange rate is now three Euro to the pound and the surviving spouse wants to ‘go home’?
As it happens, I will no longer be his or her financial adviser. The chances are that I will have popped my clogs years ago, but If not, I will most likely be supping half a pint of mild in a warm corner of a pub somewhere in the cheapest part of the UK to live in. (In fact that is poetic licence, as I know full well that I’d probably be being spoiled rotten in my granddad flat in one of my sons’ houses). To draw this melancholy tale to a close, I’d just like to round up by saying that things are rarely as simple and straightforward as they seem. My job is not always to take what you tell me at face value. I know people who’ve been here longer than you. My advice may well be ‘hedge your bets, spread your risk’. I will give you the best possible investment tools for your money and pensions, but I might just surprise you with my recommendation as to what currency those funds should be invested in.
Do You Fear For Your Financial Future?
By Jonathan Goodman
This article is published on: 24th November 2014
How do you choose your investments when you are an expatriate?
International investors face many choices, and taking personalised advice can be vital, especially in the current economic climate. With high inflation and record low interest rates, volatility, complexity, uncertainty and a huge amount of change sum up the current state of the global economy.
Picking the right investment opportunity with maximum return objectives can be a risky and complicated process, and mapping a financial strategy that enables you to better navigate these turbulent financial times is a must.
The International Prudence Bond (Spain)
The International Prudence Bond (Spain) is a medium to long term bond designed with the needs of international investors in mind. Tailored to each market and sold via professional Independent Financial Advisers, it allows access to a range of unit-linked investment funds with the aim of increasing the value of the money invested over the medium to long term.
The PruFund Range of Funds includes guarantee options where the choice of guarantee can be linked to the anticipated year of retirement. The funds utilise the asset allocation expertise of the Portfolio Management Group and offer a truly global investment perspective.
Benefits
- Funds denominated in euros, sterling and US dollars
- A minimum investment of only £20,000, €25,000 or $35,000
- A minimum allocation rate of 100%
- No set investment terms
- Top-up facility from £15,000, €20,000 or $25,000
- Cumulative allocate rate on top-ups
- Flexible withdrawal options so clients can access funds when it suits them
- PruFund Protected Funds guarantee
How Spectrum Can Help
Spectrum’s role is to provide Insurance Intermediation advice and to assist clients in their choice of Investment Management Institution. Our Financial Advisors can help you decide which investment opportunity is right for you.
For more information or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.
What New Year’s Resolution can I make for 2015?
By Amanda Johnson
This article is published on: 18th November 2014
As 2014 draws to an end and we look forward to spending the festive period with family and friends, there is one New Year’s resolution that you can make which will benefit both you and your family and that is to make sure that you review your finances in 2015.
2014 has seen the UK Government make changes to pensions, the French Government levy Social Charges on areas not previously charged and a joint agreement on Wills which is due to come into effect during 2015. On top of this, there is constant media concentration on whether the UK is better off in or out of the EU. Bearing all of this in mind, it is worth taking advantage of a free financial review to ensure your savings, investments & pensions are working for you in the most tax-efficient manner and that they match your goals and aspirations for the future.
A free financial review will include the following areas:
- Investments – to ensure they are as tax efficient as possible
- Inheritance tax – to minimise the amount of inheritance tax imposed and increase your say in where you money goes after you die.
- Pension planning – putting you in better control of planning for your future
Whether it has been a while since you last looked at your finances or you are unaware of how changes both in the UK & France could affect you, a decision to take a free financial review could be one of the best New Year’s resolutions you can make.
Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me on the contacts below and I will be glad to help you. We do not charge for reviews, reports or any recommendations we provide.
Have a Merry Christmas and a very Happy New Year.
With care YOU prosper
By Spectrum IFA
This article is published on: 3rd October 2014
I’m getting an increasing number of calls from expats based here in France who are very worried and sometimes completely dismayed by the financial advice they have received elsewhere. Worried by the fact that their investments have decreased in value, and dismayed when they realise that they cannot even withdraw their money or cancel their polices, as parts of the investment are now in funds that have been suspended (that is no-one can either buy them or sell them).
Now I’m not looking to get into any legal wrangle with the company concerned, and it is only one company, but I think this is a suitable time to flag up what is happening in the hope that some of you will avoid falling into this situation in future. I will also add that I am prepared to ‘adopt’ clients in this situation, in order to ensure as fruitful an outcome for the client as possible.
What is happening is not illegal, but it could certainly be regarded as unethical. The clients concerned have either unwittingly or deliberately chosen to put their faith in an adviser who is not regulated in France. This is not illegal, because we are all part of the wonderful organisation that is Europe, and that frees Europeans to ply their trade in other countries within the Euro block. That freedom of trade is not, however, backed up by a freedom of regulation. If you live in France and have cause to complain about advice you have received, the French regulator will show no interest in your case if the adviser is not in his jurisdiction. You will be guided to seek help from the regulator in the country where the adviser is based, and hopefully regulated. Good luck.
There are two main problems that I am seeing at present. The first relates to the quality of funds in which the clients are invested. At The Spectrum IFA Group we have an investment team that spend many hours evaluating hundreds, if not thousands, of funds and produce a recommended list for clients to invest in. There are of course hundreds of thousands of funds available, and we can’t look at them all, so we do allow our clients to choose their own investments if they wish, thereby ignoring our recommendations. All we ask, in this instance, is that you sign a form to accept that the investment was your choice. There are many good funds out there, but there are also some bad ones. All of the (now) clients who have suffered in this way have been put into a single asset class which has had a disastrous time in the past eighteen months. Needless to say, none of the funds involved are on our recommended list.
The second issue centres on a specific type of investment called a structured note. These are often complex derivative products, and the type of note that I am now seeing regularly, certainly falls into that category. So much so, that the product notes that accompany the investment clearly state that this is only for seasoned professional investors, who are willing to accept the potential for serious loss of capital. None of the people I’m taking to fall into that category. The structured note is an interesting concept, and not all of them are overly complicated. You may have seen me write about such a note in the past, and you may have seen such a product at our seminars, offering an excellent 12 month fixed deposit rate alongside a five year deposit where the reward is linked to the performance of the stock exchange index. Not exactly ‘Janet and John’ stuff, but I like to think that I can explain it completely to my clients. And I don’t use it unless I’m completely sure that the client also understands it. I don’t understand the notes I’m seeing recently, and I’m sure the client doesn’t either.
So why sell them? Simply because the companies that make up these products factor in an element of commission to the brokerage that sells the note to the end user, the client. Now I don’t know how closely you look at small print when you read articles from me or Daphne, but if you look at the bottom of this article you will see reference to our client charter at spectrum-ifa.com/spectrum-ifa-client-charter
If you have read the charter, or are just about to do so, you will see or have seen this:
Some investment funds or products within an Insurance policy may generate an additional initial commission. If this is the case, we undertake to rebate this commission to you (in full) by way of increased allocation.
Strangely (not), none of the new clients I’m speaking to seem to have benefitted from this principle. It seems clear to me that funds are being pedalled for the advisers benefit, not the clients. This is a very dangerous practice.
I must stress that no laws have been broken here, and no fraud has taken place. I sell a simple structured note, but I pass on the commission. I even have clients who are invested in the struggling asset class that we have been talking about, but only by their own choice, and for many months now that has been contra to our advice.
Be safe – use locally produced goods, and that includes financial advice.
If you have any questions on this, or any other subject, please don’t hesitate to contact me.
Investments and investment risk
By Spectrum IFA
This article is published on: 16th September 2014
As I am writing this article, the hot topic of the moment is of course the Scottish Referendum on Independence. The polls are swinging from one direction to the other, but only by a small margin between the ‘yes’ and the ‘no’ camps. The final result will most likely be very close.
Even the Queen has uncharacteristically got a little involved in the politics, by expressing her hope to a well-wisher in Scotland that people will think very carefully about the future. Whatever the result of the referendum, it is clear that the United Kingdom will change.
What will happen to investment markets if Scotland votes yes? Well the wider world outside of Scotland seems to have woken up to what is actually happening in Scotland. Sterling has weakened amidst the uncertainty of the outcome, but beyond this, I am not bold enough to forecast any further effect on markets. Like any other investment risk, it needs to be managed.
On this subject, The Spectrum IFA Group has produced a Guide to Investment Risk. This has been written in plain, no nonsense, down-to-earth English and covers a range of assets classes and strategies. The individual articles included in the Guide can be found on our website at: spectrum-ifa.com/spectrums-guide-to-investment-risk/
Alternatively, if you would like to receive a full copy of this Guide, please contact me.
We are also taking bookings for our Autumn client seminar – “Le Tour de Finance – Bringing Experts to Expats”. Our industry experts will be presenting updates and outlooks on a broad range of subjects, including:
- Financial Markets
- Assurance Vie
- Pensions/QROPS
- Structured Investments
- French Tax issues
- Currency Exchange
Places for our seminars are limited and must be reserved, in advance. So if you would like to attend the event, please contact me as soon as possible. The date for the local seminar is
Friday, 10th October 2014 at the Domaine Gayda, 11300 Brugairolles.
Alternatively, if you are reading this further afield, you may be interested in attending one of our other events:
- Wednesday, 8th October – St Endréol, 83920, La Motte, the Var.
- Thursday, 9th October – Chateau La Coste, 13610, Le Puy-Sainte-Réparade.
For full details of all venues can be found on our website at spectrum-ifa.com/seminars
If you cannot attend one of our seminars and you would anyway like to have a confidential discussion about any aspect of financial and/or inheritance planning, please contact me either by e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.
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 at spectrum-ifa.com/spectrum-ifa-client-charter
Buying property – the alternative options
By Peter Brooke
This article is published on: 10th September 2014
Having a real estate investment is often an excellent decision for any investor, but many don’t have the ability to own a complete house or apartment. They may not have enough capital to buy the property outright, fund a deposit or receive enough income to be able to afford a loan.
For crew, it also can be difficult to get a mortgage due to the offshore nature of their income, though it is possible in some countries. So what other options might there be for having invested capital in the various property markets around the world?
Collective Investment Schemes:
There are many mutual funds that invest into bricks and mortar. Most of these buy into commercial property in developed markets, such as the UK or Europe. They are managed by professional managers and diversify across several commercial sectors, such as office buildings, retail stores (split between “out-of-town” and “high street”) and industrial complexes. They also always hold a portion of the portfolio in cash and property equities, i.e., the quoted shares of building contractors and the like. The cash and shares are to maintain liquidity so funds are available to investors who need to make a withdrawal without selling huge office blocks. The legal structure of property funds is very important to watch. During the financial crisis, several offshore funds (domiciled in the likes of the BVI and Cayman Islands) suspended and have since begun to liquidate, losing many investors their money; some are still suspended. At the same time, there were no UK authorized property funds that suspended.
Fractional ownership:
Although this term has broadened in the last decade, it basically means owning parts of a property. It tends to be most popular in the residential sector and can cover the entire range of property, from distressed sales and repossessions to luxury property clubs. You’re the legal owner of a share in the property; therefore, your name will appear on the deed and you share in the property’s costs and profits and are legally liable. One unique system available is to own “bricks” of property. This is when a company buys real estate at a discount, renovates if necessary and then sells “bricks” for a proportional price. This system allows an investor to own many bricks in many different properties, thereby hugely diversifying their property exposure. Their share of the rent is paid to them (after any management costs), and they can sell their bricks on a specially designed marketplace. An example of a market maker in this sector would be ownbrix.com.
When buying real estate, it’s wise to understand all the legal and tax implications of owning it, as it’s physically located in a jurisdiction and liable to the taxes in that location. If in any doubt, get advice.
How to protect yourself in uncertain times
By Spectrum IFA
This article is published on: 15th August 2014
Wealthy individuals have a lot more in common than just their wealth. Ambition, skill, patience, consistency and a strategic game plan are all vital to ensure success. Keeping an eye on the end goal and never giving up have been key to reaching greater heights.
Only a minority of the population become extremely rich, as the likes of Warren Buffet, Richard Branson or Paul Getty, but this does not mean that we can’t enjoy a comfortable lifestyle with luxuries and freedom.
World stock market performances over the last 60 years reveal that the enduring trend is up and it is evident that any sharp downward movements often coincided with world calamities. Even with the peaks and valleys, stock market performance over time still yields inflation-beating returns for those who remain loyal.
Despite this, investors are concerned about the fluctuating Gold price and negative impact of the mining and metal strikes in South Africa and the developing Russian/Ukraine crisis which is already a cause for alarm – Russia is now talking of disallowing air travel over its skies to the East thus hampering tourism, the lifeblood for many of the Asian Tiger’s economies.
Hearing the words ‘hang in there’ is not enough reassurance for those trying to save for retirement or financial independence. This in turn affects investors who feel the pinch whether it be through investment of stocks directly through their own portfolio comprising retirement annuities, pension plans, QROPS, unit trusts or any other long term investment products which are exposed to the share market.
The critical questions is …
“How you manage your income and investments to shield against market volatility?”
Well, there are basically two main strategies that need to be developed in order to provide an effective buffer against economic turmoil.
The first is effective management of income and the second is a well-structured investment strategy.
Effective Money Management
It is little wonder that rising interest rates cause such widespread concern when so many people and businesses are exposed to excessive debt. If you take an average small- to medium-size business owner, they will probably have an overdraft, two car leases, a home mortgage and perhaps credit card debt. In anyone’s book, this results in a big chunk of money to repay before the school fees have been paid or the life policy has been covered.
The first step to minimising the effects in uncertain economic times is to reduce debt. If you don’t have excessive debt, the impact of rising interest rates on your pocket will be negligible and it’s worth bearing in mind that if you have cash reserves, the higher rate will benefit you greatly.
Well-structured investment strategy
The consensus amongst investment experts is to advise individuals to construct an investment portfolio in order to take advantage of long term trends. If the long term structure of an investment portfolio is healthy, short term storms can be weathered.
The first defence against any volatility in the markets is diversification. What this means, is that investors need to ensure that their investment portfolio is structured in such a way that they have investments in different asset classes such as cash, bonds, property and equities.
Uncertainty and volatility are intrinsic to investment markets. For this reason, investment should be viewed as simply a means to having enough money to live the lifestyle that you would like to live.
An investment portfolio should remain unchanged during times of volatility, unless the factors upon which the construction process was based have changed.
Investors should not change a long term game plan based on short term volatility. Attempting to time the market based on short term movements only increases portfolio risk.
The best way to protect yourself from market volatility is to first reduce your risk, which can be achieved by reducing debt. By doing this, you will have a lot less to worry about if inflation forces interest rates up.
The next step is to ensure that your investment strategy has a long term view and a financial planner will be your best resource when setting up a long term portfolio.
If you realise from the above the importance of seeking proper professional financial advice involving risk classification and correct diversification, why not give me a call in order to facilitate a meeting where we can do this.
Precious metals and gold
By Spectrum IFA
This article is published on: 30th July 2014
Which of these has more value? Is there something better?
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When it comes to hedging (protecting) against dollar debasement, few things have performed as well as gold. Having gold or unit trust gold funds could be said to be “preparing for the worst.”
Following the fairly recent global financial crisis, governments have adopted expansionary monetary policies by cutting interest rates and increasing the amount of money in circulation to keep their banks and indebted borrowers afloat. Even though the historical case for gold is strong and the price goes up, the raw supply and demand case for platinum and palladium might be even stronger.
Russia and South Africa currently hold 80% of the world’s platinum and palladium reserves and both are struggling to maintain output. In fact, global supply is becoming increasingly less as production declines in these two politically volatile countries. Strikes in South Africa have resulted in the loss of 550,000 ounces (14,174,761 grams) worth of production in the first quarter of this year. And the tensions along the Ukraine border threaten to trigger huge disruption in markets in Russia.
This instability in South Africa and Russia all but ensures that the platinum and palladium markets will see yet another supply deficit in 2014.
Regardless, demand continues to increase and is unlikely to come down soon. Primarily, these metals are used in catalytic converters, the mechanism in your car’s engine that helps reduce noxious gas output and helps to keep the air cleaner. As more and more cars hit the roads – particularly in developing nations – the demand for cleaner air looks set only to rise.
Do you have gold shares in your investment portfolio? Or Uranium or Platinum? Now is the time to look at exactly what assets make up your portfolio. After all, I am sure you want to cover all bases.
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“The best time to invest is when you have money.
This is because history suggests it is not timing which matters, but time”
Sir John Templeton
As safe as money in the bank
By Spectrum IFA
This article is published on: 24th July 2014
More than a fifth of UK citizens think that the best long-term investment is putting their money in the bank. This is the rather discouraging result of a July survey by Bankrate.
One of its questions was, “For money you wouldn’t need for more than 5 years, which one of the following do you think would be the best way to invest your money?”
- 26% – cash
- 23% – real estate
- 16% – precious metals
- 14% – stock market
- 8% – bonds
That thumping sound you hear is me banging my head on my desk!!
I assume those who opted for cash did so because keeping money in the bank seemed to be the safest choice.
However, for long-term investing, that safety is an illusion. The best and safest place to put your nest egg for the future is not in the bank, but in a well-diversified portfolio with a variety of asset classes. And here’s why:
Savings accounts and CDs are safe places to store relatively small amounts of cash that you expect to need within the next few months. The funds are protected by insurance. You know exactly where your money is, and you can get your hands on it anytime you want.
This short-term safety does not make the bank a good place for the money you will need for retirement or for other needs five years or so into the future. It may seem like safe investing because the amount in your account never goes down. You’re always earning interest. Yet, over time, that interest isn’t enough to keep pace with inflation.
The purchasing power of your money decreases, which means you’re actually losing money. It just doesn’t feel like a loss because you don’t see the loss in its value.
In contrast, the stock market fluctuates. The media constantly reports that it is “up” or “down” as if those day-to-day numbers actually matter. This fosters a perception that investing in the stock market is risky.
Combine that with the scarcity of education about finances and economics, and it’s no wonder that so many people are actually afraid of the stock market and view investing almost as a form of gambling.
Wise long-term investing in the stock market is anything but gambling. Instead of trying to buy and sell a few stocks as their prices go up and down, wise investors neutralize the impact of market fluctuations by owning a vast assortment of assets.
This is accomplished with a two-part strategy.
The first is to invest in mutual funds rather than individual stocks.
The second component is asset class diversification. The mutual funds you invest in will comprise all of the asset classes in proportions or percentages falling in line with your appetite for risk (conservative, moderately conservative, moderate/balanced, fairly aggressive, high risk). Ideally, a diversified portfolio should include at least four asset classes.
By holding small amounts of a great many different companies and asset classes, you spread your risk so broadly that the inevitable fluctuations are small ripples rather than steep gains or losses. As some types of investments decline in value, other types will be gaining value. Over the long term, the entire portfolio grows.
In the long term, investing in this way is usually safer than money in the bank.
Perhaps you are holding too much capital in bank accounts and are beginning to realize you will see no “real growth” thereon. Why not give me a call to arrange a mutually convenient time for us to get together to investigate better ways of having your money grow for you? It does no harm in checking and, who knows, you may come away pleasantly surprised.
“With money in your pocket, you are wise, and you are handsome, and you sing well too.”
Jewish Proverb