Financial Peace of Mind
By Amanda Johnson
This article is published on: 13th December 2013
Are you thinking about what to give your family & loved ones for Christmas? How about financial peace of mind!
As we approach the season of goodwill, many of us think about how we can help our families more. Whilst you are our choosing presents or perhaps arranging to spend the festive period with your nearest & dearest there is something you can do which may give them peace of mind well into the future. You can arrange for a financial review with me, which is free & provides the following benefits:
Peace of mind for you
Your financial review will look at your current financial situation and help you ensure that all investments are working for you in the most productive and tax efficient way, whilst taking into consideration your own risk profile
Peace of mind for your children
We will look at your potential inheritance tax obligation & ways to keep this to an absolute minimum
Peace of mind for all of your dependents
There are many options available for your investments or UK private pensions that can provide a more efficient & tailored way to pass money onto your dependents in the event of your death
If you want to know more about these areas you can either drop in to the Café des belles Fleurs in Fenioux where I hold a financial surgery on a Thursday morning, come and see me at Open Door in Civray last Tuesday morning in the Month, register for our newsletter or speak to me directly. Please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Have a fabulous Christmas & New Year from all at The Spectrum-IFA Group
TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009 Paris « Société de Courtage d’assurances » R.C.S. Paris B 447 609 108 (2003B04384) Numéro d’immatriculation ORIAS 07 025 332 – www.orias.fr « Conseiller en investissements financiers, référencé sous le numéro E002440 par ANACOFI-CIF, association agréée par l’Autorité des Marchés Financiers»
Finances and stepfamilies
By Spectrum IFA
This article is published on: 2nd December 2013
Here are some tips for swimming in the blended family waters, financially and otherwise. “In France, it is not possible to add the name of a new spouse to the deeds without encountering some tax liability,” said Daphne Foulkes, a financial adviser with The Spectrum IFA Group in France.
‘Tis the season to get a grip on festivity spending
By Victoria Lewis
This article is published on: 18th November 2013
As the year draws to a close, holidays begin marching past in quick succession. These festivities present almost endless chances to open your wallet. Christmas is a weeks-long spending affair in many places in December.
In France, “some go skiing, and a lucky few travel overseas for warmer climates, such as Martinique and Guadalupe,” said Victoria Lewis, a financial adviser with The Spectrum IFA Group in Paris.
Fact or Fiction
By Amanda Johnson
This article is published on: 5th November 2013
There are so many differing thoughts and views on Expat forums and websites, how do I know what is fact and what is opinion?
Living permanently in France, one thing I notice is the vast amount of information available for expats. Whether on the internet via websites and discussion forums, or as printed media, such as The Vendee Magazine, there is always information and opinion for any specific queries you may have.
The hardest task I find is sifting through the raft of varied opinions and recommendations, to get to the facts which will help me choose the path which is right for me. If I want an electrician or heating engineer to look after my house, I will look for someone whose business is registered to provide the service I want and has a proven track record in this industry. I am sure most of you would do the same?
Managing your finances is another key area where you want to be sure the information you receive is accurate, up to date and provides you with the professional peace of mind you need to protect your assets. The Spectrum IFA Group’s French company, TSG Insurance Services S.A.R.L. is regulated in France by ANACOFI-CIF and ORIAS (see our website for details of these organisations) to provide financial advice. Our free financial consultation means that you do not have to spend your valuable time separating fact from opinion when ensuring your estate is as tax efficient as possible.
When it comes to keeping abreast of changes to French financial legislation you can always register for the Spectrum IFA Group’s regular newsletter. It will provide details on changes in the law and the impact this could have on you, as well as bringing you details on financial road shows which you can attend and hear from many leading financial organisations first hand.
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 & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009 Paris « Société de Courtage d’assurances » R.C.S. Paris B 447 609 108 (2003B04384) Numéro d’immatriculation ORIAS 07 025 332 – www.orias.fr « Conseiller en investissements financiers, référencé sous le numéro E002440 par ANACOFI-CIF, association agréée par l’Autorité des Marchés Financiers»
Millions of over 40s at risk of being left penniless after partners’ death
By Spectrum IFA
This article is published on: 1st November 2013
More than half of couples over the age of 40 are at risk of leaving one partner penniless in retirement in the event that the other one dies because they have failed to sort their financial affairs.
Some 53% of couples surveyed by Prudential said they had not made pension, will, or life insurance arrangements to ensure one of them will still get a retirement income after the other dies, the Daily Mail reports.
Women are particularly at risk, as one in five admitted they will be solely reliant on their partner’s income in retirement, meaning they could be left with nothing unless they take steps to ensure they’re taken care of should their husband die.
Vince Smith-Hughes, retirement expert at Prudential, said: ‘For couples looking to enjoy a comfortable retirement, organising and agreeing their income options should be a priority – long-term financial planning can be even more important than managing day-to-day finances.
‘Our research shows that even those couples who have discussed their retirement finances have still made decisions that could leave one of them without an income if they outlive their partner.’
People with money purchase pension schemes see them converted into incomes when they come to retire, this can either be by purchasing an annuity, or taking out an income drawdown product.
But there have been multiple examples of people reaching retirement and taking out a single life annuity, which pays out an income for the lifetime of the pension-holder only, not fully aware that it will not continue paying out to their spouse once they die. Taking out a joint life policy would ensure some form of payment would continue, while income drawdown plans will also pay out death benefits.
The plight of many married pensioners who unwittingly took out single life policies highlights the importance of taking financial advice when approaching retirement. Smith-Hughes said: ‘Having open and frequent conversations as a couple is definitely an important first step.
‘However, making the right decisions on the best retirement income options – including what happens when one partner dies – can be daunting.
‘That’s why seeking advice from a retirement specialist or financial adviser is just as important.’
To read the full article please click here
IFAonline
Author – Laura Miller
Who do you bank with?
By David Hattersley
This article is published on: 30th October 2013
Following the recent “Le Tour de Finance” seminar at the Marriott Hotel in Denia, one of the attendees approached me with interesting tale. The Lady was a British expatriate and long term resident in the Javea area. Like many retried expatriates she had been concerned about the security of her assets following banking issues in both UK and Spain, post 2008. She told me she had always felt safe banking with British household names whether at home or abroad. She was shocked to learn that Lloyds Bank’s Spanish operations had been sold to Banco Sabadell.
She felt this had not been properly publicised and she had not had clear information about the change from the bank. She visited her local branch and was surprised that the staff knew little about the change of ownership.
I was able to explain the €100,000 per account deposit guarantee scheme, guaranteed by the Spanish Government in the same way as UK bank deposits are guaranteed by the British Government to the tune of £85,000. This Lady had clearly done her homework and pointed out that the guarantee is per banking group and not per account. We agreed that bank accounts were necessary for emergency funds even when, given current interest rates they were guaranteed to lose money in real, spending power terms. We also agreed that for longer term investing, especially for income, there were much better options out there, one particular proposition from the Prudential, (fully Spanish compliant) had been highlighted during the “Le Tour” seminar.
Our motto is “With Care, You Prosper”, we urge our clients to take a very active interest in their finances, we are here to help our clients help themselves.
Compound Interest “The Eighth Wonder of the World”
By Chris Webb
This article is published on: 27th September 2013
None other than Albert Einstein described this amazing fact about finance, compound interest, as “the Eighth Wonder of the World”.
So, what is compound interest and why is it so important?
Compound interest is, quite literally, a form of free money… and it is free money that grows over and over again. The example detailed below explains how……..
Imagine that you invested €1,000 today and that whatever you invested it in went up by 10% this year. In this case you would have €1,100 one year later, made up from your original sum, plus €100 of interest or return on investment.
Now comes the Compound Interest: Assume you reinvested that €1,100 for another year and achieved 10% again. The following year you would have €1,210. This time you have made €110 of interest simply because the 10% interest is paid on the new balance not the original investment. Essentially, €10 of that interest is free money.
It is the interest you have been paid on your interest or, put another way, the return on your return.
At first glance this may not seem particularly exciting but over time the effect is incredibly powerful. Let’s look more closely at some examples to see just how:
The power of compounding
Let us say you decided to start investing some of your surplus income. For the sake of the argument, you wanted to invest €1,000 each year.
These might seem like numbers to small to make a difference but are they?
The two tables below detail the difference between non compound interest and compound interest.
I have illustrated at 5%, 7% and 9% growth annually, realistic expected rates of return.
These return figures are on top of your original investment !
NON COMPOUND
| Year No. | Annual Invested |
Total Invested | Return 5% |
Return 7% |
Return 9% |
| Year 1 | 1,000 | 1,000 | 50 | 70 | 90 |
| Year 2 | 1,000 | 2,000 | 100 | 140 | 180 |
| Year 3 | 1,000 | 3,000 | 150 | 210 | 270 |
| Year 4 | 1,000 | 4,000 | 200 | 280 | 360 |
| Year 5 | 1,000 | 5,000 | 250 | 350 | 450 |
| Year 6 | 1,000 | 6,000 | 300 | 420 | 540 |
| Year 7 | 1,000 | 7,000 | 350 | 490 | 630 |
| Year 8 | 1,000 | 8,000 | 400 | 560 | 720 |
| Year 9 | 1,000 | 9,000 | 450 | 630 | 810 |
| Year 10 | 1,000 | 10,000 | 500 | 700 | 900 |
| Year 15 | 1,000 | 15,000 | 750 | 1,050 | 1,350 |
| Year 20 | 1,000 | 20,000 | 1,000 | 1,400 | 1,800 |
| Interest Earned |
4,500 | 6,300 | 8,100 |
COMPOUND
| Year No. |
Annual Invested |
Total Invested | Return 5% |
Return 7% |
Return 9% |
| Year 1 | 1,000 | 1,000 | 50 | 70 | 90 |
| Year 2 | 1,000 | 2,000 | 102.5 | 144.9 | 188.10 |
| Year 3 | 1,000 | 3,000 | 157.63 | 225.04 | 295.03 |
| Year 4 | 1,000 | 4,000 | 215.28 | 310.80 | 411.58 |
| Year 5 | 1,000 | 5,000 | 276.28 | 402.55 | 538.62 |
| Year 6 | 1,000 | 6,000 | 340.10 | 500.73 | 677.10 |
| Year 7 | 1,000 | 7,000 | 407.10 | 605.78 | 828.04 |
| Year 8 | 1,000 | 8,000 | 477.46 | 718.19 | 992.56 |
| Year 9 | 1,000 | 9,000 | 551.33 | 838.46 | 1,171.89 |
| Year 10 | 1,000 | 10,000 | 628.89 | 967.15 | 1,367.36 |
| Year 15 | 1,000 | 15,000 | 1,078.93 | 1,759.03 | 2,642.48 |
| Year 20 | 1,000 | 20,000 | 1,653.30 | 2,869.68 | 4,604.41 |
| Interest Earned |
5939.03 | 9412.31 | 13807.17 |
We can immediately see a meaningful difference between what the saver has managed to achieve after a year versus the investor. Of far more interest is what happens over a number of years.
It is clear to see the big difference between keeping your money in a savings account and investing your money, potentially life changing, even if the amounts you start with are what you describe as “small”. Imagine, the impact can be huge depending on the amount you choose to save.
Just imagine the difference if you were saving €5000 per annum or if you transferred the cash savings you hold now and not later in life.
When Compound Interest works against you…….
It is just as important to understand that if you borrow money, the power of compounding hits you in reverse:
Over time you end up paying more and more to whoever you are borrowing from.
Luke Johnson, the man behind the Pizza Express Chain and ex Chairman of Channel 4 refers to this as “…the gruesome mathematics of leverage in reverse.” This is why you must eliminate debt and get invested as soon as you can. We all know that the majority of debt is expensive. It is challenging to make a 15-20% return on your investments but almost certain you will pay at least this on your debt.
In summary
So we can see from the power of compound interest that if you can achieve a half decent return on your money, even a relatively small amount can become a very large amount in time…
This is probably the most important thing you will ever learn about money.
My UK will and living in France
By Amanda Johnson
This article is published on: 15th August 2013
Question: Is it true that even though I live in France, new legislation is coming which means I can use my UK will when I die and will pay less inheritance tax as a result?
From August 17th 2015 European law will allow British Nationals the option of electing to use their UK wills in France. The inheritance tax regimes for France & the UK are quite different and professional advice should be sought before deciding which option is going to be correct for you.
Under the UK system each person has £325,000 of tax allowances before paying death duties on their estate, whilst in France it is 100,000 Euros per child per parent. Clearly the more children you and your spouse have the greater the allowance before paying death duties in France. You also have the tax advantages in France of using an Assurance Vie, where you can leave additional money per beneficiary outside of your inheritance tax bill.
As you can see where you pay inheritance tax is not a straightforward decision and opting to use a UK will is not necessarily a good idea for everybody. Although the new regulation is still two years away, understanding how you can maximise your inheritance tax allowances now, coupled will an understanding of which regime will suit your personal circumstances better after August 2015 is a sensible idea and getting the right advice is very important.
I offer a free consultation in the privacy of your own home to discuss your circumstances and explain how to maximise your tax free allowances here in France.
It is very important to manage your money so that it works hard for you, after all you’ve worked hard to earn it and have already paid tax on it, so why would you choose for your loved ones to pay more than they need to when you are gone?
Get your nest egg working harder
By Charles Hutchinson
This article is published on: 1st August 2013
Returns from bank savings accounts are at an all-time low, and savers are becoming increasingly frustrated. Expatriate financial advice expert Charles Hutchinson, of the Spectrum IFA Group, explains how expats can get their ‘nest-egg’ working harder.
Most of us know by now that interest rates in the western world are at extremely low levels, with the Euro base rate at 0.75%. In the UK it is even lower, at 0.5%. While helps some people such as mortgage holders with tracker rates, savers are being punished as banks have continually cut the interest rates paid on savings accounts. Retirees drawing a pension, or looking to buy an annuity have also been hit hard in this low-interest rate environment.
Low Interest Rates Here to Stay
First, it doesn‘t look like this will change for quite some time yet. The prevailing policy of central banks has been to increase money supply (quantitative easing, also known as QE), maintain liquidity in the banking system and keep interest rates low. Even a slight increase in the base rate over the next couple of years is unlikely to result in decent interest rates on savings.
Second, inflation is running at around 2-3% depending on which part of Europe you live. It just feels like everything is getting more expensive, especially food and energy costs. The end result is that we are effectively losing money by leaving it in the bank!
Of course, we all need to leave some cash in the bank, as our emergency fund. Most financial planners would recommend that you leave at least 6 months income as your emergency fund.
It is the ‘nest egg’ money (the savings that we don’t really need in the short-term) that we can do something about.
How Can You Get Your Nest Egg Working Harder?
With the objective of ‘beating the bank‘ over the longer-term, a diversified portfolio of investments can be built. In plain English this means spreading your money across different types of ‘assets’ and not having ‘all of your eggs in one basket’. Assets primarily fall into one of the following categories; equities (shares in companies), fixed-interest bonds, property, cash or commodities.
Lifestyle Investing
You need to be clear about your ‘Risk Profile’. At Spectrum, we carry out a ‘Risk Profiler’ exercise which aims to establish the level of risk you are comfortable with and helps you understand the relationship between risk and reward. We then employ a forward-looking ‘Life-styling Process’ which means building a portfolio to match your own personal situation and objectives.
The eventual portfolio should therefore match your risk profile, usually measured from ‘cautious’ at the lower end of the scale, ‘balanced’ and then ‘adventurous’ at the higher end. The investment strategy should therefore be appropriate for your stage of life.
What assets to invest in
There are literally thousands of investments funds and vehicles to choose from. At Spectrum, we filter these by using strict criteria when choosing clients‘ investments. For example we only use;
- UCITS compliant, EU regulated funds, ensuring maximum client protection and highest levels of reporting.
- Daily priced funds, providing clients with daily liquidity, so that clients do not get ‚locked-in‘.
- Financially strong and secure investment houses.
- Funds which are highly rated by at least two independent research companies.
Multi-asset funds
Multi-asset funds are popular with clients as they are managed by experienced asset managers who, through active daily management, can offer access to all asset classes within a single fund. Their job is to capture capital growth while also protecting investors when markets suffer a downturn. Some fund managers have a great track record of doing this, for example Jupiter Asset Management’s Merlin International Balanced Portfolio, which has returned +35% (Euro share class) since launch in Sept 2008, with relatively low volatility.
Multi-asset funds can be used as a ‘core‘ holding within a portfolio, with more specialised and sector-focussed funds making up the rest of the portfolio.
Equities (shares)
Many blue-chip companies have very strong balance sheets and pay dividends of around 4%, which is higher than current interest rates. This dividend income can be re-invested into your capital (unless you need the income). The capital value of course will fluctuate but if you are investing for the longer-term you have time to ‘ride out‘ any volatility.
Equity funds can be global in nature, regionally specific (for example focussing on emerging market countries) or even country specific. Other types of equity funds focus on smaller ‘growth-orientated’ companies rather than those blue-chip, dividend paying stocks.
Ethical Investing
Ethical funds are also an interesting option. These are funds which only invest in ‘ethical’ companies. They are screened and assessed on criteria such as environment, military involvement or animal welfare.
Fixed-interest bonds
This includes government bonds and corporate bonds. Western government bonds were traditionally seen as ‘safe havens‘ however yields are now currently as low as cash. It may be wiser to look at corporate bonds, and these are categorised in terms of risk (higher-yielding bonds means higher capital risk). Emerging market bond funds (with exposure to local currencies) could also be considered.
May investors like to get exposure to bonds via a fund, which is a diversified mixture of bonds. One good option may be Kames Capital’s Strategic Bond Fund, with a return of +57% (Euro share class) since launch in Nov 2007.
Commodities
Commodity-focussed funds can be volatile and would normally make up only a small part of a portfolio. However there is potential for long-term growth by investing in companies with exposure to precious metals and resources (gold, silver, iron ore, copper) as well as other ‘soft’ commodities such as agricultural resources and the food sector.
Property
Collective property funds or property-related shares could also form a small part of your portfolio. Physical property by its nature is illiquid but by using a property fund you can obtain exposure to shares in property companies, keeping your money liquid.
Review Your Portfolio Regularly
It is vitally important that your portfolio is regularly reviewed. One reason why people do not get the most from their finances is the lack of regular attention paid to their arrangements. Consider using a regulated, independent adviser who should offer regular reviews as part of their ongoing service.
At Spectrum we have an in-house Portfolio Management team, who help advisers and clients monitor their portfolios regularly for performance and suitability. One aspect of our regular reviews is ‘profit-take alerts’; when one area of your portfolio has out-performed then why not take some profits? Investors can really benefit from such regular service.
Charles Hutchinson has been with The Spectrum IFA Group since inception and is one of the founding partners. He helps expats in Southern Spain with their financial planning. The Spectrum IFA Group is a pan-European group of independent financial advisers. Feel free to contact Charles at charles.hutchinson@spectrum-ifa.com or call him on 952797923
French U-turn on tax grab spells good news for expats
By Graham Keysell
This article is published on: 2nd July 2013
Expats in France can breathe a sigh of relief after the French government backed down on its tax grab on second homes.
From September 1, those owning a second home in the country for more than 22 years will have complete exemption from capital gains tax (CGT).
Graham Keysell comments in The Daily Telegraph personal finance section. Read more here