The Spectrum IFA Group and Cogs4Cancer

By Spectrum IFA
This article is published on: 5th August 2015

05.08.15

In October 2015, the COGS4CANCER riders are saddling up again. This year is even bigger with a two team format. 26 riders will cycle 850km from Barcelona, Spain to Antibes, France in just 5 days.

The Spectrum IFA Group are once again delighted to be sponsoring
Lee Mutch on this epic ride.

The are four main charities that will benefit directly from this years ride; Cancer Research UK, l’Archet Hospital Nice, Cancer Support Group 06 and Clinique Tzanck Wellbeing.

The ride in October will be the third for the Cogs4Cancer team that have so far raised €399560 since 2013 and at this point in time, the 2015 event has raised a massive €106680.44.

Everyone at The Spectrum IFA Group wishes Lee and the other 25 riders all the very best of luck.

To follow the event and riders please visit the Cogs4Cancer website

QROPS – Qualifying Recognised Overseas Pension Schemes

By Spectrum IFA
This article is published on: 4th August 2015

I’d like to revisit the topic of pensions this month; specifically QROPS pensions. I’m sure you remember that it stands for Qualifying Recognised Overseas Pension Schemes. I spend a lot of time talking to clients these days about QROPS. I don’t want to bore you with loads of technical detail here; I want to concentrate on the core reason why you should consider a QROPS if you are non UK resident or are considering becoming so. Much has happened this year in the UK pensions industry, and it has tended to cloud the picture regarding expats and their retirement savings. Let’s try to regain some clarity.

If you’ve moved to France, or are considering a move here, you need to at least consider a QROPS as an option. It gives you the right to move your pension fund out of the UK jurisdiction altogether, and have much more control over your pension pot, and protect it from internal taxation and other forms of interference from the UK system which is focussing more and more on how to tax your assets.

I’m talking to a client in this position at the moment. His name isn’t Steve, but we’ll call him that anyway. He has a £400,000 pension pot made up of four different pensions accrued over his working life. He and his wife are UK resident, but intend to be French resident soon. I’ve given him all the background information, and he has come back with a very succinct question:

‘I think it quite likely that I will live in France for many years, but equally likely that I will return to the UK at some stage in the future. As my pension will revert to UK jurisdiction when that happens, is it worth my while paying the overseas trustee fees while I am outside the UK?’

Steve is 65 years old, and he thinks he will return to the UK when he is 80. Let’s also assume a modest net return of 5% per annum of the QROPS pension. This of course cannot be guaranteed, but is the current performance of my preferred investment fund over the past 5 years. Let’s assume that he decides to do a QROPS transfer.

Now let’s move forward in time by 10 years. Steve’s pension fund is now worth £550,000. (the mathematicians amongst you will of course realise that he has been drawing down some of this pension to supplement their other sources of income) He’s quite pleased with this, but would be less pleased to learn that in two weeks’ time he will be killed in a tragic car accident.

As tends to happen in later years, Steve and his wife had discussed what they would do if one of them died. Steve thought that if he was the one left, he would stay in France, but his wife, we’ll call her Jane, thought it more likely that she would go back to the UK to be with the children and grandchildren. This is indeed what Jane decides to do, and to facilitate this, she decides to take the full pension pot as a capital sum to enable her to buy a decent house back in Cambridge. She will invest the proceeds of the sale of the French house when, and if, it sells.

Because Steve decided to transfer under the QROPS system out of the UK pension jurisdiction, Jane will get every penny of the £550,000 pension lump sum. If Steve’s decision had gone the other way, and he had decided to keep his four pensions in the UK, Jane would be looking at a tax bill from HMR&C of 45% on the majority of the money if she took it as a lump sum. Her tax bill would be in the region of £210,000 at current rates.

There will have been additional costs in having a QROPS pension, principally to remunerate the overseas trustees who take on responsibility for the administration of the pension under HMR&C rules. There will also have been savings. UK pension funds are subject to UK Dividend Income Tax. The rebate of the 10 per cent credit (ACT) was withdrawn by Gordon Brown, costing pension funds billions in tax.

It is therefore difficult to quantify how much extra a QROPS costs, if anything at all. What we can say with a fair degree of certainty is ‘not as much as you might think’. In Steve’s case it probably cost about £9,000 over the ten years in trustee costs, but £8,000 of this was recovered immediately when he invested his pension money into the QROPS bond. That doesn’t happen with all QROPS, but it can currently with Spectrum.

As far as insurance goes, and I regard this as an insurance policy for while you are abroad, the cost/savings ratio looks pretty impressive. I always practice what I preach; my own pension fund is safely housed in two separate QROPS, well away from the UK tax–grabbers.

With regard to the changes that have erupted on the UK pensions scene this year – Pension Freedom – as the chancellor likes to call it; I think my views are well documented. I see this as a tax raising scheme, nothing more and nothing less. It may be that in the future QROPS schemes will be forced to fall in line with the new UK stance, but that has little to do with the many compelling reasons to look at a QROPS transfer.

QROPS is one of the topics that we will be featuring at our next ‘Le Tour de Finance’ seminar. Our industry experts will be presenting updates and outlooks on a broad range of subjects, including:

Financial Markets
Assurance Vie
Pensions/QROPS
Structured Investments
Currency Exchange

The date for the seminar is Friday, 9^th October 2015 at the Domaine Gayda, Brugairolles. Places are limited and must be reserved, in advance. This venue is always very popular and so early booking is recommended. Please complete the reservation form here

The EU Succession Regulations

By Spectrum IFA
This article is published on: 20th July 2015

20.07.15

What a month it has been since I wrote my last article. The Greek crisis has waxed and waned and as the prospect of increases in UK interest rates comes closer, now the Sterling Euro exchange rate has hit new highs. All of this while the temperatures continue to soar in France and the effects of the canicule are felt!

August is almost upon us and this means that the long-awaited EU Succession Regulations will come into effect. From that point, as French residents, we will be able to opt for the succession rules of our country of nationality to apply (whether or not that country is within the EU). If you do nothing, the default position is that the succession rules of your country of habitual residence will apply. However, regardless of which country’s succession rules are to apply, this will not change the tax situation. French succession taxes will still be due, which can be up to 60%, depending upon your relationship to your beneficiaries.

I am not going to go into the detail of the EU Succession Regulations here, as I have done this before and so I invite you to read my article on this at: spectrum-ifa.com/eu-succession-regulations-the-perfect-solution

As the months have passed since writing that article, I have discussed the implications of the Regulations with several legal professionals who operate at an international level and so they are already highly experienced in dealing with cross-border succession situations. Unfortunately, the further clarification on the practical application of the Regulations that we were hoping for has not appeared and so still we can only wait for the results of actual cases.

What is clear though is that if you elect the succession rules of your country of nationality, then your French property and any other assets that you own would be administered by a French notaire trying to apply another country’s law and this is likely to cause complications, delays, additional expenses and delays. So I, like many other professionals, hold the view that if there is a tried and tested ‘French way’ to achieve your objectives, then this should still be used. The ‘French way’ is another subject that I have written about in detail and the full article can be read at: spectrum-ifa.com/inheritance-planning-in-france

There will be cases where the EU Succession Regulations will be welcome for some couples. Typically, this might include situations where children are estranged from parents or step-children just will not accept the step-parent, regardless of the length of the relationship. The Regulations will be a relief for couples in such situations, as they will be able to circumvent the French forced succession rules, but they will still need to address the taxation issues that may occur. As concerns financial assets, this is an area where we can help.

Everyone’s situation is different and this is why it is very important
to seek professional advice on this subject.

Are you concerned about the EU Succession Regulations and how this affects you? If you would like to have a confidential discussion about this please contact me from the contact box below.

Don´t slip up with over “Greece”ing

By John Hayward
This article is published on: 15th July 2015

15.07.15

The original cash machine?

With events in Greece taking prime news position, certainly the east side of the Atlantic, the main question that I am being asked is, “How will the Greek debt problem and referendum affect my investments?”.

It is said that, back in the BC years, Greece invented finance and all the baggage that it carries. It had the first financial crisis, with bad debt. Debt was subsequently written off and the currency devalued. Unfortunately this has not been an option for Greece now as they are part of the Euro.

Greece has defaulted on loans many times before, yet this never brought the rest of the world crashing to the floor. The word contagion is used an awful lot as the assumption by many is that the rest of the PIIGS (Portugal. Ireland, Italy, (Greece) and Spain) will follow suit. If this was to happen and Spanish banks, in our case, had problems, then there would be major concerns for those who had money with them. Bank risk in Spain has been around for a while and keeping a whole lot of money in a Spanish bank makes little sense. Here are some reasons:-

Little or no interest paid.
High charges for little or no gain.
Inheritance tax liability for Spanish residents.
Even greater inheritance tax liability for non-Spanish residents.

For those who are brave enough, a financial crisis is a brilliant opportunity to make money. Many are not prepared to be so brave with hard earned savings and, for these people, we have a proven solution with a household name. Very few people like volatility. In reality, volatility means that your money can go down in value, sometimes sharply. With the right approach, we can do away with volatility. Take a look at this graph illustrating the difference between the truly managed approach, the average cautious fund, and the FTSE100. See how consistent the managed fund has been compared to the roller-coaster ride of the others.

Greece is the word at the moment but this shouldn’t mean that all our lives should be dependent on what happens there. Living in Spain, being part of the Euro is the one that I want.

What holds you back from investing?

By Charles Hutchinson
This article is published on: 14th July 2015

14.07.15

Investing for some can be a very difficult task and yet for others it is both easy and immensely satisfying. Those in the former group would just love to be in the latter. So what is the problem? Why are they so different?

The underlying problem is fear but there are ways to reduce these anxieties.

The most fearful are the beginners and yet it is surprising how many “mature” investors go through a similar experience. There is no doubt that that without that leap of faith, you will not achieve the return you so much seek. If your overriding desire is to obtain real growth on your capital, however big or small, you must rethink your approach. For “from small acorns, grow great trees”.

Probably the best antidote is to look back through history – look at what our forebears were faced with when they were poised to put their capital at risk. I should add at this point that without risking your capital to some degree or other you will never experience real wealth creation. “There is no gain without pain”. Here at The Spectrum IFA Group, we look to do this in a controlled and disciplined fashion to insulate the client as much as possible from the stress and concerns of investing.

But we should go back to the basic instincts which create these fears and are the barriers to wealth creation. Someone once said that “The brain is a massive sabotage machine” which interferes in a negative fashion with every important decision we make. I could go into all the reasons for not making an investment decision but I would like to zero in on just one of the many. If you look for reasons for not making the decision to invest then you need to remain in your “comfort zone”. The older we get, the more we want to be in that place because the alternative is too stressful.

Probably the greatest excuse we come up with is the current situation: the Greek debacle, the threat to the Euro, Putin’s bellicose posturing, the state of the EU and its future, whether the UK will stay in, the collapse of the Chinese stockmarket, increasing terrorism, our old favourite secure backstop the Bond Market in total disarray, bank interest rates at all time lows, global warming, global overcrowding, shortage of food and water – need I go on? In fact these are all the excuses for not investing. The fact of the matter is that the only way to beat inflation and actually create wealth is to invest in capital markets, whatever they are, whenever. There is no good or bad time to invest. In fact, if you are a contrarian like the all time most successful fund manager, Anthony Bolton, you invest when everyone else is selling. And to put it another way, fund managers wait with anticipated glee for markets to fall, so that they can get back in at a lower level. Using people like us is the least stressful way to invest as we have already done the research on your behalf as to who are the best managers and for which investment houses they work!

Let us now look back in history and see all the reasons why we shouldn’t have invested at that time. And yet, those who ignored these doomsday factors went on to achieve amazing growth on their capital – not through some rocket science wizard scheme but by just investing in the top stocks in their respective stock markets. An internationally renowned global investment house has produced figures over decades to show that if you had ignored the gloom merchants and just invested * when you had the capability, you would be a wealthy person now. For example, if you had invested just £1,000 in 1934, it would today be worth today over £4,000,000; just £4,000 invested in 1960, would have grown to £1,000,000. If you had invested £10,000 in 1989, it would have grown to over £90,000 today. How could this have happened with all the appalling crisis’s which have occurred in the meantime? Simple, global capital does not just disappear in times of crisis, it has to have a home, it cannot evaporate and like seasons and the rise and setting of the sun every day, capital markets just continue on, regardless of war and pestilence.

(*invested in a portfolio of investment funds or top stocks actively managed by a competent regulated investment house with good past performance.)

Ah, but that was then, there is too much going on the world to de-stabilise the markets. Oh yes? What has changed in the last 80 years? NOTHING!

Let me show you:

1934 Depression
1935 Spanish Civil War
1936 Economies still Struggling
1937 Recession
1938 War Clouds Gather
1939 War in Europe
1940 France Falls & Britain is blitzed
1941 Pearl Harbour & Global War
1942 British Defeat in North Africa
1943 Heavy defeats continue in the Far East
1944 Consumer Goods Shortages in the U.S.
1945 Post-War Recession Predicted
1946 Dow Tops 20 and London market too high
1947 Cold War begins
1948 Berlin Blockade
1949 Russia Explodes A-Bomb
1950 Korean War begins
1951 U.S.Excess Profits Tax
1952 U.S. Seizes Steel Mills
1953 Russia Explodes H-Bomb
1954 Dow tops 300 – Market Too High
1955 Eisenhower illness
1956 Suez Crisis
1957 Russia Launches Sputnik
1958 Recession
1959 Castro seizes power in Cuba
1960 Russia downs U-2 Spy Plane
1961 Berlin Wall Erected
1962 Cuban Missile Crisis
1963 Kennedy Assassinated
1964 Gulf of Tonkin incident
1965 Civil Rights marches
1966 Vietnam War Escalates
1967 Newark Race Riots
1968 USS Pueblo seized by North Korea – fear of renewed war.
1969 Money Tightens – Markets Fall
1970 Cambodia invaded – Vietnam War Spreads
1971 Clouded Economic Prospects
1972 Economic Recovery Slows
1973 Energy crisis & Market Slumps
1974 lnterest Rates Rise & steepest markets falls in 4 decades
1975 Oil Prices Skyrocket
1976 lnterest Rates at All-Time High
1977 Steep Recession Begins.
1978 Worst recession in 40 Years
1979 Oil prices sky rocket
1980 Record Federal Deficits & Interest rates at all time highs
1981 Economic Growth Slows
1982 Worst recession in 40 years
1983 Largest U.S. Trade Deficit Ever
1984 Energy Crisis
1985 Economic growth slows
1986 Dow Nears 2000
1987 Record-Setting Market Decline. Black Monday and UK Hurricane
1988 U.S. Election Year
1989 October “Mini Crash”
1990 Persian Gulf Crisis &1st Gulf War
1991 Communism Tumbles with the Berlin Wall
1992 Global Recession
1993 U.S.Health Care Reform
1994 Fed Raises lnterest Rates Six Times
1995 Dow Tops 5,000
1996 Dow Tops 6,400
1997 Hong Kong Reverts to China
1998 Asian Flu sweeps the Globe
1999 Y2K Millennium Bug Scare
2000 Tech Bubble Burst
2001 9/11 Terrorist Attacks
2002 Recession
2003 War in lraq
2004 Rising lnterest Rates
2005 Hurricane Katrina & destruction of New Orleans. London bombings.
2006 U.S. Real Estate Peaks
2007 Liquidity Crisis & Subprime Lending crisis spreads to Europe
2008 Credit crisis /Financial Institution failures globally
2009 U.S. Double Digit Unemployment Numbers
2010 European Sovereign Debt Crisis
2011 U.S. Credit Downgrade
2012 Fiscal Cliff Issues-/European Recession
2013 U.S. Government Shutdown/Sequester
2014 Oil Prices plunge 50% & Malaysian Airliner shot down in Ukraine

2015 Greece, Terrorist attacks, ISIS rampaging all over Middle East, etc.,etc.

So against this seemingly grim litany of disasters and cyclical market falls, the global financial wealth continued to increase at a remarkable pace over the last 80 years and before that. It will continue to do so into the future. The only thing to stop it would the total annihilation of the Human Race where wealth & money would be useless anyway!

I hope I have illustrated that fear of exposing capital to a perceived risk has no foundation! For those who are still not convinced, they should leave their money in the bank where it will continue to earn nothing, its real value will erode with inflation and possibly disappear with the collapse of the bank they have so carefully chosen to safeguard it!

Reflecting on Gains

By Gareth Horsfall
This article is published on: 12th July 2015

12.07.15

I was recently struck by the ‘musings’ of a fund manager based in London and his take on the world of global economics.

The funny thing is that what we read in the papers, online and listen to from so called experts can literally be taken with a piece of salt. It really doesn’t have a lot of value for the man in the street and it all just goes to prove that no one really knows what is going on. That includes Janet Yellen of the FED and Mario Draghi of the ECB. They seem to be playing a game of ‘trial and error’ to achieve the best short term outcome in the race to make consumers consume again and for economic growth to start apace once again. The indiscriminate use of quantitative easing has only served to push up the cost of asset prices (property, shares, Bonds). In fact it has taken all these 3 asset prices to new highs in recent months and so now might be time to look at reviewing your investments once again.

We, at The Spectrum IFA Group, have been, for some time, looking at the investment fund space, given that stock markets have been moving upwards for the last couple of years. This often signifies that volatile times are ahead.

We are now starting to look at the markets with a more negative stance and believe that it might be the right time to start taking profits from your funds that have made good capital gains during this time and secure those in a less volatile investment.

(For our clients who are using Rathbones Investment Managers and Tilney Best Invest Discretionary fund management services, profit taking and reinvestment will be being taken care of at a micro managed level on a day to day basis).

We, The Spectrum Group, have identified a range of Absolute return funds which are designed to protect capital in volatile markets. And in addition, we believe that cash and Gold will have great value in the next market meltdown.

Absolute return funds, whilst not perfect, aim to protect against market falls and can allow for reinvestment back into undervalued assets at the right time, such as equities, which may be valued considerably less in a crisis. We have to accept that despite Greece and other world worries, the markets could keep on advancing for some time to come (at least while quantitative easing continues from the ECB) and therefore to remain largely un-invested due to fear, could be to lose out on further capital protection opportunities. Absolute return funds offer the option to stay invested with reduced risk.

(A word of warning. Not all are made equal, and absolute return funds need to be carefully assessed to their exposure to underlying assets which may not serve to protect capital so well in volatile markets)
If you would like to know more about these funds, protected capital investments or other low volatility investments then you can contact me on gareth.horsfall@spectrum-ifa.com or on my cell 0039 3336492356.

And so onto the musings of a London based Fund Manager. This makes for interesting reading.

There is approximately $3.6 TRILLION of government debt, in other words nearly a fifth of all global government debt that is now trading with a negative yield (basically you pay the Bond holder for the right to hold the Bond as an investment, rather than them paying you an interest payment to hold it) and yet money is still being invested in Bonds to the tune of roughly $16 BILLION – the highest investment in Bond funds on record going back to at least 2008.
€1.5trn of euro area government bonds over one-year maturity have negative yields, and yet Mario Draghi thinks if he can just get interest rates down a bit further, he can turn the European economy around.
The fact that the American stock market closed on highs recently would tell you the US economy is firing on all cylinders, and yet the Federal Reserve seems frightened to raise interest rates seven years in to the recovery.
In 2007, global debt of $142 TRILLION was enough to nearly blow the financial system to smithereens but, seven years later, global debt stands at $199 TRILLION, and nobody seems to believe this is such an issue.
This year British Telecom issued shares to buy EE for £12.5bn, a firm it previously owned before it spun it off in 2002 (a year in which it also issued shares).
You can now see another coffee shop from the window of nearly every coffee shop in London, and yet Costa Coffee owner Whitbread is valued at 25x earnings.
In 2009, General Motors emerged from government backed Chapter 11 with a final cost of the GM bailout to the US taxpayers of $12bn. A group of hedge funds have recently taken a stake in the company and have come up with the brilliant idea of GM gearing itself up again.
If there is any value left in the UK stock market it is certainly in the large-company part of the index and yet many fund managers have little exposure to this area.
As two thirds of the world might be close to deflation, oil demand has naturally dropped causing a fall in the price. However, most investment bank economists seem to think this fall in the oil price will lead to an increase in demand.
While bond yields, commodity prices, the Baltic Dry Index, and inflation expectations are all collapsing and suggest deflation could be an issue, equities continue to rise, suggesting it is not. Inflation on the way?
As the yield on corporate bonds of companies such as Nestlé and Royal Dutch Shell goes negative, money continues to flow in to corporate bond funds.

It is always good to have a contrarian opinion about markets. I hate reading the usual financial press which leads you to believe that which is probably in the interests of some large corporation/person and not our own (the conspiracy theorist in me).

Whilst we are on this topic, my own personal experience (and which could be of no merit whatsoever) is that when I first started out in this business I attended many seminars which were frequently attended by big fund managers, one of which was the then respected HSBC Bank. I have to admit that there were 3 occasions when they were marketing very specific investment funds in specific sectors which, very shortly afterwards, seemed to be the assets which were in crisis. Whether it was HSBC pushing something they wanted to dump at the top of a market or whether it was purely them following the crowd we will never know. What this has taught me is to never never follow the crowd!

All this is why at The Spectrum IFA group we have a fund selection committee who are constantly in touch with fund managers from the big investment houses that we work with (including HSBC). If you would like to read more about our selection criteria for our clients then you can do so Here.

Remember our old friend the Assurance Vie?

By Spectrum IFA
This article is published on: 10th July 2015

In last month’s article I maintained that you can’t please all of the people all of the time. Whilst that met with general agreement, it did provoke some interesting responses; mainly exploring the ‘Should I stay or should I go?’ theme so loved by fans of The Clash. Here is an excerpt from a mail I received from a regular critic of my articles. I left the first line in, out of vanity:

Just for a change, I rather liked your piece in the A&A. Very sensible.

Although for me this is home. Eventually cremated here and ashes scattered over France. It’s in my last wishes. But here’s a thought for another piece for you, progression from your current article. Although I myself have no intention whatsoever to return to the UK – I intend to die here – I read that one of the things that can go, as you get really old, is your ability to speak a second language. If that happens, and should I finish up in a care home, it will be difficult both for me and my carers. In that case my family, most of whom do not live in the UK, might reasonably consider I would be better off in the UK………….

And so be it; let’s explore this theme a little. I’m sure Charles Green (not his real name) would never be packed off back to the UK by uncomprehending carers and uncaring children, but it is an important point. I for one would not relish spending my bath chair days in what I perceive to be the alien environment of a French care home. Coincidentally, I met a couple last week who have retired from UK care home ownership to live in France. I put it to them last week that if they were to open a home in France solely for UK elderly clients, they might be very successful. Unfortunately my idea was shot down in flames. They retired from the business due to increasing bureaucracy and paperwork in the UK, and certainly wouldn’t dream of trying to recreate the same nightmare in France. Can’t blame them I suppose, but it still sounds like a nice idea to me, from a future consumer point of view.

For obvious reasons, I need to steer this article towards financial concerns. I talk to virtually all my clients about retirement provision. It’s not uncommon to hear that actually people would quite like to spend all of their money before they ‘shuffle off’. The problem, I always point out, is timing. It’s one thing to put in place a programme of concerted spending that will exhaust your funds when you reach the age of say 85, but most inconvenient to yourself and others when you last until you are 103. Life can of course be great fun, and we should always enjoy it while we can, but let’s be under no illusion here; none of us gets out of this alive. Money comes in very useful while you are living, and my view is that if there is any left after you die, it might be put to good use elsewhere.

My average client couple; Mr. E. and Mrs. X. Pat, have worked hard during their lives and have garnered enough cash to see them through to the bitter end. I use the word ‘bitter’ deliberately, as I don’t think life has many happy endings. Some of my clients take a rare and altruistic view of their legacy. They may not have children or close relatives, or maybe they just don’t like them. They feel totally at home with the concept of their residual wealth being assimilated into the French national coffers as their contribution to society. Thankfully, to my mind anyway, this approach is rare, and could even be a sign of approaching mental frailty. The vast majority of the people I talk to would much rather that anything left be put to somewhat better use; any use in fact that doesn’t involve the word ‘tax’.

Without any tax planning at all, anything you leave to your spouse will be free of succession tax, and your children will get a moderate allowance before paying the tax, but can end up paying 45% on large sums. Pretty much everyone else need a tin hat to protect themselves from the onslaught from ‘le fisc’. Step children; your best mate; your ex-wife (?), they will all pay 60%. In anyone’s language, that’s a lot of tax.

There is a better way. Remember our old friend the Assurance Vie? He keeps your investments away from the prying eyes of the tax man, and when you eventually need to draw income, he may be able to get you a very good rate on the tax you will then pay. He also happens to come in pretty handy with succession tax. In theory even the richest of investors could manage to pass on all of the invested wealth free of succession tax; all he would need would be a lot of beneficiaries. Each one of them could take away €152,500 without paying a centime in tax. For we mere mortals, this sort of tax generosity should solve the problem quite easily. All you have to do is get your act in gear in good time. You must set up your policy before you get to 70 to get the full benefit.

A bit more thought needs to go into how you pass on property, but it can be done. For now though, I’m just going to concentrate on the ‘spare’ cash. Bank accounts; premium bonds, ISAs; PEPs; National Savings, your old Pru bond that you’ve had since Adam was a lad… They are all manna from heaven to the French succession tax system, and it will swallow them up. Only Assurance Vie has that nasty tasting Teflon coating that it doesn’t like, and spits out again.

And all you need to do to get an assurance vie is talk to your financial adviser…

In the few days since I wrote this article I have learned of the tragic death of one of my earliest clients; a good and kind man, fallen victim of the carnage so often seen on French roads. This sadness only reinforces my view that life rarely has a happy ending.

A rough guide to submitting your tax information in Italy

By Gareth Horsfall
This article is published on: 8th July 2015

It is around June each year that your Italian tax bill should have been presented and been paid for. If it is more than you had expected then hopefully this article can explain some of the ‘how’ that came about and ‘what’ solutions are available.

One of the main questions I am asked on a regular basis is ‘what are my obligations in terms of declaring foreign income and assets in Italy?”.

Of course, your commercialista may be doing it for you, but what exactly are they reporting, or should they be reporting? With the help of Andrew Lawford at SEB Life International, I managed to go through the instructions on how to fill in an Italian tax return (interesting reading I can tell you).

What I want to look at in this article is how financial assets, (excluding property) i.e funds, managed portfolios at the bank or with an asset management group, ETF’s, shares, Bonds, Money market accounts etc should be declared properly in Italy.

Tax treatment of diversified financial assets.
The first, and most obvious point is that foreign investment income is taxed in Italy due to the principle of worldwide taxation. The basis of the Italian tax system. Once you have established residency in Italy, you must declare all of your income, wherever in the world it was produced.

Dividends and interest
Typically, an investment portfolio will produce periodic income in the form of dividends and interest, especially if you are looking to live from the income stream generated from the very same portfolio.

These need to be declared by converting any foreign currency amounts into euros at the exchange rates designated by the Banca d’Italia for the day the dividend or interest was paid.

The amounts received, duly converted into euros, are taxed at a rate of 20% (up to 30th June 2014) or 26% (from 1st July 2014 onwards).

The relevant section in the Modello Unico is the RM.

***You should declare the net amount received (after withholding taxes) and pay the 20/26% income tax on that. The amount which should be taxed is commonly called the “netto frontiera”.***

Capital Gains
Capital Gains are taxed at the same rates as dividends and interest income (see above), but with the complication that the amount of the capital gain must include the variation in foreign currency over the holding period.

So, what does that mean? As an example, if a fund was purchased on 1st March 2010 and sold on 15th November 2014, it will be necessary to have both the purchase and sale prices (information you will need to provide to your commercialista) and to convert these into euros at the exchange rates for those days (as established by the Banca d’Italia).

This gets relatively complicated when you have a portfolio of assets that are managed by you, the bank or an asset manager and multiple trades have taken place over the year. Checking annual statements to find purchase costs for every trade can become quite onerous. In addition there may have been corporate actions, such as share splits, demergers, capital returns etc, which compound the issue.

Where partial sales and purchases have occurred, the LIFO (Last-In-First-Out) principal needs to be applied.

It is also the case that when you become a resident in Italy you cannot simply use the value of the investments on the day when you arrive and become tax resident, you must use the historical cost from when the asset was bought for the purposes of capital gains tax. (This actually makes a lot of sense if you think about it, because it would mean disposing of any historical tax liability when moving countries and a lot more people would move if it were possible).

The relevant section in the Modello Unico is the RT

Foreign Asset Declarations and IVAFE
The fun really starts in the Italian tax return when the Quadro RW is contemplated. This section has more to do with a monitoring requirement than it does to do with taxes, although the changes brought in for the 2013 tax year mean that the Quadro RW is also used for calculating the foreign assets tax (IVAFE), which is currently due in the amount of 0.20% on the year end market value (with a difference for bank accounts, which are generally taxed at a flat rate of 34.20 euros).

The Quadro RW requires the Italian resident with foreign assets to declare their value each year; this doesn’t sound too bad, as you would think that you would only have to list your assets at year end as per the statements provided by your bank or broker. However, the Quadro RW actually requires you to declare exactly for what portion of the tax year you have held each asset and then to apply the foreign assets tax on that basis.

e.g. calculate the number of days the asset was held for in the year and then pay 0.20% on a pro rata basis. Once again this becomes onerous with multiple trades in the year.

***And unfortunately an end of year tax statement will not provide you with the information needed to accurately complete the tax return. You would need to go back through a year’s worth of trading statements to identify book cost and when they were traded. ***

WHAT I THE SOLUTION TO THIS HEADACHE?

Very simply, it’s the humble Italian compliant Investment Bond. It allows you to do everything you want to do without the fuss. All of the tax is worked out for you, your asset manager can make as many trades as he needs without immediate liability to tax and there is no need to track movements of money in the portfolio or declare when dividends and interest were paid. In addition, when monies are withdrawn from the Bond and a tax liability is incurred then the tax is paid at source on your behalf.

There isn’t even a need to declare the portfolio, trades, interest payments or anything else to your commercialista each year.

Life couldn’t be simpler

If you have found collating your tax information a little ‘heavy’ this year, or you think you may not have been submitting the right information based on what you have read above, and youwould like to make financial life in Italy a bit easier then contact me directly by the link below or fill in the contact form.

The full spectrum – an interview with Advisor.com

By Spectrum IFA
This article is published on: 3rd July 2015

03.07.15

With a dozen offices dotted around Western Europe and a flourishing profit ownership scheme under its belt, Spectrum IFA Group certainly shows no signs of slowing down as it now enters into its 12th year.

The firm’s founders might continually roam between six countries, but the UK appears to be at the heart of the business, with the vast majority of Spectrum’s advisers and clients born and bred in the British Isles. Speaking to International Adviser from France, one of the firm’s three founders, Michael Lodhi, mentions he is holding out for Scotsman Andy Murray to perform well this summer, particularly as the warm weather is said to be the prime climate for the tennis player. Climate, however, seems to be no obstacle for Spectrum, having survived the global financial crisis while maintaining a solid number of IFAs, many of whom have been with the firm for an ample number of years.

Strong bond
The 45 advisers might be peppered around the Continent, working with clients based in France, Spain, Luxembourg, the Netherlands, Portugal, and Switzerland, yet Lodhi maintains that this is a close-knit army of financial planners. “There is a certain atmosphere and a strong bond between the advisers within Spectrum and that’s very clear. Obviously that’s a good thing, but what’s more important is that we do our jobs properly,” he says. “We are very careful with how we guide clients with their investments and their financial planning; if we do that correctly and properly then our clients will do well and be able to sleep at night, as will our advisers.”

The core members of the company – including founders Anne Ollerenshaw, Michael Lodhi, and the now semi-retired David Holmes – have known each other for over a decade, but no doubt Spectrum’s profit share system also plays a key role in its collaborative vibe, particularly as the last four years have seen the firm build up enough reserves to ensure its advisers all get a substantial piece of the pie.

By insisting that IFAs use daily-traded EU-compliant UCITS funds from large brands, the firm also avoids some of the issues, like suspended funds, which brokers can frequently be faced with. But Spectrum is not only strict with the underlying investments advisers use within tax wrappers. “Our criteria for selecting advisers is quite tough and that is why we have grown nice and steadily,” says Lodhi.

Same boat
What is notable is that most of Spectrum’s advisers are in the same boat as their clients, living and working as expatriates. “We seem to have built the business partly on the virtue of the fact that our advisers are expats who are living locally in these areas themselves,” he says, before emphasising that financial advice is still very much about the relationship between an adviser and their client. “Though behind the scenes the IT side can be very valuable and helpful, people buy people, and I think the personal service and face-to-face meetings with an adviser remain very important in our market.” “If we hear criticisms of other financial institutions, it’s usually because the client has gone into the bank to ask for some advice and they want it to be like the old days where you went in to see your bank manager.

The banks obviously don’t do that anymore, but the financial advisory business is still there to provide that kind of hand-holding and personal level of service. “I believe that makes good business sense for the adviser because the closer you are to the client the more likely you are to do business with them,” says Lodhi. Local banks are the firm’s biggest competitor, but far from being daunted by rival businesses, Lodhi acknowledges that competition is healthy, and in fact the multi-currency tax wrappers the company offers are more suited to the niche expat market Spectrum serves.

Not better or worse
Despite the abundance of regulatory changes around the world forcing firms to restructure their remuneration models, Europe has not yet implemented any new RDR-like changes. Meanwhile, Lodhi has no reservations about his advisers using a commission-based model to receive payment. “It is not better or worse for the clients either way,” he says, comparing a commission-based structure to those firms which receive payment through fees. “I have looked at some UK IFAs and worked out what the bottom-line cost for the clients is going to be over a five to 10-year period and there is nothing much in it. It’s just another way of getting paid. “Clients look at the bottom-line cost and they also look at the level of service they are going to get. That’s certainly important to them, and we make sure we are transparent with how much everything costs when we sit down with clients.”

Prepared for change
Though the firm’s founders have not yet been tempted to take the plunge and move towards a fee-based payment model, that’s not to say Lodhi and Ollerenshaw are not keeping an eye on the ball and their minds open to changes. “You never know what these regulators and politicians are going to do until the time comes,” he says. “Obviously we are aware of various changes coming out of Brussels and in the future we might change our business model.

We have certainly been thinking about it and how we would do it. “But at the moment the regulations haven’t changed, so we will just have to wait and see and be prepared as best we can for any changes we think are coming.” One of the ways Spectrum keeps up-to-date with these changes is through its membership with associations like the Federation of European IFAs (FEIFA) and the European Federation of Financial Advisers and Financial Intermediaries (FECIF), which help to shine a light on any issues in the industry, while also giving firms the opportunity to voice concerns.

One of the biggest bugbears for Lodhi is the lack of fresh products in the market, particularly tax wrappers which are an integral part of Spectrum’s business. “All of the wrappers are quite similar and, having been in the European advisory industry for 24 years, there has been nothing much new out there,” he says. “There needs to be change in respect of some product structures, particularly in the area of regular savings. “The providers know they need to change, and we are just hoping this change comes sooner rather than later.”

European family
But one thing Lodhi hopes won’t come to fruition is a decision by the UK to cut ties with the European Union, a decision which is looming on the horizon as the British Government plans the date for a referendum. “Some of our clients do express their concerns about the UK’s membership with the EU. It’s definitely a worry for people living and working in Europe who are British, of which there are substantial numbers. “Having lived in Western Europe for a long time I personally feel like a European, and I think it would be very sad if the UK did leave the EU.”

The striking thing about Spectrum is the firm’s resounding focus on building and nurturing relationships. The term ‘family’ has often been used by those outside the business to describe the connection between its IFAs, and though Spectrum’s offices might be miles apart, it’s this European togetherness which is rooted in the way its advisers do business.

Does my foreign Will cover my Italian property on my death?

By Gareth Horsfall
This article is published on: 2nd July 2015

In May I held a joint event nr Lucca, with a firm of Anglo/Italian lawyers called Studio Legale Internazionale Gaglione. They are a firm I met whilst in London presenting at The Place in the Sun event. I was impressed by their knowledge but more importantly their long term view of the Italian legal profession and their moves to proactively model their business accordingly.

This swayed me into giving them a chance to present at a joint event and I have to say that it went very well indeed. All the participants gave excellent reviews for the speakers and hopefully the issue of preparing a will, or not, for these Italian property owners became a little more understandable.

In an effort to provide you with the information I thought I would write a summary. However the event itself was far too detailed and technical to give a full synopsis of the morning, but here are the highlights:

Should I make an Italian Last will and Testament as an Italian property owner or is it covered by the will in my home country?

Well the simple answer is that the will ‘might’ be covered by your home country will. But as is always the case in legal matters the situation is not exactly that straight forward.

Let’s take the 3 types of Italian will to start with.

1. THE HANDWRITTEN WILL (also known as the holographic will)

Key Points

It must be 100% handwritten
It must be signed and dated

A handwritten will is as simple as that. However, there are things to be careful of which were explained.

* The hologrpahic will is very easy to do, but just a bit too easy. If somebody contests it, this may lead to court proceedings in which the handwriting has to be examined for authenticity.

* This type of will could be lost, burnt, destroyed or stolen very easily and therefore it is wise to have more than one original. A possibility is to give one or more originals to the heirs.

* Any new will made after the date of the previous makes the oldest version invalid. Therefore, if you update the will it is wise to destroy old copies.

* You can add codicil’s (amendments) to this type of will, but it is preferential to add the wording on the same document in your own handwriting. Adding on separate sheets of paper can cause confusion and questions over the validity of the additions.

* NO witnesses are required

* No legal wording is required

* And lastly, and very importantly it is much better if the will is written in Italian. Roberta Moretti pointed out that a UK will (as an example) would stand in Italy for a UK domiciled individual. However a UK will is made under UK law and it could cause some impracticalities when trying to apply it in Italy. The biggest question of course is the cost of making a will in Italian, but the cost of having a UK will translated and made public through an Italian notary would far outstrip the cost of making an Italian will in the first place. And at approx €500 + for an Italian will (the cost rises depending on complexity of circumstances) then it is probably worth it.

2. A PUBLIC WILL
This is a will that is made in front of a notary public in Italy. You will require 2 witnesses and have to pay taxes on the will (approx €200 + Notary fees)

* This type of will would not normally be used where you expect multiple changes to your will during your lifetime as each change requires payment of the relevant taxes. In addition, each change must be witnessed.

* If you were to make a handwritten will after making a Public will then the Notary would ultimately have to define which was the last will made after the public one. More complications which cost time for the beneficiaries of your estate and money to pay the notary and taxes

* If the testator (you) does not speak Italian, the Notary will need two Witnesses who speak English to make sure that the testator is aware of what the notary reports on the will.

3. A SECRET WILL
This is a very uncommon and rarely used will, even by Italians. But it can be typed and written by a third person and 2 witnesses are required.

The notary keeps the will in an envelope and the contents are not disclosed.

This is so rarely used in Italy that it is only worth a quick mention, but it was explained that this might be used in those circumstances where a small community have an interest in knowing the wishes of someone in a village and therefore that person wants to keep those wishes secret.

Those are the 3 types of will and some interesting points that came out of the discussion.

SUCCESSION RULES
The rules of forced succession in Italy are always an issue that cause confusion. These rules apply on your Italian property when you die only if the beneficiaries live in Italy.

* If the beneficiary is NOT resident in Italy then the rules of forced heirship do not apply to them. I,e the property/asset can be distributed in whichever way you wish. (assuming that the laws of the country in which they live do not apply forced heirship rules).

* Of course, if there are beneficiaries who live in Italy and those that live in another country then Italian law regarding the Italian resident beneficaires will apply first.

* Whatever is written in the will can be challenged by a resident or NON resident beneficiary of an Italian asset (it depends on the reason of the challenge). This is worth consideration if you have family members in Italy and overseas. Also remember that forced heirship rules spread as far as nieces and nephews.

* Family members who you have no further contact with can claim on your estate. (i.e non divorced spouses or estranged family members)

* You have 10 years to challenge a will.

So what can you gain from this information? The general upshot of the meeting was that Italian law is too complicated to leave to chance. Although you may be able to apply your foreign will to your Italian asset, it is likely, depending on your circumstances, that the executors/ beneficiaries of your estate/ property will have to jump through hoops to try and sort matters out which could have been dealt with before.

IN BRIEF:
Make sure you seek the correct legal advice and plan your estate carefully.

I learnt a lot from the meeting and am going to now get my affairs in order as a result. If you would like an introduction to Roberta or Giuseppe at Studio Legale Internazionale Gaglione then just send me a quick message and I can introduce you to them.