Member News

1. Tax efficiency

For British citizens living in the UK, finding a tax-efficient strategy is usually relatively straightforward – at least when compared to managing your affairs as an overseas resident. The most popular European retirement destinations for Britons include France, Spain, Portugal, Cyprus, and Malta: these countries have very different tax structures and succession planning rules, and it is therefore vital to seek advice from experienced professionals with an in-depth knowledge of the local regime.

It is also important that, if possible, you seek this advice in advance of making your move, in this way looking to avoid seeing otherwise excellent investment returns destroyed by a tax bill which might have been avoided altogether or at least mitigated.

2. Investment risk

It is essential to establish your appetite for risk before drawing up an investment strategy, to ensure that your portfolio is suited to you. There are various tools available to help in making this evaluation, including psychometric testing. These can be used alongside a clear and objective assessment of both your assets and your financial objectives (personal and family).

It is not possible to avoid risk altogether and choosing to lower your exposure to risk can result in lower returns. You need also to consider inflation risk - rises in the cost of living resulting from even low levels of inflation can significantly reduce the spending power of your money over time, especially when interest rates are low.

Most people choose a balanced portfolio which exposes at least some of their assets to market movements, aiming to outperform inflation and to produce real returns over the medium to long term (five to ten years).

3. Your risk profile

It is well worth looking to a third-party for professional guidance as it is very difficult to be objective about your own risk profile. Poor assessment of your attitude to risk or a failure to be clear about your financial objectives could leave you with a set of investments that are either too cautious or too risky for you.

Investment forecasts can be set according to a given risk amplitude. Low amplitude is associated with less risky investments but possibly lower potential returns. Higher amplitude may well mean higher potential returns but brings with it greater investment risk. What is important is that your investment portfolio reflects your personal attitude to risk.

Your adviser should also help you to be clear about your financial objectives. Do you need your investments to provide income, growth, or both? Perhaps your priority is to protect your assets and to pass them tax-efficiently to your children and grandchildren. What is your investment horizon? Armed with this information your adviser will be able to guide you in building a portfolio matched to your financial objectives as well as your attitude to risk.

4. Portfolio diversification

Diversification of your investments is essential, making sure that your portfolio is balanced and that you are protected from over-exposure to any one asset type, country, sector or stock.

Asset types include equities, government bonds, corporate bonds, property and cash. By investing across these groups and across markets (US, UK, Europe and emerging markets) you can spread the risks and improve the chances of your portfolio performing well in the face of poor returns in any one area.

You can also choose to spread your risk by employing a ‘multi-manager’ approach where investments are shared across several fund managers, making returns less dependent on the performance of any one investment manager in different market conditions.

5. Regular reviews

Regular reviews of your portfolio are essential to ensure that, as asset prices rise and fall, your investments continue to match your risk profile together with the financial objectives that you have set. This is something that your adviser should do, probably annually, as part of the service they provide to you. It also provides an opportunity to identify whether your circumstances have changed and to adjust your portfolio accordingly.

Thoughtful and regular re-balancing of your portfolio helps to mitigate risk and can lead to improvements in performance overall.

Jason Porter is a Director of specialist expat financial advisers Blevins Franks and head of the company’s European Emigration Advisory Service. Blevins Franks has been advising Britons moving and living in Europe for over 45 years.