Expatriates are often investors out of necessity but are rarely cared for in the way they would be back in their home countries. The vast majority of expats become lifelong expats once they have been living and working abroad for a few years, whereas others only become expats upon retirement.
Living in a foreign land means you need to be financially independent in the country where you reside. You may have some financial arrangements back home but in the main these will prove insufficient for your overall needs. It is also often the case that these savings are not portable and will not be the most suitable investments for someone intending to retire in a different location, often with a different currency and differing levels of expense and inflation.
It's impossible to compare your financial requirements and affairs with those in your home country because circumstances are so different.
We live in an ever-changing world where nothing seems to be constant. Just when you think you are all set in a specific area, the rules are changed and you are forced to rethink your strategy. If you have a UK pension you may know the feeling. The world of QROPS (Qualified Recognised Overseas Pension Schemes) has recently been changed and Her Majesty's Revenue and Customs has imposed unexpected amendments that have temporarily stunned pension providers. These changes, and the subsequent amendments that will follow from providers, will be the subject of a continuous change in dynamics over the next few years, and it is hard for an ordinary person to keep their finger on the pulse and remain one step ahead of the changes.
I recently met a British expat who told me he had been to see his doctor in the UK over the Holidays, but had been advised that the National Health Service had a policy of refusing treatment to any person once they have lived abroad for more than three months, without a fixed date of intended return. That, or will charge the individual as a foreigner might be charged.
Most expats realise the dilemma they face in their quest to become financially self-sufficient. They build wealth and then have difficulty managing it successfully, finding the reserves they have accumulated will not sustain them in the future due to various unexpected issues.
Such things as deferred pensions in your home country, where you have no control over how investments are managed, frequently languish and deteriorate in value. Quite often you are not even aware that you have such assets. They are simply parked in a convenient place for the manager and are usually going nowhere except downward. It is not only back home where this problem occurs however, many expats I’ve met have found that after the “Initial Sale” their so called “Advisor” had already made his commission and thus disappeared into the sunset.
Many expats have invested in specific products through so-called professional advisers who provide no follow-up service after they have got you to sign on the dotted line and have pocketed their commissions.
These neglected portfolios have deteriorated and often lost real-time value, as well as having fallen way behind in terms of inflation.
You may learn this too late and find that surrender penalties only worsen the pain.
Such an experience may have shredded your confidence in financial advisers. However, there are solutions available and one is to find an adviser you can trust. If he is worthy he will be willing to assist you in getting your investments back into shape and offer you ongoing advice and management of your investments rather than letting things fall back into neglect.
In working with you on getting your finances back in shape, your adviser may well suggest that you restructure your investment into a new portfolio product. There are new-generation facilities available that have much lower charges and greater investment choices than the older models. However before doing so you should be fully aware of any restructuring or exit penalties that will apply to exiting the old policy, along with any new fees which will be applicable when opening the new account.
Of course, your new advisor will want to be remunerated for his work, but he/ she should be able to clearly demonstrate that the new structure, inclusive of any exit fees on the older policy, will leave you financially better off and reduce the overall cost of your portfolio moving forwards!
When a plan is restructured correctly, your adviser will be able to demonstrate that any exit charges and any new charges on a future plan will work out more cost-effective than remaining in your existing structure. Making sure that the overall cost of the exercise to you is zero, or even better that you will clearly pay less for making the move.
Of course it is not only the fees that should determine whether or not a new plan is required. You should also take into account the ranges of investments available in the new plan. Whether the plan offers the same tax benefits as the older scheme, and whether any accumulated tax benefits will be lost in surrendering the old scheme - often the best solution is to keep the older plan in place and just manage it better!
In making decisions your adviser should assist you in formulating ideas about where to invest while ensuring any recommendations comply with your risk appetite. In this respect he should complete a risk profile questionnaire with you so that he understands your objectives and expectations.
If you state that annual growth of 10% is your expectation and yet you advise that you are a cautious investor, your adviser should let you know that this is impractical. These two factors do not gel. No cautious investor in today's markets should expect a return of that magnitude. Therefore the risk profile is important and will help the adviser understand your objectives, fears and attitude towards risk in the investment world.
It is also very important that your adviser understand your overall situation so that he can offer you holistic advice. Ordinarily one adviser will not look after the whole of someone’s portfolio; it is important to also remember that the advisor needs to understand what is held in the overall portfolio, so that the risk profile is applied appropriately to the clients overall circumstances and not just to the smaller portion of his holdings under the advisors management.
In formulating a plan with your adviser he should be meeting you on several occasions, explaining how he is thinking and the strategies he intends to employ. This should be an open discussion and it would be wise for you to question his thinking and challenge some of the ideas so that you both have an understanding of each other and agree on the approach.
These sessions will also allow you both get to know each other and feel comfortable with the way things are shaping. The relationship is very important and feeling that you have an adviser and confidante rather than being faced with a product-pushing salesman is imperative. Your adviser ought to be a long-term addition to your financial planning.
There are many neglected investments held by expats and they are often falling into decay because of disregard. It doesn't need to be this way and a few tweaks or a little restructuring can have you back on track in no time.
Get a second opinion and make sure you are one of those who do not suffer as a result of such neglect. Reach out to your PS & Partners advisor on +63 9177750730 or www.partners-ps.com today