The term “wealth management” covers many aspects – savings and investments, pensions, tax mitigation, estate planning, asset protection etc. For many of us they are equally important, and across all of them is the desire to protect our wealth.
First of all, we need to protect the value of our capital and income right through our retirement years. Knowing that both your spouse and yourself will be financially secure, no matter how long you live or what health issues life may throw your way, provides welcome peace of mind.
You may also want to pass wealth on to the next generations, to help your children and grandchildren as they make their way through life.
Everyone’s situation is different. On the surface many retired expatriates living here in Portugal may appear to have similar financial goals, but in fact when you consider your personal family situation, source of wealth, income needs, short and long-term aims, time horizon, risk appetite etc, your situation is quite unique. You therefore need highly personalised financial planning.
The first move to protecting your wealth is to identify the potential threats. Only then can you weigh up which affects you most and how you can take steps to protect against them.
Threats include:
▪ Taxation, which can reach quite high levels these days
▪ Exchange of financial information between tax authorities and the end of financial privacy
▪ Frequent changes to legislation, such as taxation and pensions – are you up to date?
▪ Inflation, which slowly but surely reduces your spending power over time
▪ Historically low interest rates
▪ Institutional failure
▪ Asset volatility.
You then need to seek advice from an experienced, expert wealth manager, one who is best placed to deal with all your current and future needs. You want an adviser who will be around for the long-term to provide guidance and recommendations as needed, both to yourself now and to your spouse and family after you are gone.
Since wealth management is such a personal issue, your adviser should take all the time needed, and use the necessary tools, to help to get to know you, your needs and objectives, very well. He should understand how you want your family to inherit your assets and be looked after in future. Building up a close, long-term relationship with one advisory firm produces positive results as well as peace of mind.
Your adviser should live locally here in the Algarve. They will understand what it is like to live here and cope with the local bureaucracy, and have a deep understanding of the financial planning needs of expatriates living here and the Portuguese tax regime.
They need to be able to react quickly and help you make adjustments if your personal circumstances suddenly change, or if there are reforms to local tax legislation. For example, there was limited time between the Portuguese government announcing the new legislation to tax fiscal structures like trusts in mid-December 2014 and the new rules being implemented on January 1, 2015. This affected many British expatriates living in Portugal and they needed prompt specialist guidance.
Your advisers should have suitable professional qualifications. Ideally, for British expatriates with financial planning concerning both Portugal and the UK, the firm should be authorised and regulated by the Financial Conduct Authority in the UK for providing investment and pension advice, with the necessary ‘passport’ to provide advice here in Portugal.
There are other factors to consider when choosing an advisory firm, but note that for certain transactions you should be looking for a UK regulated firm. For example, under the UK pension rules, you can only transfer out of a defined benefit scheme if you have taken advice from a UK FCA regulated firm.
Investment is probably the area where people are most concerned about losing money. All investment, including bank accounts, carry risk. However, portfolios can carry a wide spectrum of risk, depending on the assets held within it, the proportions, and the level of diversification.
So your portfolio must be based on your personal situation and risk appetite. It is essential that you obtain a clear and objective view of your risk tolerance. Your adviser can do this, for example, through psychometric tests, combined with his knowledge of your personal situation and aims for you and your family.
The sooner you review your financial planning, and set it up with a well-thought out, long-term vision to protect your wealth, the sooner you can put it behind you and get on enjoying your life here in Portugal.
By Gavin Scott
|| features@algarveresident.com
Gavin Scott, Senior Partner of Blevins Franks, has been advising expatriates on all aspects of their financial planning for more than 20 years. He has represented Blevins Franks in the Algarve since 2000. Gavin holds the Diploma for Financial Advisers. | www.blevinsfranks.com
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