Beyond the convenience of one financial planning exercise, each element is connected. How you structure your assets can influence your tax position, who can receive them on your death, and whether they must go through probate or can be transferred more easily.
If you sold your UK home or business, you may be wondering how best to invest the proceeds now to improve income and growth prospects. Or you may receive an inheritance you wish to invest for the future. You probably have various investments, too, made over the years. They may have been good decisions based on your objectives at the time, but are they suitable for your life today and do they work well together as an overall portfolio?
Ask yourself:
- What are you looking to achieve? Do you need income to finance your retirement or treat yourself occasionally? Are you looking for growth to protect the long-term value of your savings?
- What is your time horizon? Do you need your savings to last just your lifetime or to pass on to your children? Or are you looking to cash in investments within a few years? Short-term investors should usually consider different options from those with longer-term perspectives.
- What are your circumstances? What are your monthly expenses? What pension savings/income do you have? Do you have family to consider and where do they live? Are you in good health? Do you expect to live in Portugal long-term or return to the UK one day? Are you expecting to buy or sell a property?
- What currency? Converting Sterling funds into Euros monthly puts your income at the mercy of exchange rate movements. British expatriates may wish to hold a mix of both currencies or use structures with currency flexibility.
- How much investment risk are you comfortable with? What level of risk does your current portfolio have?
- How much Portuguese tax are you paying on your investments? What was tax efficient in the UK is unlikely to be here; how much tax could you save by re-structuring your capital?
Your overall portfolio should be designed around the answers to these questions. A poorly aligned portfolio may fail to meet your objectives, lose real value to inflation, expose you to unnecessary risk, or be difficult to access.
Your appetite for risk
Establishing the right risk/return balance is important for your peace of mind, but it is extremely difficult to assess your own risk profile effectively. You will benefit from professional objective guidance. Some advisers use psychometric assessments to give them a greater understanding of your risk appetite and position your investments accordingly.
Asset allocation and diversification
Diversification is key to managing risk within a portfolio. Different investments carry varying levels of risk, and you need to determine the balance that works for your risk profile and objectives.
Diversification ensures you are not over-exposed to any given country, asset type, sector or stock. By spreading across different asset classes (equities, bonds, real assets) and markets (UK, US, Europe, emerging markets etc), you give your portfolio the chance to produce positive returns over time without being over-exposed to a particular asset class or sector.
Tax-efficient investment arrangements
A tax-efficient structure can keep most of your investments in one place, making them easier to manage, and provides protection to help you legitimately avoid paying too much tax. The less tax you pay, the more of your returns you get to enjoy.
Take specialist wealth management advice to establish if you can improve your tax liabilities on your investment assets and income. For example, holding investments within an approved life assurance contract can provide considerable tax advantages in Portugal and perhaps estate planning benefits too.
Regular reviews
Even if you have restructured your capital investments since moving to Portugal, you should review your portfolio annually to ensure it remains on track. Your personal circumstances may have changed, or your risk weighting may have shifted, and you need to rebalance it.
To ensure your portfolio is both tax efficient and suitable for you today and into the future, spend time with a professional financial adviser so they can get to know you and your objectives, and recommend highly personalised wealth management that covers investing, tax and estate planning.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com
These views are put forward for consideration purposes only as the suitability of any investment is dependent on the investment objectives, time horizon, and attitude to risk of the investor. The value of investments can fall as well as rise, as can the income arising from them. Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
By Christopher Moore, Partner, Blevins Franks
