For most people, the key aim of financial planning is to protect their wealth. Whether you are looking at your savings and investments, tax planning, pensions or estate planning, there are two key elements to consider – are they up-to-date and are they specifically designed around your family’s circumstances and objectives?
Protecting your wealth
We need to protect the value of our capital and income right through our retirement years. Knowing that both you and your spouse 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.
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. You can then weigh up which affect you most and establish what steps you can take to protect against them.
Threats include taxation; automatic exchange of financial information and the loss of financial privacy; frequent changes to legislation (e.g. taxation and pensions); low interest rates, inflation, asset volatility and institutional failure.
Long-term personal advice
You then need to seek advice from an experienced, expert wealth manager/financial adviser, one who is best placed to deal with all your current and future needs. You want an advisory firm which 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. They 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.
Understanding local taxation
The ideal situation would be for your adviser to live locally 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 here and all the nuances of 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.
Brexit makes it even more important to use a locally based adviser. If you live here, all elements of your financial planning, from investments to estate planning, need to be set up for Portugal, and not for the UK. And only someone with local experience can provide that. If you move between countries, your adviser should have knowledge of both and the interaction between the regimes.
Investment is probably the area where people are most concerned about losing money. All investments, 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 specifically 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.
Your advisers should have suitable, higher-level professional qualifications, and follow ‘continuing personal development’ practices to ensure their advice is always up to date. Regulation is very important, and the advisory firm should be authorised by a reputable regulatory body, such as, or on a par with, the UK’s Financial Conduct Authority. Check that the firm is authorised to give advice here in Portugal, for example, through the EU ‘passport’ system.
Note that for certain transactions you may need to use a UK-regulated adviser. For example, under the UK pension rules, if you want to transfer more than £30,000 out of a defined benefit scheme, you must first take advice from a UK FCA-regulated firm.
The sooner you review your financial planning, and set it up with a strategic, long-term vision to protect your wealth, the sooner you can put it behind you and get on enjoying your life here in the Algarve.
By Adrian Hook
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Adrian Hook is a Partner of Blevins Franks and has been providing holistic financial planning advice to UK nationals in the Algarve since 2007. Adrian is professionally qualified, holding the Diploma for Financial Advisers.