Is your financial planning in shape for today?

Is your financial planning in shape for today?

When was the last time you gave your finances a health check? If it was a while ago or you cannot remember, you will almost certainly benefit from reviewing your situation.

Not only do your circumstances and goals generally evolve over time, but the rules and available options can change too. If you don’t keep up, you could find you are paying more taxes than you need to or missing out on new opportunities that offer significant advantages.

You will benefit most from a holistic review of your financial situation – looking at how your savings, investments, other assets, tax planning, pensions and estate planning are structured and how they can best work together.

Protecting your wealth
It is only natural to want to preserve your wealth and see it grow over time. This is the key to enjoying the lifestyle you want while also providing lasting financial security for your family and future generations.

However, today’s economic and political climate presents many challenges to capital protection and growth.

The prolonged period of low interest rates, for example, has made it harder to achieve decent returns on bank deposits and lower-risk investments, while creeping inflation further erodes the value of capital and income. This is also a time of heightened global tax scrutiny, with frequent changes to tax and pensions legislation. And, of course, Brexit is playing its part in stoking economic uncertainty and fluctuations in the value of sterling.

At times like this, careful cross-border planning plays a particularly important role in securing your financial security over the long term. You need to weigh up which issues affect you most and establish what you can do to protect against them.

DIY vs expert advice
While some choose a DIY approach to financial planning, most people who have built up or inherited wealth will benefit from an independent and expert review of their finances. After all, it is difficult to take a step back and look at your broad financial situation from a truly objective point of view, or fully understand the complex tax implications. As the goalposts often change, it is quite easy to get DIY tax planning wrong and potentially invite an unexpected tax bill or even a tax investigation.

For the best results, talk to a financial adviser with cross-border experience. They should take time and use relevant tools to thoroughly understand your unique situation, needs and objectives to establish tax-efficient solutions for you and your heirs.

Investment planning
Investment is usually the area where people are most concerned about losing money. While all investments – even bank accounts – carry risk, a suitably diversified portfolio can help manage risk within your comfort level. It is essential to establish a clear and objective view of your risk tolerance to determine the investment approach that will best suit you. An adviser is best placed to do this objectively using psychometric testing, for example, combined with their knowledge of your family’s situation in Portugal and your financial goals.

Understanding local taxation
If you live here, all elements of your financial planning – from investments to estate planning – need to be set up for Portugal, not for the UK. Ideally, your adviser should be based in the Algarve and have first-hand experience of the issues facing expatriates here, financial and otherwise. Crucially, they should also have in-depth understanding of cross-border tax planning, including the Portuguese tax regime and how it interacts with UK rules.

A local adviser can also react quickly and help you make adjustments if your personal circumstances change, or if there are Brexit developments or tax reforms that may affect you – including new opportunities. If you decide to relocate again or return to the UK at any point, they can help you navigate the tax regimes and residency rules of both countries.

Protection through regulation
Make sure you only deal with an adviser that has suitable, higher-level professional qualifications. The advisory firm should be authorised by a reputable regulatory body, such as the UK’s Financial Conduct Authority (FCA), and also authorised to give advice here in Portugal.

Note that for certain transactions, using a UK-regulated adviser is mandatory, such as if you want to transfer from a ‘defined benefit’ pension scheme worth £30,000 or more a year. However, it is sensible for anyone considering their pension options to help protect their retirement wealth through UK-regulated advice.

Remember: if you are living in Portugal, your finances should be set up for your life here, not for your old life in the UK. The sooner you set up a strategic, long-term vision to protect your wealth, the sooner you can relax into a prosperous future in the Algarve.

All advice received from Blevins Franks is personalised and provided in writing. This article, however, should not be construed as providing any personalised taxation or investment advice.

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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.