There has been much discussion and finger pointing following the events that produced the so-called financial meltdown of 2007/08 and the problems which followed, but whatever the reasons and who or what was to blame, it happened, and the aftershocks are still being felt throughout the world’s financial markets.
The aftershocks are taking on different shapes as we get further from the actual events; the real difference in today’s financial market is the speed and number of changes taking place. New and tougher legislation on most, if not all, financial entities is creating change throughout the industry, and so often it’s the individual investor that is suffering the most impact and uncertainty.
Unfortunately when faced with uncertainty, we are most inclined to take the path of least resistance: in other words we do nothing – which is almost certainly the opposite of what we should do where our finances are concerned. What is required now is not really that different from before – careful, considered, professional and proactive activity – anything less is certain to cost us money!
Of course, our dilemma is how do we get this activity and from where? Our choices range from DIY through to full daily active management – in between being the many different and sometimes nefarious middlemen. So, finding the best way can be a very daunting task indeed.
Keep calm and carry on
Unless we are very experienced in managing our own finances we should start with finding the right advisor to work with. His or her job is to identify, build and control the correct plan – the plan that fits our profile and needs, short term through to long term and all points in between.
This specific task is the foundation for managing our finances and choosing the correct investment strategies and products – and the best expertise to work with. Indeed a financial advisor’s role is more involved with finding and working with the best experts, rather than choosing actual investments.
As in any other situation where we are buying products and services, there is a sales process involved, which means we have to consider trust and understanding as a prerequisite for choosing our advisor. This is our first and most important job, because we need to trust our advisors to make the correct choices for us and our futures, not for their commission payments today.
Such an important task should not be taken lightly. Protecting our assets and ensuring a secure future is not simply a matter of making ad hoc investments, it requires a diverse portfolio that balances risk and reward, age and income requirements and tax and security.
This is our overriding choice and we need to make it calmly and wisely, considering the individual’s and company’s track record, strength and reputation, always remembering that we should not be blinded by headline return rate promises but consider the long term strategies of a complete individual plan.
What should be in our plan?
Equities, commodities, structured notes, government/corporate bonds, cash, stocks, unit trusts, exchange-traded funds, Reits, Options and Warrants, Gilts, Hedge Funds, Collective Investment Schemes, Unit Trusts etc. etc. the list is very extensive!
Further, where should the portfolio be held and in what type of vehicle, for example on a platform or in a wrapper?
We need also to decide how hard our money should work for us. We should not simply chase the maximum return; rather we should work to achieve the ‘right’ return to fit with our profile and requirements.
This means that when we are approaching ‘retirement’ or have ‘retired’ and rely on our investments for income, we must be much more aware of the need to protect our future. Therefore we must tie our investment more strongly to the need of income at minimum risk.
The bottom line, therefore, is to ensure that we work to a plan for the remainder of our lives, and consider what happens to our money after we have gone. This requires careful planning and strong and constant on-going management in a tax efficient and secure environment – without these elements in place our future could turn out to be a very dismal and uncomfortable place to live.
This facility is not suitable for all expatriates, and we recommend that advice is sought before one makes any commitment.
By William Offen
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William Offen is Blacktower Financial Management (International) Country Manager, Portugal. Blacktower is an Independent Financial Adviser.
289 355 685
