Time To Review Your Financial Planning

By Gavin Scott

Over the summer months many people put off dealing with matters like their financial planning. They were busy enjoying all the Algarve has to offer in summer, entertaining visiting family and friends or taking holidays themselves. But as we move into autumn it is time to stop and consider the latest developments in the financial world. It is time to review your tax planning, investments and pensions to ensure they are up to date; designed for the current economic climate, and targeted to your personal needs and objectives.

You may already have a considered, strategic wealth management plan in place, but if not then you should aim to set one up by year-end. This way you can start 2014 knowing that your wealth management is designed with the long-term view of preserving your wealth and meeting your objectives.

Tax planning

There have been two key trends over recent years: tax rises and the crackdown on tax evasion and offshore assets. Both of these could impact on your tax planning.

Taxpayers across Europe, including here in Portugal, are paying more and more tax. Higher earners have been hit hardest, though most people are affected one way or another.

Are you sure that your assets are structured in the most tax efficient manner for Portugal, and that your tax planning takes all the latest tax changes into account? You should ask a tax planning specialist to review your current arrangements and establish if you can lower your tax liabilities on your savings and investments and protect your wealth from capital taxes where possible.

At the same time you should also consider your estate planning. If you are a British expatriate you need to establish if your worldwide estate is subject to UK inheritance tax and, if so, what steps you can take to reduce the liability for your heirs. As I discussed last week, UK inheritance tax is based on domicile rather than residency, so many British nationals living here remain caught in the tax net – and may not even realise it.

Many people intend to review their estate planning but never quite get round to it. Aim to get it sorted now, to ensure you leave as much of your estate as possible to your heirs rather than the taxman.

In tandem with tax rises, there is a move across Europe and globally towards automatic exchange of information. There is very little financial privacy left, and what there is will diminish further. Governments and tax authorities are adamant that no-one should be able to hide assets offshore anymore.

Whether you are looking to lower your personal tax liabilities or those for your heirs, it is essential to only use arrangements that are fully compliant in your country of residence as well as, in the case of inheritances, where your heirs are based.

Savings and investments

Successful investment is about managing risk versus return and having a well thought out portfolio strategy specifically based on your personal circumstances, needs and objectives.

Consider the following:

Did you buy your current investments according to a strategic overall plan, or have you bought shares and funds here and there over the years? If the latter, it is time for an overall review. Your portfolio may be riskier than you realise, and riskier than it need be to meet your objectives.

Are you confident that you have adequate diversification and the right balance between assets to reduce risk?

Is your portfolio specifically targeted to your needs?

Have any of your circumstances changed over the last year or so? If so your portfolio may need adjusting accordingly.

Has your portfolio been reviewed over the last 12 months, to see if it needs re-balancing to remain in line with your risk profile? Re-balancing helps to control risk and tends to have a positive effect on portfolio performance.

Are your savings and investments protected from institutional failure?

Finally, going back to tax planning, how tax efficient are your current investments? You will not want to lose any more of your income and gains to tax than you have to, but are your investments designed with Portugal taxation in mind? What was tax efficient in the UK is not tax efficient here. Ideally tax planning and investment planning should be tackled together.

For peace of mind that you have considered everything and have the most up to date information to hand, you should review your financial planning with the help of a professional wealth manager who specialises in providing advice to expatriates in Portugal.

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Gavin Scott, Senior Partner of Blevins Franks. Gavin 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.

Blevins Franks Financial Management Limited is authorised and regulated by the Financial Conduct Authority in the UK, reference number 179731. Where advice is provided overseas, via the Insurance Mediation Directive from Malta, the regulatory system differs in some respects from that of the UK. | www.blevinsfranks.com