Managing your Investments when living in Portugal by Blevins Franks

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Moving to Portugal offers not just the chance to embrace a new lifestyle, it is also the perfect opportunity to review your investments and savings, alter your tax and estate planning to benefit from local regimes, and ensure that you are not only fully compliant but also managing your wealth efficiently.

To enjoy your new life in the sunny Algarve, well-advised financial planning is essential. The sensible first step is a review of your current investments and savings. In the article below, Adrian Hook, partner at Blevins Franks, provides a checklist of questions to ask in order to clarify your objectives and needs.

Blevins Franks provides expert wealth management advice on cross-border tax issues, estate planning, pensions and investments to their clients in Portugal and across Europe. With offices in Loulé, Algarve, (as well as in Lisbon), Blevins Franks offers integrated advice and financial services to expats living in the Algarve and the rest of Portugal

by Adrian Hook, partner, Blevins Franks

Are you managing your investments to be suitable for your life abroad? Your combined investment portfolio should be specifically structured around your risk profile, objectives and circumstances, as well as provide tax and inheritance planning advantages in your country of residence.

Moving to a new country is the perfect opportunity to have a fresh look at your savings and investments.  You need to adjust your tax planning and estate planning to take account of the local tax and succession regimes, and it makes perfect sense to review your investment capital at the same time.

Besides the convenience of getting everything done at once, it is all interrelated anyway. The way you hold your assets may affect your tax liabilities today and what inheritance tax your heirs will pay.  It can also impact whom you can leave the assets to on death and whether they will need to go through probate or can be easily passed on.

If you make a good profit on selling your UK home, or perhaps a business, when relocating abroad and these funds are sitting in the bank, you may be wondering how best to invest the money to give you better income and growth prospects.  Or you may receive an inheritance you want to invest for the future.

You probably have various investments too, made over the years, whether it is ISAs, company shares, or equity and bond funds.  They may have been good decisions at the time, based on your objectives back then, but are they suitable for your life today as an expatriate and do they work well together as an overall portfolio?

Start your review by asking yourself a few questions –
  • What are you looking to achieve? Do you need income to help finance your retirement or treat yourself occasionally? Or are you looking for growth, to protect the value of your savings for the long-term? Or is it both?
  • What is your time horizon? Do you need your savings to last just your lifetime, or do you hope to pass on wealth to your children? Or are you looking to cash in investments within a few years? Short-term investors should usually consider different options to longer-term ones.
  • What are your circumstances? What are your monthly expenses? What pension savings/income do you have? Do you have family to consider? Are you in good health? Do you expect to live here long-term? Are you expecting to buy or sell a property?
  • What currency? Converting Sterling funds into Euros for your expenses puts your income at the mercy of exchange rate movements.   British expatriates may wish to hold a mix of both currencies, and/or use investment structures that provide currency flexibility.
  • How much investment risk are you really comfortable with? And what level of risk does your current portfolio have?
  • How much tax are you paying on your investments? What was tax efficient in the UK is unlikely to be tax efficient abroad, so how much tax could you save by re-structuring your capital?

Your overall investment strategy should be specifically designed around the answers to the above questions, and your portfolio created and managed to meet your circumstances and goals.  An ill-fitting portfolio may not work as hard as you need it to, or be eroded by inflation, or too risky for you, or difficult to access.

Your appetite for risk
Establishing your objectives and determining your risk tolerance are the starting points for a successful investment strategy.
You need to pinpoint the right risk/return balance for your peace of mind, but it is extremely difficult to effectively assess your own risk profile. You will benefit from third-party professional objective guidance – there are some sophisticated ways of evaluating your risk appetite, with some advisers using psychometric assessments. This gives them greater understanding of your attitude to risk and helps position your investments accordingly, so your portfolio is neither too risky nor too cautious.

Asset allocation and diversification
Diversification is key to managing risk within a portfolio.  Different investments carry different levels of risk, so determine which balance works for your risk profile and objectives.
Your investments need to be suitably diversified to ensure you are not over-exposed to any given country, asset type, sector or stock. By spreading across different asset types (equities, bonds, property, cash) and markets (UK, US, Europe, emerging markets etc), you give your portfolio the chance to produce positive returns over time without being vulnerable to any single area or asset class under-performing.
This can be extended one further step. Utilising a ‘multi-manager’, approach where several different fund managers are blended together, can reduce your reliance on one investment manager making the right decisions in all market conditions.

Tax-efficient investment arrangements
A tax-efficient structure can keep most of your investments in one place, making them easier to manage, and provide 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 countries like France, Spain, Portugal and Cyprus, and sometimes estate planning benefits too.

Regular reviews
Even if you have re-structured your capital investments since moving abroad, it is still important to review your portfolio around once a year to confirm if it remains on track.  Your personal circumstances may have changed, or your risk weighting may have shifted as values rise and fall, in which case you may need to re-balance 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 from Blevins Franks so they can get to know you and your objectives, and recommend highly personalised wealth management that covers investing, tax and estate planning.
This article should not be construed as providing any personalised taxation or investment advice. Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Blevins Franks Wealth Management Limited (BFWML) is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts, retirement schemes and companies. This promotion has been approved and issued by BFWML.
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