Blevins Franks Financial Tips - Why Time in the Markets Matters

When you have worked hard to build up your savings, it is not always easy to decide how best to look after them, especially if you are nearing retirement or already enjoying your retirement years. You most likely have some or all of the following objectives: 

·      Protect your capital and maintain financial security  

·      Generate an income  

·      Grow the capital, but with an acceptable level of risk 

·      Leave a healthy inheritance to children and grandchildren

You know that you need to invest to earn enough capital growth but may also be wary about taking on too much investment risk.  And if you are invested geopolitical events and market volatility can make you nervous and wonder if you should sell and sit in cash for a while.

In truth, for most people, successful investing is hard; financial markets are complicated and can be unpredictable. But by getting a better understanding of investment principles you can avoid some common pitfalls. Following these principles and working with a financial adviser will help turn your goals into reality.

The risks of trying to time the market

Successful investors are marathon runners, not sprinters. So staying invested in the markets over the long term usually gives the best returns. When you see the markets fluctuate, it can be tempting to buy and sell investments, either to chase short-term gains or because you are afraid share prices will fall.  Unfortunately, this can often result in entering or exiting the market at precisely the wrong time and making emotional investment decisions will rarely help you meet your longer-term financial goals.

For individual investors, it is extremely difficult to anticipate and deal with the wide range and speed of events and issues which can impact economies and markets. At any time, external events, investor sentiment and even rumours can have a negative or positive impact, often unexpectedly and suddenly. Reacting to current conditions is usually too late, so to be successful, you would need to foresee both the best time to buy and to sell. Even experienced investors cannot get this right all the time. 

Then there is the risk of missing out. It is surprising what a difference certain days in a market cycle can make to returns. If, for example, you are not invested because you are waiting for share prices to stabilise after a period of volatility, you could miss benefiting from rebound days if the market suddenly rallies.  

To illustrate this, if you had invested £100,000 in the FTSE All-Share index for the full ten-year period up to 31 December 2021, and stayed invested the whole time, you would have enjoyed a profit (before fees and charges), of £110,700, so  your investment would notionally have more than doubled to £210,700, including the original investment. Investors who missed the five, ten and twenty best days saw profits, before fees and charges are applied, drop to £64,090, £40,540 and £6,820 respectively. Those who missed the best 30 days saw a loss of £15,800.

While it may feel uncomfortable to stay invested when markets fluctuate, this discipline usually produces better returns over the longer term than chasing short-term gains.

The importance of diversification

Before investing, you need to ensure that your strategy is well diversified and suitable for your situation, risk appetite and goals. Even the most patient investor is unlikely to benefit from an ill-fitting portfolio that does not meet their needs or is overly concentrated in one area. 

The best strategy for minimising risk is to diversify by spreading investments across multiple, unrelated areas. This should include a range of different asset classes (shares, bonds, cash and ‘real’ assets such as property) as well as geographical regions and market sectors. Diversification gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area or stock under-performing. 

Choosing an adviser who uses a dynamic ‘multi-manager’ approach can help increase diversification. By combining several carefully selected fund managers, this reduces reliance on any one manager making the right decisions in all market conditions. 

Establishing a suitable investment approach

When investing, it is crucial to carefully assess your situation, income requirements, goals and timeline alongside your appetite for risk. This is best done objectively by an experienced professional who can then build a diversified portfolio with the right balance of risk/return for your peace of mind. Your arrangements should also be structured as tax-efficiently as possible for your country of residence. 

If you have capital to invest but today’s climate makes you nervous, you could consider spreading the timing of your investments over a period by investing in tranches. The ‘pound (or euro/dollar) cost averaging’ approach can help smooth out volatility and potentially improve average returns over longer time periods. 

British expatriates may also benefit from exploring investment structures that have a multi-currency facility to minimise exchange rate risk. This would allow you to invest, for example, in sterling now and then switch to euros as you wished, and choose the currency of withdrawals. 

Ultimately, a long-term, diversified investment approach is vital to help protect and grow your capital, whatever the economic climate. While a ‘keep calm and stay invested’ approach usually gives the best overall results over time, make sure you still review your planning once a year, or sooner if your circumstances change, to realign your investments with your risk profile and continue meeting your long-term financial goals. 

These views are put forward for consideration purposes only as the suitability of any investment is dependent on individual circumstances; take individual personalised advice. The value of investments can fall as well as rise as can the income arising from them. Past performance should not be seen as an indication of future performance.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). 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 France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

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Strategic & Effective Financial Planning for the New Year with Corporate Partner Blevins Franks

Strategic Financial Planning for the New Year
By Rob Kay - Senior Partner Blevins Franks

Of course, you can review your financial planning any time to ensure it is on the right path, but the New Year is the perfect prompt to do so if you have not taken a fresh look at it for a while.  And perhaps it is even more important this year as we navigate a post-Brexit world.

One key reason to review your wealth management is to ensure it is up to date. Establish whether any tax rules or financial regulations have changed, and consider if developments in your personal and family circumstances mean you should adjust previous arrangements.

But an effective review of your financial planning, to ensure it is suitable for your life in France and your wishes for the future, needs to go beyond that.  

The benefits of strategic planning
Many people only consider segments of their finances at a time. They may have bought shares in companies they like and/or invested in funds recommended by a financial adviser years ago.  They may speak to a tax accountant to learn about French taxation and perhaps ask about tax planning opportunities.  Then they speak to a lawyer about setting up a French will.  At some point they will look at their pension funds and try and work out how best to access their retirement savings. 

For truly effective financial planning, however, you need to consider all these various aspects together.  For example, how you hold your investments can make a difference to your French tax liabilities.  Estate planning in France is no simple matter, with its complex succession tax regime and forced heirship rules, and how you own assets can impact on what you can achieve.  And when deciding what to do with your pensions, look at all your retirement savings and what income they can generate for you.

Here is a summary of three key areas you should consider in your financial planning review. 

French residency and taxation 
The fact that you are resident in France, rather than the UK, has a significant impact on your financial planning. First of all, make sure you know where you are resident for tax purposes, especially if you are new to France or spend time in both countries.  The French and UK tax residence rules can be more complex than first meets the eye. The double tax treaty determines where you pay tax if you are resident in one country and earn income in the other. 

Regardless of how effective your tax planning in the UK was, you pretty much need to start afresh in France. What was tax efficient across the Channel is unlikely to be tax efficient here. Have you explored all the compliant arrangements that provide tax benefits in France?  Assurance-vie, for example, can provide a range of advantages that go beyond lowering your tax bill.

Estate planning
Do not leave estate planning to the final stage of financial planning.  The way you own property and investments in France makes a difference to how you can distribute your assets on death and how much tax your beneficiaries pay. So take this into consideration when buying assets and setting up investment arrangements. 

Succession law in France protects children over your spouse.  This can have unwelcome consequences for families with children from previous marriages, unless you plan ahead. UK nationals can use the EU regulation – ‘Brussels IV’ – to distribute their estate under UK law, but do research this first as it may not be the best solution for you. 

Financial structuring for life in France 
Perhaps the key rule for financial planning is that it must be specifically structured around your personal circumstances – your lifestyle today and plans for the future, family situation, income requirements, objectives, time horizon and risk tolerance. 

If you do not already have a strategic financial plan in place for France, you may need to take a completely fresh look at all your savings and investments and consider if they are suitable for you today and the current economic climate, for example:

Are they too risky? 
Do you have adequate diversification?
Can they provide income without risking the capital? 
Could you consolidate shares and funds so they are easier to manage? 

Tax liabilities
And, at the same time, consider your tax liabilities on investment income and gains and whether you could use alternative tax-efficient arrangements to hold your investments.  And how will these savings be passed to your heirs? What inheritance taxes will they have to pay? Can the funds be passed on directly or will there be a lengthy probate process?

Some assurance-vie allow you to hold your choice of investment assets while providing tax and estate planning benefits. There are various ones available so choose the one that works for you.

Securing the best results
Every family is different. Your strategic financial planning must be carefully designed for you. All the various aspects should work cohesively together to create an overall wealth management plan that provides long-term financial security for yourself and achieves your wishes for your heirs.  

For peace of mind that you have covered everything, that you have understood the intricacies of French taxation and not missed out on tax planning opportunities, and that making one financial decision will not have unexpected consequences on another, take expert, professional advice, ideally from a locally based cross-border wealth management specialist. If you still use a UK-based financial adviser, confirm that they can continue to provide services to you in France after Brexit. And as is always the case, your adviser should take the time to get to know you to then outline personalised recommendations for you. 

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.

You can find other financial advisory articles by visiting our website

Benefit from Expert Financial Advice with our Corporate Partner Blevins Franks - Specialists in Strategic Financial Planning

BLEVINS FRANKS - SPECIALISTS IN STRATEGIC FINANCIAL PLANNING

If you’re a UK national living in France or planning to move here permanently, you will benefit from expert advice to make the most of your wealth and minimise taxation. 

Blevins Franks has 45 years’ experience providing cross-border tax, pensions, estate planning and investment advice to British expatriates across Southern Europe. Advisers and support teams live and work throughout France, Monaco, Spain, Portugal, Cyprus, Malta and the UK to provide a local, personalised service.

The Local Team
With an office in the French Riviera for over two decades, Blevins Franks is well-established in the region, providing a genuinely holistic approach to financial planning on your doorstep.

View the Blevins Franks Corporate Feature