What do you need to think about when it comes to creating and protecting your wealth as a French resident?

Drawing the analogy between investment planning and gardening may bring a clearer understanding of the important factors to consider, particularly when you have moved from the UK to France – not everything you have previously planted is the best for current circumstances.

Investment through the various stages of your life has seasons, as does gardening. What you successfully planted and grew in the UK may be entirely wrong for France. You have to consider your new, often very different conditions if you are to get your plants to flourish and achieve the results you are looking for. You then need to carry out regular ‘weeding’ to ensure the long-term growth of the plants you wish to develop and sustain for the future.

This is all a careful process and often involves professional guidance. A locally based adviser who understands and has years of experience dealing with the local conditions will give you the best results.

In our view, these are the key aspects that you need to address to ensure you obtain the optimum investment portfolio to suit your particular situation:

Tax and succession considerations - choosing the right tax-efficient structure

A tax-efficient structure, such as an ISA or pension plan in the UK, can keep most of your investments in one place and help you legitimately avoid paying too much tax. You want to ensure as much of your hard-earned wealth as possible is placed in the most suitable structure to limit your tax liabilities. At the same time, consider your estate planning wishes so your investment capital can be passed to your chosen heirs as easily and tax efficiently as possible.

That was perhaps easier to achieve in the UK where we are accustomed to the rules, but here in France with its complex tax and succession regimes and various reforms over the years, it is sensible to take advice from someone who is well-versed in the nuances of the French systems and how they impact your wealth.

In France, UK ISA accounts are not tax-efficient and the income and gains generated are fully taxable here as investment income – you will currently pay 30% which covers both income tax and social charges.

There are, however, compliant arrangements available in France, for example, assurance vie, that provide significant tax advantages as well as estate planning benefits. There are various assurance vie available though, so you need to choose the most suitable for your circumstances and objectives.

Establishing your risk profile and optimum portfolio

Most of us recognise that for some of our assets, exposure to market movements gives us a better chance of outperforming inflation and producing real returns over the medium to long term.

However, the starting point has to be to obtain a clear and objective assessment of your appetite for risk. These days there are some very sophisticated ways of evaluating your risk appetite, involving a combination of psychometric assessments and consideration of your investment aims and other assets. Since this is an emotional issue, you will benefit from third party professional, objective guidance here.

The key is then ensuring your investment portfolio matches your attitude to risk. Without such a sound assessment being then matched to the optimum blend of investments, you could find yourself with a portfolio that is too risky or too cautious for you.

Another important initial step in ensuring your portfolio is suitable for you is to establish your objectives. Are you looking for income, growth or a combination of the two? What is your investment time horizon? Your adviser should help you build a portfolio based on both your risk profile and objectives.

Diversify, diversify, diversify

The higher your concentration in one particular investment type or area, the greater the risk. By spreading across different asset types (such as equities, bonds, property, cash) and then across sectors, geographical regions and companies, you give your portfolio the chance to produce positive returns over time without being vulnerable to any single area or stock under-performing.

You can take diversification further by utilising a 'multi-manager' approach to spread your investments out among several carefully-selected fund managers. This reduces your reliance on any one manager making the right decisions in all market conditions.

Regular reviews

You should then review your portfolio, usually once a year. As asset values rise and fall, your portfolio can shift away from the one designed to match your risk profile and objectives. You may need to make adjustments to re-establish your weightings. With today’s challenging and changing climate, reviews are even more important to help control risk and encourage a positive effect on portfolio performance.

You also need to consider any changes in your personal circumstances, as well as to tax and succession regulations – particularly in France where the annual budgets can introduce significant tax reforms.

Your investment adviser

Choosing your adviser is another key element of successful wealth management. If you are still using a UK-based adviser there are two issues to consider.

Are your financial arrangements tailored for your life in France or are they actually better suited to a UK resident?

Brexit dissolved automatic ‘passporting’ rights for UK financial services in the EU, so unless they have made other arrangements, UK advisers, banks and financial providers may no longer able to legally service French residents. If you have UK bank accounts or investments, you may be restricted from making changes, such as moving funds or applying for new services, or they may be closed altogether.

To bring all these guidelines together, take personalised, quality advice from a regulated, locally-based adviser. With the right strategy in place for your life in France, you can help protect and grow your wealth in real terms – not only during your lifetime but for the next generations to enjoy.

This article should not be construed as providing any personalised investment or taxation advice. Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.

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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While it may be tempting to choose investments based on past performance, this tactic rarely works in the long term. So how can you put your best foot forward as an investor?

Reading about investing, you will usually find the disclaimer ‘past performance is no indicator of future performance’. While this may seem like a standard get-out clause inserted by lawyers, it serves as an important reminder that nothing is certain in the world of investment.

There is a reason we aren’t all making millions on the stock markets! Financial markets are complicated and unpredictable, with no formula you can follow to ensure you will strike big, or even get out more than you put in. It is important for private investors to carefully manage risk, as investment success often comes down to the sheer luck of being in the right place at the right time.

Given this element of chance, it is important not to get swayed by the latest trend and chase good performance. History repeatedly shows that the best performer one year could be amongst the worst the following year.

Asset class performance

There have been many examples of ‘star’ assets that have soared before dramatically crashing back to earth. The dot.com bubble famously saw US technology stocks in the Nasdaq Index rise five-fold in the late 1990s before falling 77% in 2002, wiping out billions of dollars. Just recently we have witnessed the less dramatic, but nonetheless volatile, fortunes of bitcoin and other cryptocurrencies change rapidly.

Essentially, there is little long-term benefit in only picking the latest top-performing asset. If you look at which asset type generated the most returns during a year, you would likely see a different star each month. Take 2019 – the year started with North American equities leading the way, only to move over for UK stocks the next month, then European shares before property took the spotlight. May saw Japanese equities ahead, followed by emerging markets, then Asia-Pacific stocks. UK bonds in varying forms took over for the next four months, before the year ended with cash in the lead.

Over the ten-year period from 2010, no two years followed the same pattern, and one asset class rarely spent more than one month at the top. Without a crystal ball or a time machine, you could not have picked the right winners every time.

Fund manager performance

The same is true of ‘star’ fund managers. With hundreds of funds available from different managers, it can be difficult to know where to turn. While many of them seem to offer similar investment opportunities, the difference in performance can be significant… but often temporary.

Let’s say you had invested £10,000 in a UK-listed shares fund over the ten-year period starting 1 January 2010. If you happened to be in the best performing fund over that period, you would have made a net profit of 440%. Meanwhile, investing in the lowest performing fund would have brought a much reduced profit of 49%. Similarly, the best-performing property fund over that period would have returned profits of 227% versus 72% from the lowest.

On the face of it, it looks like you should just pick the best performing fund. But again, choosing a previously successful fund manager is no way to guarantee ongoing top performance. Statistics illustrate how the performance of the top 25% of fund managers tends to weaken over time. Of the 56 managers in the top quarter of performers in 2015, for instance, only four remained the next year.

A sensible investment approach

So how can you improve your chances of investment success? There are some key principles you can follow to help manage risk and reach your financial goals.

Diversification is crucial. Spreading your investments across multiple areas is the optimal strategy for minimising risk. This should include a range of different asset classes (shares, bonds, cash, property) as well as geographical regions and market sectors. Diversifying in this way gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area or stock under-performing. You can diversify further using a dynamic ‘multi-manager’ approach, which reduces reliance on any one manager making the right decisions in all market conditions.

It is also important to think long term and have patience when investing. As we have seen, chasing good, quick returns rarely succeeds in the long run. Likewise, exiting a market when it dips would lock in your losses and make you miss any rebounds when markets recover. Research shows that ‘time in’ the market – staying fully invested – is a more successful strategy for investors than trying to ‘time’ the market.

Ultimately, of course, you need to make sure your portfolio is matched to your personal situation, income requirements, goals and timeline, alongside your appetite for risk. This is best assessed objectively by an experienced professional who can then build a diversified portfolio with the right balance of risk/return for your peace of mind.

For the best results, talk to a locally based adviser with cross-border experience who can bring all the principles together while ensuring your arrangements are structured as tax-efficiently as possible for your life in France.

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.

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.