Wednesday, April 1, 2020

Things Expats With Investments Should Remember

Dealing With Forgotten and Neglected Investments

Andrew Wood

Are you one of those expats who has one or more investments which you have either forgotten about or pushed to one side because you are flummoxed about what can be done with it?

Many of us move around from place to place during our expat lifetimes and go into investments which seem good at the time and also in the place where we were based. Now these schemes are maybe not as relevant or simply do not work for us in our current location. Sometimes they are inaccessible for a long period of time and simply languish somewhere, wasting away to very low values.

Expatriates are investors out of necessity. They are not cared for in the way they would be back home. The vast majority of us get the travel bug and become lifelong travellers once we have been living and working abroad for a while.

But you need to be financially independent whilst travelling, which is often where it gets challenging. Perhaps you have some financial arrangements back home which are very likely insufficient and inappropriate for your overall lifetime needs.

We live in a fluctuating world where the only constant is change. Just when you think you have it right, someone changes the rules or moves the goal posts. It is thus essential that all investments and assets are continuously monitored for their relevance and performance.

Most expats realise the dilemma they face. To survive they need to become financially independent. They build wealth and then have difficulty in managing it successfully, often resulting in insufficient reserves to sustain them in the future. See last month’s issue “Do you have adequate retirement reserves”

Such things as deferred pensions in your home country, in which you have no control over the investment management, frequently languish and deteriorate in value. Invariably you are unaware that you have these assets. They are parked in a convenient place for the manager and are usually only going in a southerly direction.

Some plucky expats self-manage their own offshore investments. This usually takes a great deal of their time. Others have invested in specific products through advisers who neglect further attention to their clients beyond initialisation. These are the forgotten investments I refer to. The portfolio simply ails away losing real value and dwindling way behind in terms of inflation.

Do you have one of these investment plans? They seem to be catch 22 vehicles. With values less than anticipated an attempt to surrender the plan and withdraw the money often reveals a substantial hit in penalties. So, whichever way you choose to go it looks as though you are going to be the only loser. This type of experience often shreds the confidence expats have in financial advisers.

In working to get your finances back in shape you may need to restructure your old investments into a new portfolio product. There are new generation plans available today with far lower charges and superior investment choices.

When restructured correctly, in the majority of cases exit charges can be recovered in full making sure that the overall cost of the restructure to you is zero.

No matter whether you stick with your old investment vehicles or restructure to new ones there will be a maze of decisions to make, so it is imperative that you have a clear idea of what the overall strategy is and the target growth to be achieved over time to ensure your investment works best for you in your circumstances abroad.

A self risk profile assessment is essential to understand your objectives and expectations. A clear assessment of the balance between risk, expected return and attitude to investing is required. This enables you to ensure you understand the direction to be taken.

If, for example, you expect an annual growth of 10% and you feel you are a cautious investor who shies away from risk, this is impractical. These two factors do not correspond. No cautious investor in today’s markets should expect a return of that magnitude. A correct risk profile assessment is important for you to comprehend and achieve your objectives.

In formulating your plan you are wise to initially create your own financial profile for you to understand your entire situation and how you think about your finances and plans for the future. This will enable you to fit all the aspects of your current situation into a single plan so that you can see your entire picture. It will also allow you to project forward and make a meaningful life financial plan.

This is where you will identify the neglected investments you may have forgotten about. Now you can take account of these and plan to see what can be done to improve them. Sometimes it is essential to contact a professional financial adviser to understand the options you have.

There are many neglected investments held by expats. They frequently fall into decay because of neglect. Get a second opinion and make sure you are one of those who do not suffer as a result of this.

Questions to the author can be directed to PFS International Consultants at: [email protected]

Feature graphic made by Freepik from flaticon.com

Andrew Wood
“Andrew Wood is an expat affairs writer and independent financial adviser. He lives in Bangkok and has been spending a week every month in Yangon since 2012. Andrew loves Asia and has been living in various Asian countries for 33 years. He understands and advises on all aspects of “the business of living life”. Andrew can be reached at [email protected]

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -