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Expat Investor : August 2009
EXPAT MANAGEMENT only being valid in order to complete the sale of a particular property. As soon as that property has completed, the Power of Attorney comes to an end. For example, Charlie lives in Spain yet retains several properties in the UK which he rents out. He has completed a restricted general power of attorney in favour of his brother. This power of attorney will allow Charlie’s brother to rent out the properties and also access the rental property bank account in order to maintain the properties. Charlie is also able to act whilst the power of attorney is in place. It is possible to cancel a general power of attorney at any time.The exception is where a power of attorney has been made irrevocable; however this is generally restricted to commercial contracts. Cancellation can be achieved verbally, in writing or by deed.However, the cancellation is not effective until the attorney has received the cancellation. Lasting Power of Attorney There are two types of lasting power of attorney: property and affairs, and personal welfare. Introduced into England and Wales on 1 October 2007, lasting power of attorney replaced the previous Enduring Power of Attorney Act 1985. A property and affairs lasting power of attorney allows you to select a person who will make decisions about how to manage your property and financial affairs. This type of power of attorney can be used whilst the donor (the person who executed the document) is still mentally capable, unless the power of attorney is restricted in some way. Even though you may still be able to make decisions yourself, it may be easier to delegate certain powers while you are still mentally capable. For example, if you are living out of the country for long periods of time, or you find it difficult to maintain regular communication, then you may benefit from a lasting power of attorney. The main difference between a lasting power of attorney and a general power of attorney is that a lasting power of attorney remains valid even if you become mentally incapable. It is also possible to draft a lasting power of attorney to come into effect only if or when you lack capacity to make decisions for yourself. Therefore, you are able to maintain total control whilst you are able to make decisions, but if you become mentally incapable you have chosen who you would like to manage your financial affairs. A personal welfare lasting power of attorney allows the attorney to make decisions about your healthcare and welfare. These decisions include refusing or consenting to medical treatment on your behalf and deciding where you will reside, such as in a hospice or a retirement home. These decisions can only be taken when you lack capacity to make such decisions yourself. If you choose to execute a personal welfare lasting power of attorney, as well as a July/August 2009 ? EXPAT INVESTOR 17 property and affairs lasting power of attorney, you are able to appoint different people to be your attorney(s) on each document. Lasting powers of attorney are proving to be popular, and in the first eight months since lasting powers of attorney were introduced, 17,806 applications to the Office of Public Guardian have been made to register lasting powers of attorney documents. Of these, 82% were for property and affairs, and 18% were for personal welfare. The most popular age for registering applications for personal welfare is 45 indicating that it is not limited to people in their older age. Who should be an attorney? Selecting a power of attorney can be a difficult decision, and not one that should be rushed into. An attorney should be someone you trust and who is fully aware of your wishes and life views. For example, it could be that you would only ever wish to invest into ethical funds or that you would prefer not to be resuscitated from a life-threatening situation. When you select an attorney it is important that you speak with them so they are aware of your wishes and of your long-term views. If, for example, you would expect your attorney to make decisions about medical treatment, you should ensure that the person you appoint would be comfortable making this decision. Anyone over the age of 18 is able to be an attorney. However, those who have been declared bankrupt are not able to be an attorney for a property and affairs lasting power of attorney, and an attorney may be removed from duty should they become bankrupt at a later date. As a lasting power of attorney is generally executed years in advance of use, it may be prudent for more than one attorney to be appointed. What it means to be an attorney Becoming an attorney carries a number of responsibilities. An attorney owes a fiduciary duty to the donor and cannot act to benefit themselves or other persons to the detriment of the donor or the donor’s estate. The attorney owes a duty of skill and care commensurate with their degree of expertise, whether they are being paid or not. For example, if a solicitor is appointed as an attorney their duty of care would be higher than that of a non-legally trained individual. Clients who live permanently outside the UK may find it is more appropriate to nominate a local law power of attorney within the jurisdiction they live. It is paramount that you seek specialist advice when it comes to power of attorney abroad, and if you have assets in several countries you may need to consider a power of attorney for each country, as it is unlikely that a power of attorney executed in England would be acceptable in Spain. If you are interested in implementing a power of attorney, speak with either your financial adviser or your solicitor who can discuss your requirements and recommend a suitable course of action. Remember that planning for the future can prevent conflict between families and ensure that you and your loved ones are provided for. *Figures can be found on the Alzheimers Research Trust website: www.Alzheimers- Research.org.uk Investor Serving expats for more than 16 years Now celebrating our 21st anniversary www.expatinvestor.com July/Aug 2009 firstname.lastname@example.org June 2005 In this issue 2 7 Expat labels Domicile, resident, non-resident -– which label should be you be sticking on your lapel during your stint overseas? 12 18 23 Healthcare costs and charges Check out our survey to find out how greater saving you could be making on your international healthcare insurance premiums. Offshore savings Best buy savings accounts and offshore funds. Apart-hotels Why apart-hotels are turning the heads of expatriates. Offshore Savings Survey Find out from the providers of the best buy savings accounts, what's currently finding favour with saving expats. Sorting the investing carefree from the worriers An innovative method to determine investors’ risk tolerance levels has been introduced by wealth manager HFM Columbus. Hannah Beecham reports on how it works and what the tests say about you. A new psychometric risk profiling tool commissioned by wealth manager HFM Columbus will enable its managers to “more accurately understand its clients’ approach to investment and attitude to risk”. The company – which offers investment solutions aimed at the higher net worth end of the market – is using a bespoke service designed to assess what it calls the “real” investment instincts of clients. “Our analysis of the typical tick box questionnaires deployed by most companies investing on behalf of their clients has invariably shown the majority of clients veer towards the median,” explains HFM Columbus director Marcus Carlton. “We believe the new psychometric www.expatinvestor.com Bringing advisers and investors together profiler will help us identify carefree people and worriers, those who need more information up front and are engaged with their investments and those who are impulsive types who might make quick decisions but who may come to regret them later. It is, in short, a more scientific indicator of risk appetite. “As well as being able to identify risk traits the profiler will give us helpful tips on how best to serve those particular clients – for example, the degree to which they will read supporting documentation or not and whether we need to be more pedantic in bringing certain aspects of an investment to their attention,” he adds. Personality profilers are traditionally used by human me&my easy option Enjoy a great rate and build for the future. resources teams at recruitment stage – but are thought to be less common when deployed in understanding private investors’ attitudes to risk. Psychometric profiling typically embraces five major personality traits, which are: ? Openness – appreciation for art emotion adventure, unusual ideas, curiosity, and variety of experience ? Conscientiousness – a tendency to show self-discipline, act dutifully and aim for achievement; planned rather than spontaneous behaviour ? Extraversion – energy, positive emotions, urgency and the tendency to seek stimulation and the company of others ? Agreeableness – a tendency to be compassionate and cooperative rather than suspicious and antagonistic towards others ? Emotional stability – a tendency to experience unpleasant emotions easily, such as anger, anxiety, depression or vulnerability “We are focusing principally on the ‘Conscientiousness’ variant to ascertain how much or how little the client wishes to engage in the advice process and to ensure that we deliver the correct amount and type of information in order for them to make a decision,” explains Mr Carlton. “We anticipate that the clients’ degree of conscientiousness will inform us if they are rash decision makers or if they make more studied decisions, and the profiler will also look at emotional stability in order to 2.75% Global Saver To subscribe to Expat Investor, fill in the form on page 20 or visit: analyse likely reaction to unexpected outcomes – for example severe market volatility – so that we can protect clients and manage their expectations better.” HFM Columbus stresses that its new psychometric profiler will not replace conventional client questionnaires, and neither will it replace ‘attitude to risk’-type questionnaires. “Rather, it is designed to enhance our understanding of client risk attitudes.” Meanwhile, for those of you not able to access this new profile tool, here are my own top tips for investing. ? Indulge in a little financial self- analysis. Start by outlining a detailed plan of your financial objectives. What do you want to do with your money? By clearly identifying your goals, you will find it easier to pick the appropriate investment vehicles to achieve them. ? Review your plan regularly. Check that your strategy is delivering a proportionate balance between risk and return. ? Research the four main asset classes – equities, bonds, property and cash deposits. Understand their fundamental characteristics. This will help you to find the right mix of asset classes for your portfolio – a mix that matches your risk appetite with your financial objectives. Risk is a necessary element of asset management and one which all investors must build into their investment strategy. Gross/p.a. • Annual, monthly and deferred interest options available • Minimum balance only £5,000 Interest rates effective from 2nd April 2009. 2.75% is payable for balances of £5,000 and above with annual interest. 2.72% (AER 2.75%) is payable on balances of £5,000 and above with monthly interest. The operation of the account is by post, telephone instruction or in person. 60 days notice required for withdrawals. Immediate access is available in lieu of 60 days interest on the amount withdrawn. Interest rates are quoted gross % p.a., that is, without any deduction of tax. European Union Savings Directive rules apply to EU resident depositors. It is the responsibility of the depositor to declare any interest received to their relevant tax authority. A.E.R. stands for Annual Equivalent Rate and illustrates what the interest would be if interest was paid and added to the account once a year. Bradford & Bingley International Limited (BBI) is a wholly owned subsidiary of Abbey National plc (Abbey) which is regulated by the Financial Services Authority in the UK. In turn, Abbey is part of Banco Santander S.A. of Spain, one of the world's largest banking groups. BBI places funds with Abbey, and thus its financial standing is linked to that of Abbey and ultimately Santander. Depositors may wish to form their own view on the financial standing of BBI, Abbey and the Santander group based on publicly available information, including report and accounts, obtainable via www.bbi.co.im. BBI is a member of the Depositors’ Compensation Scheme as set out in the Isle of Man Compensation of Depositors Regulations 2008 (as amended). Bradford & Bingley International Limited is registered in the Isle of Man No. 052221C. Registered Office: 30 Ridgeway Street, Douglas, Isle of Man IM1 1TA British Isles. Telephone calls may be recorded. Licensed by the Isle of Man Financial Supervision Commission to take deposits. expatinvestor.com ? Always consider the downside to any investment opportunity as it is presented to you.Worthwhile decisions can only be made when the risk–reward ratio has been worked out. ? Risk is managed through diversification. Ensure your investment strategy encompasses a balanced approach in terms of geographic, sectoral and stock spread. ? Timing is critical for investment success. Sometimes, when stock prices are falling, you just have to cut your losses and run. But as a rule of thumb, the longer your investment horizon, the more your portfolio should be able to absorb market volatility – ‘time in’ is more important than ‘timing.’ ? Remember that past performance is no indication of future outcome. When choosing investments which have generated strong returns don’t assume such momentum will continue. Investigate all the factors which have driven previous growth and ask your investment manager whether those factors are sustainable over the longer term. ? Check out the tax implications of every investment decision. Tax liabilities may impact on the profitability of a portfolio. Remember to consider any tax due in your country of residence, as well as that which might fall due when you return to the home country. The extent of your liability will depend upon whether you have resident or non- resident tax status. Call now on +44 (0) 1624 695000 email email@example.com or visit www.bbi.co.im EXPATEXPAT To register www.expatinvestor.com for Expat Investor digital edition, visit the website at
May June 2009
September October 2009