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Daphne Foulkes is a Partner with The Spectrum IFA Group
Daphne began her career in financial services in 1975 initially in the UK. Her final post before coming to France was with the European Central Bank in Frankfurt, where she was responsible for advising staff from all States of the European Union on the subject of retirement planning. Since 2008, she has been providing individual financial planning advice to clients in France. She has detailed knowledge of European Social Security rules, together with international product providers and tax-efficient structures that can assist in asset building, asset protection and, ultimately, retirement and estate planning, ensuring that her clients’ needs are met in a tax-efficient way.
Daphne Foulkes
SIRET 522 658 194 00017
Numéro d’immatriculation ORIAS 10 056 800
With Care, You Prosper
Amsterdam Luxembourg Lausanne Paris Cote d’Azur Barcelona Costa Blanca Costa del Sol Madrid Mallorca Rome
« The Spectrum IFA Group » is a registered trademark, exclusive rights to use in France granted to TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384) Numéro d'immatriculation 07 025 332 - www.orias.fr
« Conseiller en investissements financiers, référence sous le numéro E002440 par ANACOFI-CIF, association agréée par
l’Autorité des Marchés Financiers »
MORE PAIN & NO GAIN FROM INTEREST RATES
The European Central Bank made headline news again at the beginning of June, as it reduced its main interest rate from 0.25% to 0.15% and lowered its deposit rate into negative territory from 0% to -0.1%.
The reduction in the interest rate makes it less expensive for other banks to borrow from the ECB and ‘in theory’ this should result in credit flowing out to the wider Eurozone community. At the same time, the negative deposit rate means that the ECB will charge banks for keeping their excess liquidity on deposit with it. The thinking is that this should discourage the banks from making the deposits and instead, make the money available for lending to households and business thus, encouraging growth.
These measures are part of a package that also aims to increase the rate of inflation in the Eurozone, which continues to fall, as demonstrated by the change in the Harmonised Index of Consumer Prices for May, when the annual rate of inflation fell from 0.7% to 0.5%. However, there are many who think that the current measures are insufficient to turn the trend from continuing towards deflation and feel that more aggressive action should have been taken by the ECB, including an expansion of Quantitative Easing.
What does this mean for savers? There is only one answer and that is “bad news”. Even if the banks do start to lend more money into the wider community, since they can borrow from the ECB at 0.15% to do this, why would they borrow from the public (i.e. the savers) at a higher rate?
We have been living in a very low interest environment for several years now, although this is the first time that the Eurozone has gone into negative territory in ‘nominal’ terms. In ‘real’ terms (i.e. taking into account inflation), we have already experienced negative returns from bank deposits and even the most cautious of investors are now prepared to look at alternatives.
One such alternative is a particular fund in which many of our clients have already invested. Despite the fact that the fund is conservatively managed, over the last four years to the end of May, the Sterling share class has still been able to grow by more than 36% and the Euro share class by 30%. After taking into account annual management charges on the fund, the three year annualised return is around 7% for Sterling and around 5.5% for Euro. A growth fund is also available for those investors who wish to take more risk and USD share classes are available for both the cautious and the growth funds.
The funds are part of those of a large insurance company, which has a history going back for more than 160 years. The company is well capitalised and so clients feel comforted by the safety of investing with such a solid company.
One of the unique features of the funds is the delivery of a smoothed investment return. On a daily basis, each of the funds grows in line with an expected growth rate, which is the rate of return that the company expects the assets in which the funds are invested to earn over the long-term. This approach aims to smooth out the usual peaks and troughs of investment markets and so is particularly beneficial to investors seeking an income from their capital.
It is a well-known regulatory requirement for product providers and investment managers to tell investors that “past investment performance is not a guarantee of future performance”. Whilst this is true, in reality it is only by looking at the past investment performance of a fund that one can really judge the skill of the fund manager. This is not just about how good the manager is at picking stocks - but more importantly - about how risk is managed, particularly through market downturns. Happily, when I am discussing the above funds with clients, I am able to demonstrate the skill of this insurance company by showing a sixty-year history of positive investment returns on an annualised basis over 8, 9 and 10 year periods. This is another reason why cautious investors – who would have previously only ever placed their capital on bank deposit – are very comfortable about switching to this alternative choice.
If you are interested in finding out more about these funds and you would like to have a confidential discussion about your financial situation, please contact me either e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at
www.spectrum-ifa.com/spectrum-ifa-client-charter
EU SUCCESSION RULES – the perfect solution?
I don’t have any statistics, but it seems to me that more properties are being sold in France - at least this seems to be the case in the Aude and the Herault. Many of the properties are being purchased by British people, who are taking advantage of the strength of Sterling against the Euro, but they are also planning to become resident here. I know this because my telephone has been particularly busy for this time of the year, as I am being contacted by many of these people for advice. As well as seeking advice on how to restructure financial assets for French tax-efficiency, French inheritance planning is also high on the agenda.
Rather worryingly, I am finding that many clients think that potential French inheritance issues are going to disappear when the EU Succession Rules come into effect in August 2015. Whilst it is true that people will be able to choose the succession rules of their country of nationality, what is being misunderstood is the fact that this will not change the inheritance tax rules that apply.
The most common scenario that we come across is one that involves there being children from a previous marriage. Unless the couple buy the property ‘en tontine’ or the children enter into a family pact with their natural parent, the surviving step-parent will not have full control over the property. The EU Succession Rules could change that, for example, if the couple elect for the succession rules of their country of nationality to apply and that country does not have any concept of children being ‘protected heirs’.
A perfect solution? Well yes for protecting the surviving step-parent, but if the step-parent wishes to leave the property to the step-children, then there will still be a 60% inheritance tax bill., so not quite the perfect solution.
Like all aspects of financial planning, every case will have to be looked at on its own merits and what seems clear is that there will be some cases where the ‘French way’ may still be best – see my own personal situation below, which demonstrates that tried and tested solutions already exist for dealing with property, plus assurance vie will continue to be an effective tool for succession planning for financial assets. You can find out more about this by reading my article on ‘Inheritance Planning in France’ on this magazine’s website or by contacting me directly for a copy.
As a British citizen who is in a French civil partnership (PACS) with someone who has dual US and British citizenship, as well as him having two daughters and two grandchildren living outside of the EU, we will not be rushing ahead to request that UK succession rules apply to our estates. No – we will definitely continue to depend upon our French family pact and assurance vie because in that way, we know that when the time comes, the survivor will be fully protected and the potential inheritance tax bills of our heirs have been mitigated.
Now is also a good time to mention that we are taking bookings for our client seminars, which will be taking place across France – “Le Tour de Finance - Bringing Experts to Expats” during the Autumn. Our industry experts will be presenting updates and outlooks on a broad range of subjects, including:
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Financial Markets
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Assurance Vie
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Pensions/QROPS
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Structured Investments
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French Tax issues
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Currency Exchange
The date for the local seminar is Friday, 10th October 2014 at the Domaine Gayda, 11300 Brugairolles. This is always a very popular event and so early booking is recommended.
But if you are reading this further afield, you may be interested in attending one of our other events, for example, St Endréol in the Var on 8th October and full details of all venues can be found on our website at http://www.spectrum-ifa.com/seminars/
Places for our seminars are limited and must be reserved, in advance. So if you would like to attend one of the events or you would anyway like to have a confidential discussion about any aspect of financial planning, please contact me, as soon as possible, either by e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at
www.spectrum-ifa.com/spectrum-ifa-client-charter
Daphne Foulkes
SIRET 522 658 194 00017
Numéro d’immatriculation ORIAS 10 056 800
With Care, You Prosper
Amsterdam Luxembourg Lausanne Paris Cote d’Azur Barcelona Costa Blanca Costa del Sol Madrid Mallorca Rome
« The Spectrum IFA Group » is a registered trademark, exclusive rights to use in France granted to
TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384)
Numéro d'immatriculation 07 025 332 - www.orias.fr
« Conseiller en investissements financiers, référence sous le numéro E002440 par ANACOFI-CIF, association agréée par l’Autorité des Marchés Financiers »