What to look for in an investment portfolio service

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.

For British expats serious about building wealth over the long term, they need to look beyond cash. Although cash can be helpful to achieve certain financial goals (e.g. an emergency fund), the interest rates (even from fixed-rate deals) often do not keep up with inflation – eroding real returns over time.

Other asset classes, such as bonds and equities, can help investors keep pace with rising living costs and even exceed them. To invest, expats are not restricted to their bank. Indeed, a dedicated investment portfolio service could offer a better service, such as lower trading costs and a wider choice of assets.

Yet, how do you choose the right investment portfolio service? Below, our financial planners highlight some key benefits and drawbacks for expats to look out for when considering different providers. We hope these insights are useful.

If you want to discuss your financial plan with a member of our team, please get in touch to arrange a no-obligation financial consultation, at our expense:

+34 966 460 407
info@scottsdale.eu

Reputation & credibility

Naturally, expats should be wary of potential scams or incapable firms which could put their wealth at risk. Due diligence is necessary. This involves looking for solid track records, positive client reviews and regulatory approvals from authorities when considering different platforms.

Be careful with advertising from financial firms, especially on social media. In the UK, for instance, Martin Lewis (from Money Saving Expert) has stated that he “doesn’t do ads”. However, this has not stopped fraudulent advertisers from using his image and fake endorsements in adverts.

For expats, the risk of encountering dishonest firms can be even higher, especially online. Following a robust checking process can help to protect your finances – e.g. verifying company licenses and credentials and looking out for “red flags” (e.g. cold calling).

Costs and fees

When you save money into a bank account, you often do not need to pay. Indeed, the bank “pays” you via interest. When investing, however, platforms generate profits and cover their costs by charging various fees. Sometimes these are unnoticed and/or misunderstood by investors, leading to lower “real” returns after capital is committed.

Common fees to look out for include spread fees, commissions, transfer fees, exit fees, currency exchange fees and “inactivity” fees (e.g. if you do not buy/sell anything within a timeframe, such as 12 months). It can be helpful to gather different costs on a notepad or spreadsheet for comparison.

Investment choice

Some investment platforms are more restrictive than others. For instance, they might only offer funds from their own brand (or partnered brands). Others operate more on a “whole of market” basis, allowing investors greater flexibility and choice over what to include in their portfolios.

Investors need to think about the benefits and trade-offs on this subject when considering different providers. A more “restricted” service, for instance, may be cheaper (due to lower administrative costs incurred to the platform). However, some investors may be willing to pay extra to access a wider selection of funds or marketplaces.

Delegation of choice or ownership?

Some investors are confident making lots of their own investment decisions. They want to construct their own portfolios and retail a high degree of control. Others prefer to delegate portfolio construction to professionals (e.g. fund managers) so they can focus on other things.

This begins to enter the subject of “passive” versus “active” investing. The former strategy focuses primarily on buying funds which track the performance of specific market indices (e.g. the FTSE 100 in the UK). This is sometimes called “buying the market”.

Active investing, by contrast, seeks to “beat” or “time” the market by allowing fund managers to select fund investments on their investors’ behalf. They sell shares which they expect to underperformance and buy those which they expect to rise in value.

Investment platforms will usually offer both types to individual investors. Sometimes these are “packaged” into “model portfolios”, each offering a pre-selected range of funds based on investors’ goals, risk tolerances and time horizons.

Which is the best option for expats?

By now, you can see that there is no “best” solution for everyone. Rather, ideal options shift depending on investors’ needs and situations. They also vary depending on the offerings and value propositions of different platform providers as they try to outcompete each other.

To narrow down your choices, it is wise to follow time-honoured investment principles to help protect and grow investment wealth. Make sure you do not invest in something you do not understand and watch out for “red flags” when dealing with firms (e.g. pushy sales tactics and overblown promises, such as “guaranteed high returns”). Consider speaking with an expat financial adviser to review different options using the best available information.

Invitation

If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

+34 966 460 407
info@scottsdale.eu

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