Right now markets are showing a determined resistance to any steady gains. What can be gained in a day can be lost the next. Most financial advisors would advise clients to invest for the long-term and would cite examples of market performance over periods beyond 5 years as an ideal. In France the tax incentives for the most popular market(s) investment vehicle – the Assurance Vie [a life insurance policy] is geared to the delivery of those very benefits after 8 years.
Even the most rudimentary observations of late have lead the average person with money to save or invest to take what was thought the safe option of “savings” over “investment”. But of course this is to ignore the fact that deposit accounts (as we now realise), are an “investment”. They actually have a risk element to them. Savings are what you put under the mattress or in the pensioner’s favourite – the rusty biscuit tin.
Recent problems experienced by banks have now shown how truly the concept of “chance” has actually been a part of deposit account “investment”. What a stark realisation this has been, especially for those with Icelandic deposits and even the rest of us saved by Government action. Discovering that our money on deposit is treated as an asset of the bank (shocking reality isn't it) has only really come home to roost when banks are going into administration. So now we all know why Governments have bank guarantee schemes.
Now let us consider the investment vehicles I spoke about above and how they compare in the case of the companies you give your money to for such investments going into administration. Invariably and certainly given that any regulated financial advisor should be recommending investment diversity, your Assurance Vie investment monies would likely be placed in Funds or Bonds. Does this make any difference to your rights to your assets in the case of failure of the management company?
Put simply...yes, because unlike your bank deposits you own them. In the case of bank deposits - you the depositors are a long way down the list of those creditors who would have a call on the liquidated assets.
Now bond or fund holdings cannot go into the liquidation pot for distribution among the creditors. They remain at all times yours - so an administrator has no call on them.
I started off talking about how gains one day can easily be lost the next at the moment and how right now this could provide an absolute counter-argument to long-term investment. Further support for this position would appear to be the big question of when will the markets bottom out? Deposits have been for many of you the place to go since the crisis in markets hit and the exchange position has also supported this. For those with UK savings and those juicy fixed rate interest deals, you have been sitting comfortably, over the past twelve months watching market investors squirm at the least and cry into the bottom of their dwindling share portfolios at the worst. However, this is not true for all market investors.
For once Mervyn King and his merry men at the bank of England have moved swiftly and introduced a dramatic 1.5% base rate cut and now the media are suggesting that Britain and the Eurozone may be cutting the rate to 2%. It’s apparent that savers will again suffer first and worst. Your chances after tax of beating inflation are in serious jeopardy over the foreseeable future.
Go Native
What investors really need now is something that is tax efficient in France, market beating performance in these volatile times, protected in the sense that their money is their’s in the face of the money manager/bank going bust and would lock-in gains as they are achieved - even on a daily basis. I was told never to invest in something too good to be true, so what’s the catch.
Well such a thing is not without risk, but you can minimise this to less than 20% of what you invest and there are fees, but you can invest in Sterling and switch when exchange is more favourable. Our notoriously cautious French hosts have billions invested in Assurance Vie. For them it’s a way of life. You live in France...maybe it’s time to go native.
Spectrum does not charge clients for advice given, which is independent, regulated and indemnified.
Call Martin on 06 43 63 68 63 or by email to
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
for your free, no obligation financial review or mortgage application.
