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Anyone with property is likely to risk falling into the inheritance tax net. Even the simplest tax affairs benefit from professional advice and the more complex the more there is to be gained.

Volatility: Global Financial Markets and Tax - Published Feburary 2016

Timing is everything they say. That pressure could not have come at a more unwelcome point. No sooner had managers and advisers organised their clients’ wealth to comply with the Common Reporting Standard (CRS), timing has struck and portfolio values subsequently returned to the gloomy levels once seen last August.

What is the CRS? As investors we are all aware of current market conditions but for those that are no aware of the CRS, it is necessary that I explain first.

The Common Reporting Standard (CRS) was created from an OECD-led initiative, agreed in May 2014, whereby more than 60 countries will start to exchange details of individuals’ bank accounts and trusts on an automatic basis from September 2017.  Its mandate is to prise open the secretive affairs of those who are evading tax, and to play a part in reducing the so-called “tax gaps” of governments struggling with stubbornly high fiscal deficits.  No longer is it a case of choice but rather now a mandatory exposure of one’s private wealth to public authorities in your country of residence and the country where the source of your wealth is hosted.

For you, which is more concerning - the CRS or the harsh drops to financial markets?

Investment timing and tax planning are integral aspects to the creation and preservation of capital.  The volatilities we are experiencing have been caused by the tail wind of higher austerity taxes, no matter where your capital is, and the fall in stock market values. 

Both are now positively correlated at this point in time.  Advice and opinion has never been so sought after to stop the drag of loss and erosion that the depth and breadth of tax (fiscal) and investment (financial) advice are now both quite distinctive hemispheres and cannot simply be homogenised into the one.

There are some basic guidelines that you can follow to ensure you have placed your wealth within an environment that can positively endure a reasonable amount of volatility. 

Whether it is for tax or investments, the fundamental marker is to organise for the long-term; not just on your lifetime but subsequent decades, whether you decide to pass this on to your family or not. 

The other is to ensure that any platform is regulated and compliant.  The danger for many unsuspecting investors is that the risk and reward are not clearly explained nor understood.  Just because a fund has posted a consistent and above average return does not mean to say it follows the regulatory guidelines.  Equally, just because your wealth has always been secured in a tax compliant platform does not mean to say that it is no longer useful or compliant with the changes brought by the CRS. 

As with all advice, there is a cost both to the discerning client and the dedicated professional.  Gathering information from different sources is vital to get the best possible advice suited to you and your requirements.  Just because a product may tick more boxes than a platform you already have may not be the best financial option as charges may accumulate which are not, at first, visible.  The statement “We get paid by the provider so you don’t have to.” coming from any adviser could not be further from the truth.  Costs come at every level, explicit or implicit, so make sure that you see this in black and white.  Advisers’ fees must be disclosed and you should reconcile these as part of the analysis and advice that you are paying for. 

In finality, without these simple markers addressed, professional and experienced advisers cannot incorporate the important facts about you and your objectives to ensure that you will have as close as a successful outcome as you wished to achieve from the outset.  Tax and investments are volatile and unpredictable by nature but you can certainly plan, establish and change what you have to ensure your wealth remains stable in the years to come.

Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises private clients on financial investments in both the UK and throughout Europe under MiFID regulation.  He can be contacted at the offices of euroFINESCOs.a. either by telephone 289 561 333 or email raoul.ruiz@finesco.com.
Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000.

Raoul also has regular radio appearances with Raoul’s Rant on the Owen Gee Solid Gold Sunday show and the Money Minute on the Kiss FM Breakfast show, every week, from Tuesday to Thursday.

Volatillity: Global Financial Markets and Tax