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Market Volatility
With stock markets around the world falling sharply on fears of a credit crunch that could affect the financial sector, we devote this newsletter to informing our readers as to what is causing the fall, and how will it affect the ordinary individual with offshore savings, pensions or investments.
What has been happening to the world's stock markets?
The value of the world's major companies has taken a tumble as the world's stock markets have plunged in the past two days - one of several such sharp declines in the past few months.
The move has wiped billions of dollars off the value of shares owned by individuals and institutions such as pension funds and insurance companies.
This most recent fall started when a French bank, BNP, said it would freeze three investment funds because it could no longer accurately measure their value.
Fears that more undisclosed bad debts would surface led other banks to cut back on their everyday lending to one another.
That led the European Central Bank to step in and boost the amount of money in the financial system.
Markets fell around the world because they were nervous that the problems are not just confined to French banks, but are more widespread in the financial sector.
What are the markets worried about?
The underlying fear relates to the so-called sub-prime mortgage market in the US.
In the past five years, extraordinarily low interest rates in the US have led banks and other financial institutions to lend substantial sums of money to people with poor or no credit histories.
The idea was that, even if they eventually couldn't pay, the banks could recoup any losses by repossessing and reselling the houses - and in any case, house price rises would cushion the blow.
In the most extreme cases, mortgage brokers were handing out what came to be known as "Ninja" loans, to people with no income, no job and no assets.
Often the loans were "no-doc", where the borrower did not have to provide proof of how much they earned. Recent research suggests that in many if not most of these, borrowers (or their brokers) lied about their income.
But now as interest rates have risen, so have repossessions. The US housing market has collapsed, and the banks find themselves saddled with a lot of bad debts.
However, it is not just a problem for US banks.
Globalisation has meant that much of this mortgage debt has been sliced up into small pieces, repackaged as "collaterised mortgage obligations" and sold on to financial institutions and individual investors around the world.
And now, no one, including the central banks, is certain how much of these bad debt financial institutions or individuals are holding.
What is a credit crunch?
There are fears that the worries about bad debts could turn into a financial panic.
Because no one knows which banks are sound, investors may rush to withdraw their money from a large number of institutions, which would otherwise be solvent.
This so-called liquidity crisis could destabilise the economy: forcing interest rates up sharply, causing some banks to collapse, and preventing lending to legitimate companies who want to invest.
It is this fear that the world central banks are trying to address by injecting cash into the system - making it clear that they will not allow major banks to fail just because of a rush on their funds.
They took similar action after September 11, 2001, to prevent the terrorist attacks in the US from spreading financial panic around the world.
What are the wider implications?
Even if the central banks stem the financial panic, there seems to have been a general shift in market perceptions about risk.
Generally, the risky the investment, the higher the interest rate - but now the additional premium for risky investments (the "spread") is set to widen sharply.
When people with money to lend become worried about risks, they tend to put their money in safe investments.
So there has been a rush to invest in government bonds, like US Treasury bonds, and safe currencies, like the yen.
In contrast, people are now demanding much higher interest rates to lend to smaller companies or to the governments of developing countries.
And there is almost no market at the moment for the debt relating to sub-prime mortgages or leveraged buy-outs - corporate takeovers funded by taking on big debt rather than with cash or shares.
This may mean that this is much less takeover activity than in the past few years, when it has been mainly funded by private equity funds borrowing money cheaply.
That could also lower the value of the stock market in the short-term.
How long will it go on?
Stock market fluctuations are a normal part of stock market activity, and no one can say how far shares could fall or how long the slowdown could persist.
Markets have had quite a sharp rise in the past 18 months, and the current correction may simply return them to previous levels.
Broadly, company profits have been strong, and the world economy seems to be entering a period of revival, especially in Europe and Japan.
However, stock markets look at future expectations, so they may be concerned that corporate profits have already peaked.
And even if stock markets recover, it looks like the re-pricing of risk - making it more expensive to borrow for certain kinds of investments - is here to stay.
The world's major central banks, with the exception so far of the US Federal Reserve, look set to continue to raise interest rates to combat inflationary fears - even if they pause to wait until markets calm down.
What does it mean to you?
Many individuals own stocks and shares - about half of all US households, and around a quarter of those in the UK.
If the stock market falls continue, they may feel less wealthy - and be less likely to buy goods and services, slowing the economy.
In addition, many pension funds own shares which make up part of their portfolio used to pay people's occupational pensions.
If shares fall, they may have less money to pay future pensions, and employee contributions may have to rise.
Already in both the UK and US many companies have closed company pension schemes to new employees.
Finally, the impact on businesses could be mixed.
Smaller, more risky ventures could find it more difficult to get funding, slowing the pace of innovation.
But big companies might become less vulnerable to takeovers, which could mean fewer job losses and restructuring costs as long as profits keep up.
What should I do with my offshore savings plan, pension or investment?
It is generically believed that this downturn will not be long-term. However, it is also forecast that there will be a more prolonged downturn towards the end of the year.
With this in mind, we have been working on new fund strategies for our policyholders holding lump sum investments and those with regular contribution savings plans over a year old. The exact nature of the strategy will vary slightly from person to person so we would advise you to contact your adviser regarding your individual policy.
If you are not an existing customer of Candour Consultancy, we may still be able to advise on how to protect your investment if you do not have an adviser to help you do so.
- Candour Consultancy, September 2007
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Special Offers
July & August are traditionally a quite time for expatriates in the Gulf region as businesses slow down in line with the school holidays. This makes it a perfect time to review your finances and start the savings, life assurance, pension or investment you have been considering for some time. With this in mind, Candour Consultancy are offering a range of special offers on offshore savings, pensions and investments to our newsletter readers. These include:
Offer 1
Throughout July, we will offer a 1% bonus on all lump sum investments. All offshore bonds, capital guaranteed funds and tax-efficient investments will receive 101% allocation of the initial investment.
Find out more!
Offer 2
Throughout July, we are offering one free contribution on all offshore savings and pension plans with a term of at least 10 years and a monthly contribution level of US$ 500 or more.
Find out more!
Offer 3
In addition, for investments over US$ 500,000 and regular contribution offshore savings and pension plans with monthly contributions of US$ 1,500 or more, Candour Consultancy will cover the cost of having the policyholders Will rewritten to take their new asset into consideration.
Find out more!
Life Assurance
For those not feeling quite so lucky, now may be the time to consider life assurance. Whether you are looking to protect your family or repay a loan in the event of your death, life Insurance premiums are currently at their lowest ever rate – and we have searched the market to find the cheapest for you!
The market has never been so competitive; in turn, this has forced insurance companies to offer better policies at lower prices. At Candour Consultancy, we make sure you get the best deal possible.
Get a quote now!
For those who already have insurance in place, it is always worth asking whether your current policy is the fantastic value for money it could be? If you have already taken out a Life Insurance policy then the chances are high that you can either:
Below are some sample quotations:
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Gender
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Age
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Sum Assured
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Monthly Premium
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Female
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25
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US$ 300,000
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US$ 17.70
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Male
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25
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US$ 300,000
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US$ 31.75
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Female
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35
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US$ 300,000
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US$ 30.75
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Male
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35
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US$ 300,000
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US$ 38.40
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Female
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45
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US$ 300,000
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US$ 66.30
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Male
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45
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US$ 300,000
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US$ 88.80
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The life insurance quotations above are correct as of 30/06/2007 and apply to a level term assurance quote for $300,000 over 15 years on non-smoker rates. A term of 15 years has been chosen to tie in with the standard mortgage term for expatiates in the Gulf region. All premiums are guaranteed for the term of the policy.
Get a quote now
- Candour Consultancy, August 2007
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Retirement
Most people want to work longer in old age, rather than retire completely, suggests new research. That's the main finding of a survey for the bank HSBC into attitudes to retirement in 20 different countries and regions around the world.
72% of respondents in the survey said they wanted to see mandatory retirement ages scrapped. Researchers surveyed 21,000 people and 6,000 employers in the bank's second international study.
Among UK respondents, 68% said they wanted flexible working arrangements in later life, as opposed to 12% who wanted to continue working full-time, and 20% who never wanted to do paid work again.
Flexible Retirement
HSBC's adviser on global ageing, Dr Ken Dychtwald said: "We came out of the last century with the belief that retirement was better than work, and that what people really wanted to do was to stop working and just lounge and socialise for their remaining years.
"70% of the population said they wanted to be working in retirement. They don't want full time work either, they want part-time, flex-time, maybe even trying their hand at a new career."
The survey also found that the attitude of the workforce did not chime with the attitudes of employers. The researchers discovered that many employers had not yet realised that times were changing and still believed there would be a never-ending supply of young workers.
But Dr Dychtwald said because of declining birth rates in previous decades this was just not going to happen. "There is a real mismatch between what the world wants in terms of new models of work in later years but we saw that most employers were not really being responsive to these new possibilities" he said.
Many countries are starting to introduce age discrimination legislation which stops employers from forcing people to retire before the age of 65. However, when people do eventually retire, 88% of them are going to need some income to supplement their part-time salaries.
You can start saving towards your retirement with a little as £100 or US$ 150 per month. Contact Candour Consultancy specialise in retirement planning for expatriates and will help you find the right vehicle to meet your offshore savings requirements.
- Candour Consultancy, July 2007
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Is it time to Invest in US Dollars?
With the exchange rate over £1.00 to US$ 2.00, now may be the ideal time for Sterling investors to consider investing in US Dollars.
Last week the US Dollar hit an all-time low against the Euro and a 26 year low again Sterling and, whilst there is no immediate signs of a recovery, in all likelihood it will be closer the long-term average of £1.00 = US$ 1.55 in 3, 5 or 10 years time. With this in mind, investors should consider the option of establishing their offshore savings or investments in Dollars.
Both offshore account and offshore bonds will continue to grow tax-efficiently regardless of the currency that they are established in and offshore bonds will continue to benefit from their other tax advantages; such as the ability to withdraw 5% per annum with the tax deferred and time apportionment relief which allows the bondholder to substantially reduce any potential capital gains tax liability in the future. Additionally, there could be favourable growth benefits.
If the exchange rate does revert to the long-term average, there are huge gains to be made when it becomes time to switch back to Sterling. For example, an investment of £200,000 into a US Dollar based offshore bond would give the bond an initial value of US$ 400,000. Assuming just 6% growth per annum, the bond would be worth in the region of US$ 535,500 in 5 years time. If at that time, the exchange rate is back to the long-term average, this would equate to £345,500 – a massive 73% increase from just 6% per annum growth in low risk funds!
Even if the exchange rate had just fallen back to £1 = US$ 1.75, the Sterling value would still be US$ 306,000 – as compared to £267,500 if the bond was established in Sterling and has achieved the same growth rate.
For those who wish to keep their savings in Sterling and still take advantage of the exchange rate, the offshore bond has just the flexibility you need. A Sterling bond can purchase US Dollar denominated funds very cheaply and can sell these at any time without penalty or a taxable event occurring; this means that, should you feel the US Dollar is at a high in 2 or 3 years time, you can immediately switch out of Dollars and into Sterling at that time (or even Euros if preferable). Additionally, purchasing the funds through the bond means you by them at net asset value and do not pay hefty brokers fees or bid-offer spreads.
Naturally, playing the currency markets does add an additional element of risk with some analysts’ believing the Dollar will weaken even further before it strengthens, but it is an option worth considering to all but the most risk adverse of investors.
- Candour Consultancy, June 2007
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THE YEAR OF THE GOLDEN PIG
From all of us at Candour Consultancy, welcome to the year of the Golden Pig!
The year of the golden pig is synonymous with wealth and good fortune. Tradition and folklaw is backed up by fund managers who predict that many markets will reach new highs over the next 12 months. It is likely to be another 600 years until the next year of the golden pig so make sure you do not miss out now!
New Year, New Opportunities
Candour Consultancy is offering access to an even wider range of tax-efficient investment funds this year. With an investment as low as US$ 15,000 (£10,000, Euro 15,000), you can access an awarding winning range of nearly 100 funds that includes:
- Property fund managed by Morgan Stanley
- India fund managed by Jardine Fleming
- China Growth fund Managed by First State
- Latin America fund managed by Baring
- Eastern Europe fund managed by JP Morgan
- Emerging Markets fund managed by Templeton
- Commodity & Futures fund managed by Man AHL Diversified Futures Ltd
Investors can hold up to 10 funds at any one time and switch between funds (free of charge) as market conditions dictate.
Unsure of Market Levels? - Invest from US$ 150 (£100, Euro 150) per month
If you are concerned about market movements but would still like to invest offshore, then Candour Consultancy also offers a regular contribution version of the investment. Not only does it provide you with the ability to spread your money over a wide range of market sectors, from some of the best fund managers in the market, but you also have the opportunity to invest your money on a regular basis.
Make sure the year of the golden pig is a golden year for you by contacting Candour Consultancy.
- Candour Consultancy, March 2007
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RETIREMENT PLANNING
Retirement planning for expatriates can be difficult. Many expatriates not only change jobs but also countries throughout their career – each time stopping pension contributions when they move and then having to start saving again once they are settled in their new job.
This has a huge impact on the expatriates’ pension as many months of contributions are missed and those that are made never really get the chance to benefit from compounded growth.
However, there is an alternative. Many offshore financial institutions offer international pension plans. These policies have several features designed specifically for expatriates which include:
- The ability to contribute to your pension regardless of where you are resident in the world
- The pension will continue to grow tax-efficiently regardless of where you are resident in the world
- Should you need to suspend contributions when you move countries/jobs, you can do so without penalty
- Should you need to reduce contributions because you move to somewhere with higher living expenses, you can reduce contributions without penalty
- You can access valuations and fund details online, regardless of where you are
- You can increase contributions or add lump sums if desired
By purely offering the ability to allow the expatriate continuity in their pension contributions, the effect on the amount of money they have at retirement can be huge.
For example, let’s look at an individual who has 35 years until retirement and can currently afford to contribute US$ 200 a month.
In the first scenario, the individual reacts to this article and asks Candour Consultancy to advise on the most suitable pension plan. After our recommendation, they sign up to the pension plan within one month. They contribute US$ 200 every month for the rest of their working life.
Thirty five years later, their pension fund has grown, let's say, by 7.5% a year after charges. The pension pot has reached US$ 325,200 after contributing US$ 84,000 in total.
In a second scenario, the individual dithers for a year before contributing US$ 200 every month for the rest of his working life. Thirty four years later, at a rate of 7.5% per annum the pension pot has grown to US$ 300,200. They have contributed US$ 81,600, just US$ 2,400 less than he did in scenario one, and yet their pension pot is smaller by a massive US$ 25,000!
Looking at this from another angle, given the same growth rate and the same product, the individual would have to contribute an additional US$ 4,000 over the 34 year term to produce the same pension pot as in scenario one; i.e. over a 35 year term.
In a third scenario, one which most expatriates can relate to, the individual starts contributing straight away, but they have to reduce the contribution level to US$ 100 a month for a year when they relocate. This is in the fifth year of the pension plan.
Though they have only contributed US$ 1,200 more than in scenario two, their pension pot at the end is US$ 320,200; US$ 20,000 more than in scenario two primarily because the pension has benefited from compounded interest for longer.
I think the lessons we learn here are obvious and the above examples really ram home how important it is to start saving earlier rather than later.
How can Candour Consultancy help?
Candour Consultancy is an authorised introducer to many of the worlds leading offshore financial institutions. All our consultants are UK qualified to advise on and recommend the most suitable pension policy for your personal circumstances.
Additionally, Candour Consultancy offer several value added features such as enhanced terms and our portfolio service.
To request that a consultant contacts you, just click here and provide us with your preferred contact details. With Candour Consultancy there is no charge for our advice, no obligation or no hard sell.
- Candour Consultancy, February 2007
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STOCK MARKETS
Over the past two weeks, stock markets around the world have been falling sharply, as fears grow over the prospect of higher US interest rates. The market upheaval has also pushed down the price of commodities, such as oil and gold, and many currencies. Consequently, there has been nowhere to hide for those with savings and investment policies and we have all seen the value of our policies temporarily drop. Why has this happened?
Some analysts fear the volatility could be a forerunner to more serious turmoil, with a sharp turnaround in expectations about the future course of inflation. Others believe this is simply a ‘correction’ in the market and the effect will be short-lived. Either way, this article should help explain the reasons behind the falls.
Why are share and commodity prices falling?
There are a number of factors behind the current dip, not least the perception that prices may have been too high in the first place. In the past two years, shares in some companies have risen by as much as a third, prompting the need for a correction as the markets recoil from arguably overvalued stocks.
Commodities are also seen as having overshot the mark, although no-one would deny that there are solid economic reasons for the soaring prices of oil and precious metals. Growth in major emerging markets such as China and India has boosted world demand for crude, which has been at or near the $70-a-barrel mark for nearly a year now. Oil has fallen 6% in the past week, while gold is 4.5% lower and copper is down 5.2%. However, these are modest retreats that still leave commodities trading at a far higher level than last year. Copper, in particular, has risen 85% since 2006 began.
But why is all this happening now?
The latest figures from the world's biggest economy, the US, have been concentrating investors' minds in recent days. US consumer prices rose by 0.6% during April, which was faster than analysts had expected.
At the same time, US industrial output was also beating forecasts. It surged by 0.8%, raising concerns of inflationary price rises as American factories approach their production limits.
If the US economy starts to overheat and inflation goes up, one way of reining it in is to curb the money supply by making borrowing more expensive - in other words, raising interest rates. The US central bank, the Federal Reserve, is clearly worried about a resurgence of inflation. It has put up interest rates by a quarter-point at each of its last 16 meetings, and investors had hoped that rates would now hold steady at 5%. However, the Fed's boss, Ben Bernanke, is giving little away about his future intentions, and some observers believe his instincts will be to keep prices under control even at the risk of harming growth.
Why would higher interest rates prompt a share sell-off?
Investors have a choice of destinations for their money, depending on the economic circumstances at the time.
Shares, as any financial advisor will tell you, can go down as well as up, while bonds and savings accounts offer a fixed rate of return and are less inherently risky. When interest rates are low, an investor stands to make more money from shares. But when interest rates are high, bonds become more attractive as a safe haven for your money - so it makes sense for investors to sell their stocks and shift the cash to fixed-rate investments.
What other damage can higher interest rates do?
There are fears that further interest rate rises could aggravate existing imbalances in the world economy. The record $742bn US trade deficit has long worried the markets, as the value of US imports continues to outstrip the amount that the country can sell to the rest of the world.
The $400bn US budget deficit - the gap between the government's income and its expenditure - also shows little sign of decreasing. And it's not only the US government that is spending too much. The country's five-year housing boom has fuelled consumer spending, which accounts for 70% of US GDP, by encouraging homeowners to borrow against the rising value of their properties. But higher interest rates would lead to higher mortgage rates, putting consumers under pressure and jeopardising the health of the economy.
What do the experts say?
The experts are split on whether this is the end of a positive ‘bull’ run on the worlds stock markets or whether this is purely a short term correction to bring prices back to a realistic ‘base level’ before growth continues.
Whilst some analysts are convinced that recent market upheaval could be a forerunner to more serious turmoil, with a sharp turnaround in expectations about the future course of inflation and interest rates worldwide, towards the end of last week more and more analysts and bankers were stating that investors were being overly cautious and higher interest rates (if they did arise) would be no reason to see a change in the current trend of rises in the commodities and equity markets.
So what should I do?
Unfortunately, we cannot answer this question for you. Without a crystal ball, all we can do is explain what is happening and put the facts before you to decide whether you wish to remain invested in equities or consolidate the gains made over the past few years and switch to funds which are unlikely to be as heavily effected (and may even grow) should the equity and commodity markets fall further – these funds would include cash deposits, bond funds and hedge funds (which are generally ‘market neutral’).
One point we would suggest taking into consideration when making you decision is that downward markets affect single contribution investments (such as Friends Provident International’s Zenith and Generali’s Choice policies) substantially more than they affect regular contribution policies (such as Aviva’s , Friends Provident International’s Premier and Generali’s Vision policies). This is because with a single contribution the value of your investment falls as the markets do and you have to wait for the markets to regain all their losses before your investment regains it value.
However, with regular contribution policies, an effect known as ‘Dollar cost averaging’ occurs in falling markets. Put simply, each month the share price goes down, you can buy more units for each Dollar you invest. Then, when the markets return to a phase of positive growth, the policy holds a lot more units which (as they increase in value) results in your policy producing enhanced returns.
If you feel the markets will not fall further, or you feel they will fall but you have a regular contribution policy and are in it for the medium- to longer-term, then you may be better served remaining in the equity funds of the Candour Consultancy’s balanced and aggressive portfolios.
For those with regular contribution policies who wish to consolidate growth, or hold a single contribution investment and feel the markets are likely to fall further, we have structured additional ‘consolidation portfolio’ where policyholders should be protected from any further market falls.
As an example, our Generali ‘consolidation portfolio’ consists of:-
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Provider
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Fund
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Allocation
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Lloyds TSB
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USD Money Fund
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20%
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Generali International
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Global Bond Fund
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25%
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Invesco
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Bond Fund
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25%
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Thames River
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Hillside Apex Fund
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10%
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Momentum
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All Weather Liquidity Fund
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20%
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Should you require further information on suitable funds for your savings plan or investment, just write to Candour Consultancy at info@candourconsultancy.com
- Candour Consultancy, June 2006
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DAD, A GREATEST INSPIRATION
When a child is born , the first thing it acknowledges is the touch and the sound of its mother. Then it acknowledges the sound that it had heard for the past 9months while it was in mother’s womb. That’s the feel & sound of his father….
Father plays an important role in our life. God created father such that we can look up to him even though he might not be able to play with us nor tuck us in bed when we go to sleep. He might not know to put diaper pins also. But he will be always there beside us holding our hands when we are tensed and upset. Encourage and strengthen us to face life’s toughest battles.
God created Father’s shoulders strong enough so that it is used for support whenever we feel like crying. Strong hands stretch forth towards us when we reach out for them at some desperate moments. A pair of ears which is ready to listen to our small stories or problems….and a smiling face which does not show a bored look but on the contrary make us feel comfortable.
During times of failure, he encourages us not to loose our spirit and go ahead in life with optimistic approach. Pats our back as jesture of appreciation for good work done by us.
As time passes, he teaches us important lessons of life that is very helpful to face the hardships in life. At times he might be angry with us but all for our own best to reach the heights that we aim for in our life.
Since the presence of God cannot be with us always ,God created Mother and Father who builds the bridge between God and us. So we should all raise a toast for them for all their hardwork and pains they have taken to make us reach this level that we are today so that they are proud to say to the world “ Yes, I am his/her father ”
- Jiji Santosh, June 2006
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GRUMPY OLD MEN
One of the drawbacks of being an expatriate in the Gulf region is the shocking television. However, recently I have enjoyed a series on BBC Prime called Grumpy Old Men. For those of you who haven’t seen the series, it consists of several middle-aged and older men moaning about modern society.
The reason I enjoyed the series so much is that I agreed with pretty much everything they were complaining about! It also got me thinking (and moaning) about the other drawbacks of being an expatriate; especially those in my area of expertise - expatriate financial services.
Every survey I come across finds that expatriates are supposedly smarter, more ‘socially responsible’ and better paid than the average person in their home country. I am not pointing this out to be elitist (which seems to be a favourite trait of the grumpy old men) but to make the argument that if we expatriates are brought up better, less likely to commit crime and more intelligent, why do most offshore banks and financial institutions treat us like high risk idiots?
To show you what I mean, here are some of my pet hates relating to offshore financial services:
I can’t understand why many offshore banks offer expatriates interest rates (on average) 0.5% less than their ‘onshore’ equivalent. To make things worse, when it comes lending us that money back, they charge us (on average) 0.5% more than the leading onshore rates and will lend us 15% less. Why is this the case if we earn more, save more and are more reliable customers?
I can’t believe that some offshore savings and pension’s providers only publish part of the total fees and charges in their policy brochures; only mentioning mirror fund costs and credit card charges in the small print. This would never be allowed to happen onshore.
It angers me that offshore financial advisors do not need to have any formal qualifications to work in the industry. Can you believe it that I have even met an advisor who didn’t even know what a mortgage is!
It disappoints me that some offshore institutions charge are for paying our premiums or savings contributions by credit card when they are already charging us fees for the policy. This is usually 1% of the premium amount, which essentially amounts to another layer of charges.
It saddens me that some brokerages bring young advisors offshore promising the potential to earn big money from day one. These poor advisors run out of money after 6 months and have to return home broke - leaving their clients without any future feedback on their investment. This is good for no-one but the brokerage.
I can’t believe that people still fall for ‘get rich quick’ schemes – if it sounds too good to be true, it probably is.
And lastly,
I hate being cold called ten times a day – yes, it even happens to financial advisors!
So what can we do about it? Well, the first thing is to educate ourselves and understand how & when we are at a disadvantage. That’s why, in the advice section of their website, Candour Consultancy have written a number of articles explaining what to look out for whether choosing a medical insurance policy, offshore investment life assurance policy or trust.
Secondly, don’t be afraid to ask your bank or advisor what & why? What are the charges? Why are you charging more 0.5% more interest than your onshore customers? What would happen if I move countries? Why isn’t the mirror fund charges explained in the brochure? If you don’t get the candid answers you are looking for, speak to Candour Consultancy.
Candour Consultancy only employ consultants who have already worked in the Gulf region for at least two years, who are financially independent and have made a commitment to work for us long term. All our consultants are FPC qualified receive ongoing training and development; both internally and from financial institutions. Our consultants do not cold call; instead working from referrals and enquiries.
It is company policy only to recommend offshore savings and pension plans where all the charges are clearly outlined in the policy brochure; where the provider does not use mirror funds or charge extra for paying buy credit card.
Likewise, we constantly monitor the offshore banks to ensure our customers are receiving the best rates savings and mortgage rates for expatriates. And when it comes to medical insurance, we only recommend international policies with excellent service and a proven claims history.
- Candour Consultancy, May 2006
About the Author: Darren Ashley is Managing Partner of Candour Consultancy. Darren has worked in the financial industry for over 10 years; the last five years in Dubai. Candour Consultancy is an independent financial brokerage offering expatriates impartial advice on the whole spectrum of offshore financial services and taxation.
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THE BRITISH SERGEANTS' MESS – KSQA AYDIM
AN ABRIDGED HISTORY
The British Sergeants' Mess at Aydim evolved from a joint Omani/British combined SNCOs/Officers' Mess located as what has been known variously as Manston Battle Training Camp, Southern Oman Brigade Training Centre and Aydim Training Centre and now, The Sultan Qaboos Military Academy
The original Mess, albeit a dishevelment of plywood, corrugated iron and a smattering of concrete, was a home from home for all that lived there. It should be borne in mind that Loan Service and contract personnel working in Aydim at the time used to fly by Skyvan, from RAFO Salalah to Aydim on a Saturday morning, and return home on a Thursday afternoon.
Originally called 'The White Swan' this unassuming name was changed to 'The Aydim Yacht Club' in April 1992. Nestling at the top of the jebel, this moniker seems a misnomer, but it arose from the fact that adventure-training boats were commandeered by the Mess, moored at the Frontier Force pier at Raysut and availed of by Mess members for weekend recreation.
In 1984, with the opening of a new Officers' Mess, The Aydim Yacht Club became a fully-fledged British Sergeants' Mess in its own right.
In 1985, just as the membership of the Mess was declining and the Mess was in danger of being closed down, engineers from the Balfour Beatty Company arrived, here to construct the road between Mughsayl and Furious, and thus complete the route from Salalah to Sarfait. Devoid of accommodation, they were offered the facilities of the Mess until their camp was built near Arfit. To reciprocate, the men from Balfour Beatty assisted with some much needed and greatly appreciated improvements to the Mess. Many were the 'shindigs' between the Aydim and Arfit fraternities and this amiable liaison continued well into 1988, when the Balfour Beatty personnel finally departed, but not before presenting a snooker table as a way of thanking the members for their hospitality.
Although having only a few members, the Mess somehow survived, and became a popular watering hole for visiting Salalahites. This was particularly so during the khareef, a phenomenon escaped at Aydim. Paradoxically, as access to Aydim by road became easier, the vogue to drop in on the Mess abated, so, again members relaxed in their serene solitude.
A rebuild of KSQA began in 1995 and by August 1997, a new Mess was completed. Although The Aydim Yacht Club still stands, from its ashes, metaphorically arose the new British Sergeants Mess.
Although I only worked in KSQA for two years, I will always have fond memories of the dinner parties, barbeques, games nights and other social events that took place at Aydim with our friends from Salalah, and visitors from all across Oman.
Sadly, with the demise of Mess membership and due to the reduction in Loan Service posts at Aydim, The British Sergeants' Mess finally closed its doors on 12 April 2003.
Written by Dave Phillips – Loan Service KSQA Aydim – Mar 01 - Jul 03
With special thanks to Mr Morris Hanna for his outstanding reminiscences. Although sadly he was not around to see the final chapter in the life of the Mess in which he had lived for over 17 years, I know he would have been sad to see its demise.
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EDUCATION FEE PLANNING
When should you start to think about planning for a child’s education/future? Based on the assumption that the parents will be based in the UAE and therefore need to pay for schooling up until the age of 18 and in the hope and expectation that the child will eventually go to university.
A good education is one of the few investments that can be made for a child that will be of permanent benefit. However, building this benefit will involve effective planning and considerable outlay from either capital or income.
To save comfortably for higher education fees alone, parents should start saving as soon as a child is born. Based on current university costs in the UK, a parent will need to contribute in the region of £350 a month over the next 15 years to fully cover course fees, books, accommodation and other day-to-day living expenses – this can be doubled for courses, such as medicine or law, which have a longer duration.
When we take secondary education into account too, the amount we need to save on a monthly basis nearly doubles. Typically, the basic fees for a year at a private secondary school work out at over £7,500 a year - and that’s before paying for the inevitable extras such as school trips, books and music lessons. Fees for full time borders - often a necessity for the internationally mobile - can be twice as much again.
However, the majority of the increase in cost arises not because of the expense of secondary education but in the fact the we need access to funds in as little as five years (which doesn’t give our investment particularly long to grow) whilst still saving towards the next several years secondary education costs and potential university fees.
Taking inflation into account, a parent of a one year old child would have to save £600 a month for the next 20 years to fully cover secondary school, 6 form and university expenses.
As parents will be looking to save for every eventuality what kind of products do you advise your clients to consider? Bearing in mind that you will need access to money sooner than you would, say in a retirement fund, but that it also needs to be fairly risk adverse? Is this a correct assumption?
With foresight you can use an investment that will provide the growth potential to give you part or even all of the money you need to ensure you can provide the best education for your children. Candour provides investment advice on various types of school and university expenses plans, whether funded from capital or income.
Funding from Capital
If capital is available to invest for education expenses (perhaps from generous grandparents!) tax efficient investments and Trusts can be used to maximise the return on this capital. The investment return is partly dependent on the length of time before fees have to be drawn down, so the sooner you start the better.
Normally we would recommend that a lump sum of capital is invested for at least five years, ideally ten years so that a reasonable return can be achieved. When investing lump sums, it is often prudent to look at capital protected or lower risk funds. Depending on the sum to be invested, Candour may recommend spreading the capital between three lower risk asset classes; maybe a capital-protected equity based fund, a low-volatility hedge fund and a commercial property fund. All three of these asset classes should produce steady reliable returns but by diversifying we are reducing the risk further just in case one of the funds under-performs.
Funding from Income
The benefit of saving for a child’s education is that the investment is generally for the longer term (more than 10 years) and very often made on a regular basis.
When saving smaller regular amounts, the best way for expatriates to invest is through a offshore savings plan. These are essentially ‘wrappers’ which allow you to invest in a wide range of pooled investment funds.
Pooled investment funds give the everyday investor access to a variety of equities, securities (such as bonds), and alternative investments (such as hedge funds and commercial property funds) which they would not have the resources to invest in individually.
Such funds may be actively managed - where a fund manager picks individual assets based on a view of their future potential - or passively managed - where a manager invests in all the shares that comprise a stock market index, such as the FTSE 100 or the S&P 500.
What tips do you personally give parents/prospective when it comes to planning for educations costs?
The main piece of advise has to be to start as early as possible. The earlier you start be less you will need to contribute each month (or upfront) and so it becomes less of a burden to you – after a few months most people do not even miss the money.
Secondly, save as much as possible – it is better to save too much than too little. If you get a good bonus one year, why not top up the education fees plan a little?
Thirdly, if you cannot afford to contribute enough to cover the full expenses, save what you can. It is better to have money available to cover half the costs than having nothing at all. As Tescos say – every little helps!
Lastly - and this is as important as the first tip - write the savings plan in trust. Doing this involves slightly more work on the part of the financial advisor but should not cost you any extra. By writing the investment in trust (from outset), the money will fall outside your estate should you die and will be earmarked for you child’s education.
Indeed, you can even instruct the trustees (usually close family and/or friends) to pay the school / university directly and to drip feed money for accommodation, food, books, etc… in the trust document. This will ensure the money is used for the purposes it was intended rather than being spent on the more enjoyable side of student life!
- Candour Consultancy, April 2006
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