Nigel Green

Investors need to prepare now for three key issues ahead of Britain formally starting divorce proceedings with the EU. UK Prime Minister Theresa May is expected to trigger Article 50 of the Lisbon Treaty on March 29.

By this time next week, Britain will have officially started the process of unravelling itself from the European Union. This is one of the most complex negotiations in political history with global consequences, and as with most divorce proceedings, it is unlikely to be completely smooth sailing. As such, investors need to ensure their portfolios are ‘Brexit-proofed’.

With the clock ticking on the starting pistol being fired, investors need to prepare now for three key issues.

First, be prepared for increased market volatility.  Uncertainty creates tidal waves of volatility across financial markets – and the Brexit negotiations represent a huge unknown.

Against a backdrop of growing volatility, investors need to ensure that their portfolios are truly diversified. This means investing across geographical regions, sectors and asset classes. Those with a well-diversified portfolio are always best-placed to mitigate risk in times of market turbulence, and best-placed to take advantage of the opportunities.

UK assets are likely to feel the heat. Investors should consider taking precautions against the potentially significant adverse effects of Brexit on UK assets, which they can do by increasing exposure to overseas investments.

Second, be prepared for sterling to experience further swings.  The pound fell 10 per cent against the dollar in the week after the referendum to leave the EU. Similarly, it dipped this week when Theresa May confirmed the trigger date of Article 50.

Sterling is currently considered cheap, considering the underlying buoyance of the British economy, now forecast to grow 2 per cent in 2017. This is a buying opportunity for some investors.  However, with an enormous question mark hanging over the negotiations, and the creeping inflation, the pound’s current low value might not last.

And third, be prepared for the far-reaching impact of higher UK inflation and higher interest rates. This week, inflation hit its highest level in more than three years – and smashed the Bank of England’s official target.  This has raised expectations that interest rates could be hiked sooner rather than later.

This new landscape will present a new set of winners and losers for investors. A good financial adviser will help them select the right investments and, crucially, at the right time.

A lot has happened since the EU referendum in June 2016, and today the economy is facing a very different set of issues.  The economic landscape will continue to shift significantly during the two-year negotiation period.  Investors need to remain aware and agile and ensure their portfolios are Brexit-proofed.

Nigel Green is founder and CEO of deVere Group

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Nigel Green

March 16, 2017: The US Federal Reserve raised interest rates for the second time in three months on Wednesday. It was prompted to do so by strong jobs data, and forecasts that inflation is heading towards its target.

This rate rise by the world’s de facto central bank confirms that we’re in a new era of higher inflation and higher interest rates. Investors will now need to position themselves accordingly.

Rates are beginning to normalise. Whilst it may take a couple of years or so to get there, when they do, the global economy will look very different to how it does today.

With this shifting landscape, investors now need to ask themselves three key questions.

First, is my portfolio truly diversified? Having a well-diversified portfolio is one of the fundamentals of successful investing, but alarmingly, and for a myriad of reasons, many investors are simply not adequately diversified. This puts them at risk and means they are likely to miss out on opportunities.

Being truly diversified across asset classes, sectors and geographical areas, and not trying to be too smart with sector or regional bets, is perhaps more important than ever. The traditional interrelationship between sectors and regions has diminished since President Trump took office.  A lot will be riding on which way the greenback heads and, crucially, which policies are green-lit by Congress.

Second, am I prepared for dollar swings?  In the short term, higher Fed rates will attract overseas capital into the US, especially to those sectors, such as energy and financials that will most likely benefit from Trump’s policies. On the flip side, emerging markets will become less attractive because a strong dollar makes interest and repayment more costly in local currency.

However, the strength of the dollar might weaken again in the coming months.  The markets are pricing in three hikes in 2017 – I think it will be two, which would result in a fall back of the greenback later in the year.

And third, am I prepared for inflation? The American economy might not have a serious issue with inflation now, but we can be almost sure inflation is going to creep up on us.

Investors need to keep some powder dry in preparation for this time as their dollar-buying power will be hit when it finally arrives.

Investors who answer these questions honestly and then take affirmative action will find that they do not need to accept lower returns in this new era of higher rates and inflation.

Nigel Green is the founder and CEO of deVere Group

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February 10, 2017: It’s not just citizens of seven Muslim-majority countries who are facing a US-enforced travel ban.

Under new rules, American citizens too could soon be banned from travelling by having their passports revoked for unpaid taxes.

As President Trump hits out at the judge who has blocked his travel ban for citizens of seven Muslim majority countries, there are more travel complications from US authorities being introduced – ones that could prevent US citizens from travelling internationally.

The IRS is to have a new tool to collect taxes. The new law will use the threat of stopping people being able to travel by revoking passports if there are unpaid taxes. It was passed by Congress in 2015 and details are now on the IRS website.

If you have seriously delinquent tax debt, the IRS can certify that to the State Department. The Department generally will not issue or renew a passport to you after receiving certification from the IRS. The IRS website confirms that certifications will begin in early 2017.

This latest move would likely affect Americans living abroad most acutely for two reasons.

First, because they would typically use their passports more often – not only for travel but for administrative matters, such as rental contracts, in their countries of residence.

And second, since the worldwide rollout of the highly controversial Foreign Account Tax Compliance Act, or FATCA, in 2014, tax returns have become more complex, onerous and burdensome for US expats due to additional reporting requirements.

Indeed, in our experience of working with US citizens who live abroad, 35 per cent are now likely to make a mistake on their tax return and/or file late due to the new complexities.

For US citizens who are resident overseas, the IRS’ latest weapon to collect taxes, means it is more important than ever to stay on top of your taxes and file on time and correctly.

FATCA is a toxic law on many levels and there are renewed and strengthened efforts being made to have it repealed. But until that happens, Americans overseas must adhere to the FATCA rules or face the heavy consequences.

Nigel Green is the founder and CEO of deVere Group

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Enacted in 2010 by a Democrat-controlled Congress and signed into law by Barack Obama, FATCA is virtually unknown to most Americans but has been wreaking havoc with the global financial system outside the US. Touted as a weapon against ‘fat cat’ tax evaders stashing funds offshore, FATCA is instead an indiscriminate information dragnet requiring all non-US financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) in every country in the world to report data on all specified US accounts to the IRS.

If any country refuses to comply, FATCA provides for its financial sector to be hit with crippling penalties that will tank its economy.

“FATCA,” says Green, is “an extraterritorial diktat that burdens other countries’ financial institutions and their clients, which violates other countries’ sovereignty, and which is detrimental to their consumers and taxpayers. FATCA turns law-abiding, middle-class Americans living overseas, of whom there are approximately eight million, into financial pariahs,” leading to record numbers of US citizenship renunciations.

With Obama in the White House, doing away with FATCA was virtually impossible, despite repeal bills introduced by Senator Rand Paul (R-KY) and Rep. Mark Meadows (R-NC). “FATCA is a textbook example of a bad law that doesn’t achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences,” states Sen. Paul.

But now, with Donald Trump’s election and a GOP-led Congress expected to pass a comprehensive tax reform package this year, the situation has changed.

Most importantly, the 2016 Republican Platform calls for FATCA’s repeal, denouncing the law’s “warrantless seizure of personal financial information without reasonable suspicion or probable cause” and its threat to the “ability of overseas Americans to lead normal lives.”

As his co-leader of the campaign to Repeal FATCA, Green has turned to former US diplomat and longtime Senate leadership staffer Jim Jatras of the media and government relations firm Global Strategic Communications Group (GSCG). Jatras, a leading authority on FATCA, edits the online publication www.RepealFATCA.com, which is dedicated to getting rid of what he calls “the worst law most Americans have never heard of”.

On Green’s initiative, Jatras is assembling a team of experienced DC professionals to push the repeal effort over the top (Twitter @RepealFatca). “Nigel’s deciding to step up to the plate is just tremendous,” says Jatras. “Billions of dollars have been wasted worldwide complying with FATCA, billions of words have been written complaining about it. Now it’s time for action. When that tax bill gets to President Trump’s desk, we want FATCA repeal in it.”

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Nigel Green

February 1, 2017: US President Donald Trump’s ban on visitors from seven Muslim-majority nations has spooked markets, but clued-up investors won’t be panicking, they’ll be seeking out bargains.

The American markets fell on Monday below 20k, taking their cue from weak European and Asian markets.

For the past few months, a Trump presidency has been widely regarded as positive for stocks. But it appears that the rose-tinted glasses have come off as the travel ban for seven Muslim-majority countries has indicated to investors that there are major geopolitical headwinds brewing as the controversy intensifies.

The markets have been reacting to the fact that last Friday, Trump put a 120-day hold on permitting refugees into the States, an indefinite ban on refugees from Syria, plus a 90-day ban on citizens from Iran, Iraq, Libya and four other nations. Many nations, including long-standing US allies, have called the measures divisive and discriminatory.

The markets are jittery, but this is more a bump in the road than a major obstacle – for the moment at least. Markets typically have a knee-jerk reaction to unexpected or controversial geopolitical events.

There is also the argument that markets were overvalued and investors might have been looking for an excuse to sell, and this measure by Trump provided them with that.

Despite Trump’s Muslim ban spooking markets, clued-up investors won’t be panicking, they’ll be seeking out bargains – and perhaps hoping that the sell-off continues.

They will be aware that the world is changing fast. Change means volatility.

Whilst some people are put off investing because of volatility, many of the most successful investors welcome it.  This is because profitable opportunities are found where there are fluctuations and portfolios can be topped- up and advantage can be taken of lower entry points.

Nigel Green is the founder and CEO of deVere Group

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Nigel Green

January 19, 2017: Theresa May’s Brexit speech and strong inflation data should prompt investors to reduce exposure to UK assets and invest more internationally.

After months of keeping her cards close to her chest, in her most important speech since becoming Prime Minister in July, Mrs May told the world that her plans for Brexit cannot allow the UK to remain in the European single market.

Although this stance has been widely expected by the markets, it is likely that this confirmation of a hard Brexit will trigger several years of ongoing uncertainty.

The markets detest uncertainty. As such, investors should take precautions against a potential fall in the value of UK assets and avoid firms dependent upon UK-only earnings.

Investors can achieve this by increasing exposure to non-UK investments, such as international stocks, bonds and property.

Stronger-than-expected inflation data – UK inflation has hit its highest level since the middle of 2014 – also adds weight to the argument to reduce portfolio exposure to UK assets as the Bank of England could be more inclined to now hike interest rates.

Regardless of the hard Brexit and the increasing likelihood of a rate rise, many investors should be considering a rebalance of their portfolios away from the UK.  Investing across geographical regions is one of the fundamentals of a well-diversified portfolio – and those with a well-diversified portfolio are best-placed to mitigate risk in times of market turbulence and best-placed to take advantage of the opportunities.

The greater diversification that is secured by ‘going more global’, the greater the reduction of overall portfolio risk.

Nigel Green is the founder and CEO of deVere Group

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January 2, 2017: This year looks set to bring positive news for investors, but Donald Trump’s policies and the Federal Reserve’s reaction to their impact will be the biggest risk. Other key risks facing investors are the French and German elections, and further impact of lower oil prices.

It is likely that 2017 will bring good news for investors – but they mustn’t be complacent. They must remain alert. We’re now in a very different landscape to where we have been for the last six or seven years and this shift could impact investor returns.

As the world changes, investors will need to change with it to capitalise on the many opportunities that will be presented and mitigate any potential risks.

The biggest threat to investors is the changing expectations for growth, inflation and interest rates in the US, which remains the world’s largest economy.

Even before he takes office, the data and anecdotal evidence suggests that the US economy has been given an initial boost from the forthcoming Trump presidency. Considering the likelihood of a stimulus package when he takes office, and given the already near full employment rate, inflation could go higher than the Fed’s goal of 2 per cent.

Should this happen, the Fed could perceive the inflationary pressures as leading to an overheating of the economy and raise interest rates quicker than markets anticipate to cool it down.

The second major issue of which investors should be conscious are the forthcoming elections in France and Germany. Nationalist and far right are seeking to establish themselves in government in these countries. Should this happen, there could be an existential crisis in the EU as borders could be re-established and trade flows impeded in the world’s biggest single trading bloc.

The third risk is that the decline of the oil price from the highs of a few years ago will continue to have a significant impact on the finances of oil exporters.

The outlook for 2017 is strong, but investors should avoid complacency to make the most of an evolving investment landscape and build wealth.

Nigel Green is the founder and CEO of deVere Group

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December 15, 2016: Investors do not need to accept lower returns because of the US Federal Reserve’s rate raise.

The Fed on December 14 announced a 25bp rate hike at the FOMC meeting. This takes the key Fed funds rate up to a range of 50bp-75bps.

The rate rise is only the first increase this year and just the second since June 2006. It is significant because it gives further weight to the considered argument that the era of very low inflation and interest rates may be ending. And not just in America – the world’s largest economy – but globally too, as the policies pursued by central banks since the financial crash of 2008 come under increasing attack.

And despite the Fed appearing to want to proceed cautiously, and not threaten a constant rise in rates during 2017, many investors believe there are more hikes to come due to the strength of the US economy and the likely policies of a Trump presidency.

Whilst there might be some degree of nervousness about the Fed’s move, and the likely dawning of a new era, investors do not need to accept lower returns.

There will be winners and losers, and those investors who have a good fund manager, who selects the right investments at the right time, will surely profit.

Ensuring proper portfolio diversification will also be essential to taking advantage of the rewarding opportunities and sidestepping the potential risks.

Savvy investors are likely to favor the dollar over other currencies, since higher Fed rates will attract overseas capital into the US and favour those sectors that will most likely benefit from the Trump stimulus and de-regulation that he has promised.

These include US financials – which are also benefiting from the steepening US yield curve – energy and pharma stocks. Japanese and European exporters will benefit from the strong dollar, though investors may want to hedge their euro and yen currency exposure.

It can be expected that they will also seek to avoid emerging markets. Higher US dollar borrowing rates threaten the viability of almost $9 trillion of emerging market corporate debt.  This is because a stronger dollar makes interest and capital repayment more expensive in local currency and because when debt needs to be rolled over, the interest demanded may be much higher.

No matter what the Fed does with interest rates moving forward, investors who are well prepared and properly advised can look to build wealth as we move beyond the era of very low rates and inflation.

Nigel Green is the founder and chief executive of deVere Group

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Nigel Green

April 5, 2016: The allegations made in the Panama Papers case are not representative of the international financial services industry.

Regards the leak of confidential documents from Panamanian law firm Mossack Fonseca, like many people, I have found the details of the Panama Papers case, outlined in the BBC Panorama programme, very concerning as it suggests there might have been tax evasion on a grand scale. Clearly, tax evasion is illegal and punishable by law. It is a serious criminal global issue that needs to be tackled with more vigour.

However, I do not believe that the Panama Papers allegations are representative of today’s wider international financial services industry.

The overwhelming majority of the offshore sector only provides services that are fully compliant and legal and they are used by law-abiding clients, who are simply looking for typically better returns, more investment options and greater flexibility.

Many of the documents that have been revealed by the Panama Papers case date back decades and for the last several years, a new and totally unprecedented era of transparency and disclosure has been ushered in.

Indeed, the idea of a ‘tax haven’, in the traditional sense of the phrase, is now somewhat outdated.  In today’s world, in which financial information is being automatically exchanged with tax authorities globally, it is almost impossible to hide money. No longer can people stash assets on ‘treasure islands’ and not expect to be caught.”

The international financial services industry plays a vital and largely positive role in the global economy.  Yet, this is typically overlooked by the media.

As the press is quick to point out, there are many questionable reasons why people might want to keep money in an offshore account, which is simply an account in a jurisdiction different to the one in which the person currently lives.

However, in my experience of working with expatriates and international investors, who have generally more transient lifestyles, offshore accounts are preferable simply for convenience. They offer centralised, safe, flexible and international access to their funds no matter where they live and no matter to which country the individual moves to in the future. In addition, they offer a wide choice of multicurrency savings and investment solutions.

Offshore financial centres allow those who qualify to do so to use legal, bona fide international investment products to form part of a robust and sensible financial planning strategy.

Other major advantages of such centres include that they allow companies to avoid getting taxed twice on the same income and that they offer legitimate financial refuge for those in countries where there is economic and political turmoil, such as extremely volatile currency and confiscation of assets.

Whilst most international financial centres are now well regulated, transparent and cooperative, and provide a much needed and in-demand service for people and firms all over the world, the Panama Papers claims underscores that more can still be done.

Indeed, this should act as an opportunity to further enhance the effectiveness and credibility of these international financial centres and the sector. This is especially important as the industry is set to grow exponentially in the coming years as individuals and companies become ever more globalised.

Nigel Green is the founder and chief executive of deVere Group

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Suparna Goswami Bhattacharya

July 17, 2015: While the world is focused on the Greece crisis, there is something more serious brewing in the east. The tumbling stock prices in China has left everybody wondering what went wrong with the market that grew by 150% in the past one year.

More than 40 million new stock accounts were opened between June 2014 and May 2015. But the dream ride hit a roadblock. By the middle of July first week, the benchmark Shanghai Composite Index tumbled over 30% from its highs of June.

However, it is not the falling stock prices that have attracted the attention of the world. It is the way the Chinese government reacted to this crisis. The government has taken drastic measures to artificially halt the meltdown. These include stopping major investors from selling, a ban on short selling, injecting money into the market via the state-owned China Securities Finance Commission (CSF).

“The CSF could be a beast the Chinese authorities wish they had never created. It is a state controlled body that lends money to brokerages so they can provide loans to clients to buy in the stock market. And guess who the shareholders are. The major exchanges,” says Nigel Green, founder and chief executive of deVere Group, an independent financial advisory organisation.

The Communist Party newspaper warned people not to “lose their minds” over this and urged patience with the government’s measures to produce results. “If you read such a statement in the Communist Party’s own press, you do panic. Basically, the bubble has burst,” says Satyajit Das, a former banker and author of Extreme Money and Traders, Guns & Money.

Unlike in most other countries where the government has little control over the markets, the situation is quite different in China. Here the government can actually ban people from selling/buying shares or buy as many shares as it wants to boost the market. As a result, the Chinese government’s performance is linked to the returns people earn from the market.

To be fair, it is certainly not the first country to prop up the economy after a massive fall in stock prices. The US, Japan and many countries in Europe have done the same. But the manner in which the Chinese government intervened has made the situation more worrying that what it actually is.

For some, the government reaction is not surprising. “This kind of government reaction would be extreme in any other country, although it is not surprising within China. The Chinese government is hugely stability oriented, and moreover was a strong proponent of the bull market. Thus they felt obligated to intervene, even if unnecessary for economic reasons,” says Brian Jackson, Senior Economist at IHS Global Insight.

Impact on global market

“China’s financial market is not well integrated with global markets. But the worry is the combination of property bust, stock bust, banking system problems and slowing growth,” says Das.

The impact is primarily indirect and speculative. “In that sense, foreign markets are importing speculation from Chinese markets. The real impacts should be relatively limited over the medium term, once volatility settles down,” remarks Jackson.

One also has to take into account that China puts restriction on foreign investors when it comes to trading in their stock markets. For instance, they are not allowed to buy China A shares, which are shares of the renminbi that are purchased and traded on the Shanghai and Shenzhen stock exchanges. “But if the falling market leads to a financial crisis, and puts already weak banks under further stress, it will negatively impact the Chinese economy. Since China is closely interlocked with the global economy, weaker global growth and trade will follow. That can only be bad news for global stock markets,” says Tom Elliott, deVere Group’s International Investment Strategist.

The stock prices are hugely significant because it will send shock waves throughout global capital markets, not least because China is the world’s second largest economy and one of the largest consumers of commodities and other goods sold by other countries.

“As such, China, not Greece, is arguably the main cause for concern for investors right now. Bearing in mind the potentially enormous fallout of China’s plunging markets, I would urge investors to urgently reassess their portfolios to ensure they are appropriately diversified,” says Green.

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