Do-It-Yourself

Investing

How to become your own financial adviser

A publication by

Contents
Introduction
Chapter 1. Build on firm foundations
Chapter 2. Simplify your investments
Chapter 3. Make your own investment decisions
Chapter 4. Prepare for your retirement
Chapter 5. When you should seek and pay for advice

Introduction
Reading this guide will change your life.
If you are disillusioned with the advice you have received from offshore
financial salespeople in the past, or are simply looking for a way to manage
your finances effectively and at a low cost, then this guide is for you.
The day you discover that you are able to be your own financial adviser and
invest DIY will be truly life changing.
The fact is, most people, most of the time, are fully capable of successfully
managing their finances, including things like investments and insurance,
without any involvement from a financial adviser. You only really need
financial advice if you have complex financial affairs or at certain times of
your life when you require specialist or expert knowledge for example,
when you are approaching retirement.
A REAL adviser would tell you this, but the problem is that international

financial services is an industry full of salespeople, not true advisers. A

salesperson is most likely only going to tell you about products and then
sell you whichever one it is that makes THEM the most money

During the day-to-day management of your financial affairs you really do

not need to pay for financial advice which is always expensive and may not
even be in your interests.
DIY investing is particularly useful if you are an internationally mobile
expatriate as, unfortunately, there are many product salespeople who target
people like you and who are in fact only looking to make a quick buck for
themselves from your money.

By learning how, and having the tools, to manage your finances yourself,
you can avoid coming into contact with these people and keep the profits
you make completely to yourself.
You may be thinking I dont know anything about finance or I dont know
where to start. In fact, the majority of your financial needs are not as
complicated as you may think. I'm confident that
a little time getting to know the subject will pay
dividends and that you will quickly develop the
ability to make sensible, informed and rewarding
decisions.
With a little helping hand, you will soon be on
the path to financial success. I am sure you will
never look back.

Rory Gilbert
Managing Director
AES International

Do-It-Yourself Investing:

How to become your own financial adviser

4 tremendous reasons to become

your own financial adviser

No one cares more about your financial success than you.

It will cost less. Most likely it will cost substantially less than

being sold a rotten product or investment you dont need by a

financial salesperson. This means you could save tens of
thousands of pounds on unnecessary hidden which would
otherwise be lining someone elses pockets

It is actually straightforward! Once you have the building blocks

in place, keeping on top of it is really no different to having
someone else looking after it. In fact, it can be much easier.

If you ever want advice, it is still available. Taking this route

doesnt mean you can never get advice it just means you only
pay for things you need and value.

Chapter 1

BUILD
ON
FIRM
FOUNDATIONS

Do-It-Yourself Investing:

How to become your own financial adviser

Build on firm foundations

The most important part of any financial advisers job is ensuring the
underlying financial health of a clients finances is strong. Doing this is
actually quite simple. There are five main things you need to review:

Your spending

Your insurance

Your debt

Your bank account

Your Will

Do-It-Yourself Investing:

How to become your own financial adviser

1 Your spending
Before you can begin to save or invest you
need to know how much you are spending,
where it is going and how much you can
reasonably save or invest each month.
Simply put, the key is to spend less than you
earn and save or invest the difference.

2 Your insurance
Depending on the stage at which you are in your life, you will want varying
levels of insurance. If you are a home owner and are married or have
children, then you will want to make sure you have enough life insurance to
cover your mortgage should anything happen to you. You may also want to
ensure you have medical or serious illness cover in case you find yourself
unable to work and look after loved ones.
Many people do not have enough insurance and some have too much.
Review your insurance status and make sure you are neither paying for

cover needlessly, nor under-insured.

Do-It-Yourself Investing:

How to become your own financial adviser

3 Your debt

4 Your bank account

Debt can be a real drag on the overall

Build a minimum of three to six

profitability of any financial strategy.

months expenses in an immediate

Keep short term borrowing, such as

access cash account to help cover

personal loans, credit cards and

unexpected bills. For internationally

overdrafts, to a minimum as these

mobile expatriates such as yourself,

tend to be expensive. Make sure your

we recommend using an offshore

borrowing is under control. If you

private bank. This will provide you

dont feel it is, then this needs to be

with a range of benefits including

addressed immediately and before

quick and easy access to cash in a

you consider making any investments.

range of currencies, and the option to

While reviewing your debt, it may be

invest, which we shall explore later in

worth checking to make sure you

this guide.

have the best available mortgage as

rates change over time and you may
be able to negotiate better terms.
This could help save you money
which may be put to better use
elsewhere.

Do-It-Yourself Investing:

How to become your own financial adviser

5 Your Will
This is very important for expatriates, particularly if you have a spouse or
family. In some countries the rules over the distribution of assets when
someone dies are very archaic and could mean your immediate family is left
with nothing. In some countries, the local law can take precedence over any
arrangements you have. Make sure you have a very clear Will which has
been drawn up with the help of a solicitor and is registered in the country

in which you live.

Open an offshore private bank account

The ABC rule for all expatriate financial planning is that if you come from
country A and live in country B then you MUST bank in country C. There are
myriad benefits to opening an offshore private bank account ranging from
increased security, convenience and service to tax mitigation, highly
competitive lending facilities and foreign exchange services (see The Expat
Guide to Offshore Banking). We recommend opening an offshore private bank
account to all our international clients as we believe it is the cornerstone
from which a successful financial strategy is built.
Importantly, the offshore
private banking service
offered
by
AES
International
provides
access to a very wide
range of funds and
investment strategies at
discounted costs.

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Chapter 2

SIMPLIFY
YOUR
INVESTMENTS

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Do-It-Yourself Investing:

How to become your own financial adviser

Simplify your investments

You may already have an investment portfolio with a mix of funds, shares
and other investments. If you have been an expatriate for some time you
may even have an offshore bond or regular savings contract with a
company like Generali International, RL360, Zurich International, Friends
Provident International or Royal Skandia (now called Old Mutual

International).
Firstly, there is nothing wrong with
these types of products in their place.
The problem is that it is very easy for
them to be used incorrectly by
offshore financial salespeople.

For

more information on this, you can

read

our

Secrets:

special
How

report,

offshore

Insider
financial

salespeople make money on your

investments.
If you do have a regular savings product or offshore bond, you may want to
review what the charges within this plan are and what effect this is having
on your investment performance. In many cases there are high exit charges
on the products and funds, so it may not make financial sense to break the
contract, but you may still be able to switch the funds into lower cost
alternatives or renegotiate some charges.

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Do-It-Yourself Investing:

How to become your own financial adviser

It may be the case that this policy was set up by

a responsible financial adviser and that it is
perfectly suitable for your needs.

You should also review your existing investments in the current market. We
generally recommend against using structured products and Unregulated
Collective Investment Schemes (UCIS), which can be complex and
specialised, and which can be higher risk.

If you have any structured products or UCIS funds in your investment

portfolio, consider exiting them if possible. In the case of structured
products you may not be able to exit the product and so may want to sell it

on a secondary market. This is certainly an occasion when some guidance or

advice from a qualified, professional financial adviser can really help.

13

Do-It-Yourself Investing:

How to become your own financial adviser

The next step is to open an offshore private

bank account. This is a low cost way of
consolidating your assets and being able to
easily manage your money.
Sam Instone
CEO, AES International

INSIDER SECRETS
What does a
financial
professional do?
I set up an offshore bank
account when I first moved
overseas in 2005. Although
I still keep a local account
both at home and in the
country in which I am
resident - my offshore
account
forms
the
foundation upon which my
family's
finances
are
built.
Here I keep our
accrued capital in a tax
efficient environment and
make use of the low cost
investment solutions and
facilities
such
as
mortgages. Even though
many
senior
financial
professionals I know use
the exact same structure
themselves they keep it a
secret... My view is that all
expats should have the
help to get them to the
right basic structure upon
which to build their wealth.

An offshore private bank account will enable you

to manage your cash, investments and other
interests like mortgages, securely using online,

telephone and mobile banking. Holding your

assets in an offshore private bank account
means you can rest easy in the knowledge the
bulk of your money is safe and secure in a highly
regulated environment outside of the country in
which you are currently based.
For further information on the benefits of
offshore banking download our guide here.
The process of simplifying your investments may
seem complex and troublesome, but once you
have completed it you will be in a significantly
stronger

position

to

continue

building

successful financial future. It really is imperative

that this is done first as having unstable

foundations can easily erode any future financial
gains and cause irreparable damage.

14

Chapter 3

MAKE
YOUR OWN
INVESTMENT
DECISIONS

15

Do-It-Yourself Investing:

How to become your own financial adviser

Make your own investment decisions

Here are the 6 staples of investing:

Dont let returns get eroded keep costs down

Understand your risk profile and what risk means

Know your investment horizon

Active or passive?

Asset allocation and diversification

Review your portfolio

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Do-It-Yourself Investing:

How to become your own financial adviser

1 Dont let returns get eroded

keep costs down

By DIY investing you can

make

investing

more

effective as your costs can be

lower, if you know how. This is

because you can bypass the

often

hefty

commissions

levied by product vendors in

the international market.
To make investing even more cost effective and therefore profitable, AES
International has negotiated savings of up to 5.25% on a wide selection of
international funds and offshore investments.
Over a period of time, the reduced costs means your investment performs
better. The compounded effects of these savings can have a staggering
effect on the amount of money you make over the lifetime of an
investment. Albert Einstein called this effect the eighth wonder of the
world!
You can also save money by investing in lower cost or passive funds as
explained in point four below.

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Do-It-Yourself Investing:

How to become your own financial adviser

A professional adviser
can help you understand
risk and how much you
may or may not need to
take in order to achieve
your life objectives.
This process is called
cashflow planning and is
a detailed way to project
some assumptions about
how your future may
look in financial terms.

2 Understand your risk

profile and what risk
means

Among the many considerations that relate to risk,

there are two that stand out; that your investments
may fall in value or that your investments do not
grow quickly enough to meet your needs.

If you are unable to stomach any fall in the value of your investments, then you
may be better sticking to saving in a cash account. If this is the case, then ensure
you have a decent rate of interest on the account. You may struggle to meet your
financial objectives, but your capital will be secure.

If you are happy to invest in funds, then you need to decide how aggressive you
want to be with your investment strategy.

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Do-It-Yourself Investing:

How to become your own financial adviser

If you are a more aggressive investor, are saving for the long term and are
prepared to see some potential short term falls in the value of your
investments in exchange for the potential for bigger long term gains, then
you should have a comparatively high equity exposure in your portfolio.
If you are less aggressive (more risk averse) and are not prepared to accept
the potential for short term falls in the value of your investments and are
happy to see smaller long term gains, then you should include more lower

risk assets such as cash and bonds in your portfolio.

ASSET CLASSES EXPLAINED

EQUITIES
These are the most commonly traded of all asset classes and are the shares of
companies listed on a stock exchange. The value of a share will go up and
down depending on the popularity of a company on any given day. These are
the most volatile (as in their value fluctuates the most) of all asset classes.
FIXED INTEREST OR BONDS
The simplest way to explain a bond is to think of it as debt. A big company or
government will issue bonds to investors in order to raise money. The bond
itself is a promise to repay a certain amount of money on a certain date in the
future. These are less risky than equities as there is a promise to repay from the
company. They can still fall in value though or become worthless if a company
loses value or fails.
CASH AND MONEY MARKET FUNDS
Cash is the least risky asset class, although it still carries some risk such as
being eroded by inflation or even being held by an insecure institution. There
are what are known as money-market funds which trade in cash or cash
equivalent assets. The funds are low risk, low reward and simply seek to
maintain the value of an investors cash.
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Do-It-Yourself Investing:

How to become your own financial adviser

3 Know your investment horizon

Understanding your investment horizon is an essential part of constructing
your portfolio and feeds into all aspects of the decision-making process.
If you have a short investment horizon that is you want access to the cash
you plan to invest within three to five years you may want to consider
using funds which invest in low risk assets such as UK government bonds
(known as gilts) or other highly rated bonds. You may even want to consider
simply keeping it in cash.
To invest effectively though, you really should have an investment horizon
of at least five years, preferably longer, during which time the cash you
invest is not required. By investing over a longer period you can increase
the likely returns you will get substantially.

By understanding your investment horizon you will be better able to map

your portfolio with your goals and long term objectives.
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Do-It-Yourself Investing:

How to become your own financial adviser

4 Active or passive?
There are two ways which funds are managed actively and passively.
Passively managed funds (which include index
tracking funds and exchange traded funds
(ETFs)) aim to track the performance of a
particular index, such as the FTSE 100 in the
UK or the S&P 500 in the US.
The funds do this in one of two ways either
by investing in shares in each stock that make
up the index they are tracking, or through the
use of complex financial instruments to mirror
the performance of the index.
These funds will never perform better than an
index, but nor should they perform badly when
the index is rising.
Actively managed funds, as the name suggests,
are those in which the fund manager actively
tries to cherry-pick the best investments for
the fund and beat a benchmark.
There are arguments for using both types of
fund.

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Do-It-Yourself Investing:

How to become your own financial adviser

Passive

Active

There are two main benefits of

The main case for investing in an

using an index tracking fund.

actively managed fund is that a good

The first is that it removes the risk

fund manager should be able to

of choosing a bad active fund

outperform an index and therefore

manager not all active fund

an index tracking fund. Remember

managers are good and many will

that with an index tracking fund it

pick the wrong stocks at the wrong

will only ever be as good as the

times and will therefore not deliver

index it is following. Therefore the

good returns.

potential returns using an actively

The second and most important

managed fund could be much higher.

reason is cost. Passively managed

With actively managed funds, the

funds will charge substantially less

extra work and analysis involved

than an actively managed fund,

means investors will have to pay

with typical fees ranging from

more in the way of charges, with

0.07% to 0.85% per year.

annual

management

charges

averaging around 1.5%. There is also

typically an initial charge of around
5.25% as well as further underlying
costs such as those for trading
which mean the actual cost (known

as a Total Expense Ratio) is usually

between 1% to 3% per annum.
There is an ever increasing amount of evidence available which indicates that
passive investment returns more money to investors than active.
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Do-It-Yourself Investing:

How to become your own financial adviser

5 Asset allocation & diversification

Asset allocation is a major driver
of returns over the long term. For
example, portfolios with a higher
exposure

to

equities

will

outperform those with a lower

exposure to equities over the
long term.
In addition to getting the asset mix right, you
also need to ensure you properly diversify your
portfolio.
When you make a choice to invest in a certain country or market segment

through an investment fund, you are relying on that economy or part of the
market to grow. Even a very good investment manager will not necessarily
be able to protect you against a wholesale fall in the value of that country
or market segments shares. This is why it is important to build a diversified
investment portfolio.
Do not put all your eggs in one basket invest across a number of different
assets, sectors, countries and market segments. There is no way to invest
and insulate yourself entirely from stock market downturns, but in this way
you can avoid making huge losses if just one area of the market falls.
Diversification also means you are more likely to benefit when different
markets increase in value as you are more likely to be invested in them.

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Do-It-Yourself Investing:

How to become your own financial adviser

6 Review your portfolio

You should personally review your portfolio of investments at least
annually. As part of your review, consider whether the portfolio is still on
target to meet your objectives you may need to make it more or less
aggressive if you dont feel it is on track.
You may also want to refresh your fund selection if you feel market
conditions have changed or the portfolio is not performing as you would
like. Pay particular attention to those funds which are performing either
very badly or very well. Consider whether you think they will continue on
that trajectory and whether you think it is time to choose another fund.

How to choose funds

There are literally thousands of funds available so
it can be difficult to know where to start. At AES
International we have a centralised investment
team which spends hundreds of hours researching
the best active and passive managers so investors
can benefit from best of breed solutions which they feel are right for them.

Part of this is called our White List which contains the funds that we
ourselves like to invest our own money in. We have secured substantial
discounts on the costs for the funds on this list and we pass these discounts
through to our clients.

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Do-It-Yourself Investing:

How to become your own financial adviser

Top 5 tips for choosing funds and

building a successful portfolio

1
2

DONT SELECT ON PAST PERFORMANCE. Past performance is

never a guide to future returns. In some cases, the best
performing fund one year, will be the worst performing the
next.
DO LOOK AT COSTS. Using low cost funds, like passive funds,

can add real value as less of your return is being swallowed by

fees. This is particularly true in mature markets such as
Europe and the US, where actively managed funds often

struggle to beat average returns.

DO LIMIT THE AMOUNT YOU INVEST IN EACH FUND. Do not be
tempted to put all your money, or even half, in one
undiversified fund. Spread the risk.
DIVERSIFY. Choose funds which invest in different sectors and
different areas of the world. If you are investing some of your
portfolio in higher risk or less well developed markets, like
Asia or Latin America, this is where an active manager with
local knowledge can potentially be a good choice.

AVOID HIGHLY SPECIALISED FUNDS. Funds which invest in just

one thing, such as retirement care homes or agriculture stocks,
can be risky. Getting your asset mix right is much more
important than trying to pick a winning asset class leave that
to the fund managers and traders.

25

Chapter 4

PREPARE
FOR YOUR
RETIREMENT

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Do-It-Yourself Investing:

How to become your own financial adviser

Prepare for your retirement

You are probably already preparing for your retirement by paying into a
company or personal pension scheme. As you set out to take full control
over your finances, you should also spend some time reviewing where you
are up to with your retirement provisions.
The most important part of successful pension planning is to set goals. Set
yourself a target you would like to have when you retire if this is very far
off, it may be easier to set an annual or monthly saving target. You should
try to save around 15% of your annual income.
You may also want to consolidate any old schemes into one. As we go
through life it is not unusual to pay into numerous different schemes as we
move jobs. It may make sense to consolidate these into one place, such as a
Self Invested Personal Pension (SIPP) or Qualifying Recognised Overseas
Pension Scheme (QROPS).

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Do-It-Yourself Investing:

How to become your own financial adviser

Another thing to consider is where your money is invested. As discussed in

chapter three, you may need to adjust the amount of risk you are taking in
order to reach your retirement goals. If you are many years or decades from
retirement, think about increasing your equity exposure as this is likely to
generate you higher returns over the long term. You will want to reduce this
risk as you near retirement.
When you do reach retirement we suggest you do seek advice from a
professional, qualified financial adviser. It is one of the few times in your

life when paying for advice is the best thing to do and can make a
significant, positive difference to your life.

28

Chapter 5

WHEN YOU
SHOULD TAKE
FINANCIAL
ADVICE
(and how to pay for it)

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Do-It-Yourself Investing:

How to become your own financial adviser

When you should take financial advice

(and how to pay for it)
There are times in your life when taking financial advice from a professional,
fully qualified adviser is the right thing to do.
As an expatriate, your financial affairs can become complex, as there are
usually many more options available to you than if you were based in your
home country, particularly around tax and estate planning.
There are also some more technical choices to be made around your pension
both in terms of how and where you save and what you do at the point you
retire.
It is at times like these when it makes sense to consult a qualified financial
adviser who will be able to explain your options to you and guide you
towards a solution which is right for you.

If you choose to consult an AES International financial adviser you have the
option of paying by a fee rather than through commission which is built into
the product and which can eat away at future returns.

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Do-It-Yourself Investing:

How to become your own financial adviser

Top 10 reasons for choosing

independent professional advice
1

Ensuring you have the right banking and financial structures in place
to face major life events such as having children, moving country or
buying additional property.

Help your planning and investing for retirement. Reviewing existing

pensions and investment arrangements.

Advice on options at retirement. Maximising your retirement benefits

and flexibility.

Help in overhauling 'messy and disorganised' portfolios that are in

Investing a lump sum released from other assets e.g. the sale of a

A review of an underperforming portfolio/investment from an existing

multiple locations.

property or business, or reducing cash holdings.

IFA or wealth manager particularly focusing on charges, asset

allocation and risk.

You no longer wish to manage your own investments maybe you lack

Cash flow planning so you can begin to get control of your expenditure

the time, interest or confidence to keep making your own decisions.

and an idea of how to plan for your future.

Investing an inheritance OR inheritance tax planning.

10

Reducing administrative hassle and to strip out costs.

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Do-It-Yourself Investing:

How to become your own financial adviser

People often tell us

...they are unsure if they would benefit from
one-to one advice. In response to this we
developed X-Ray. This gives you the
opportunity to get a free, detailed technical
analysis of your existing investments to

review without obligation and in your own

time. You can also discuss your needs and
the services we offer in a free telephone
consultation.

I am convinced that people should only pay for

things that they need and value. The RIGHT adviser
can be invaluable in helping you identify, achieve
and maintain your desired lifestyle without ever
running out of money, whatever happens. They
should help you understand your wealth to help
you accumulate it, manage it, protect it, and most
importantly, ENJOY IT! Choosing the wrong adviser
can be a disaster for you and your family. That's

why we help you to work out how to run your money

yourself, and to decide if and when good, trusted,
Rory Gilbert
Managing Director
AES International

expert advice might be what you need.

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Do-It-Yourself Investing:

How to become your own financial adviser

A word on choosing a financial adviser

Unfortunately, the international market is littered with offshore financial
salespeople who make it their hunting ground looking for people like you
to exploit entirely for their own gains.
They are often charming and charismatic individuals who wear sharp suits
and drive flashy cars. They will use this charm to offload very expensive and
unnecessary products on people like you; products which could ultimately
destroy your finances.
Whats worse, once you realise the products are not what you thought they
were and your money is being eaten away by hidden charges (they will
likely claim the advice is free or that they are paid by the product

provider), they will be nowhere to be found, having moved on to their next

victim.
When you do need financial advice, make sure you choose a fully qualified
adviser. Check their credentials and that of their firm. Dont be afraid to
really quiz them on their qualifications ask for copies of their certificates.
If they are a high quality, qualified adviser they will not mind and will
respect your diligence. If they are not, then hopefully they will be put off by
your inquisitiveness.
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Do-It-Yourself Investing:

How to become your own financial adviser

What next?
Before you take the reins as your own financial adviser, you may want a
little help identifying what financial goals are important to you and
assistance in constructing a plan which will help you reach those goals.

34

A word on choosing a financial adviser

Unfortunately, the international market is littered with offshore financial
salespeople who make it their huntingOur
ground
looking for people like you
Offices
to exploit entirely for their own gains.

Serving our clients from 10 offices and

36 jurisdictions
across
Europe
the
They are often charming and charismatic
individuals who
wear
sharpand
suits
Middle East
and drive flashy cars. They will use this charm to offload very expensive and
Our products
Expertisewhich could ultimately
unnecessary products on people like you;
destroy your finances.

International Investment
International
Whats worse, once you realise the products
are not Pensions
what you thought they
Non Domicile UK Resident Planning
were and your money is being eaten away
by hidden
charges (they will
Financial
Planning
Financial
Planning
likely claim the advice is free or that Expatriate
they are paid
by the product
International Estate Planning
provider), they will be nowhere to be found,
havingManagement
moved on to their next
Investment
Offshore Private Banking
victim.
Credit and Lending
Insurance
When you do need financial advice, make
sure you choose a fully qualified
adviser. Check their credentials and that of their firm. Dont be afraid to
really quiz them on their qualifications ask for copies of their certificates.
If they are a high quality, qualified adviser they will not mind and will
IMPORTANT
NOTE:
This diligence.
guide aims toIfprovide
information
on DIY Investing.
It is abe
short
andoff
simplified
respect
your
they general
are not,
then hopefully
they will
put
by summary
of a complex subject, so please do not make any decisions based solely on the contents of this guide. Whether or not
yourareinquisitiveness.
investments
appropriate to you will depend on many factors, including your individual needs and circumstances. For
a personalised recommendation, please contact AES International or request the free portfolio X-ray report.

To find out more about how to choose a financial adviser and what makes a
good one read our guide here
Blurb about AES International here taken from another guide

35