We asked two Singapore-based financial advisors with expatriate clients for their opinions on two important issues: finding financial common ground with your new partner, and how to invest ethically.
Are you ready to share a bank account?
So you think you’ve found the one? Before you get carried away with dreams of “happily ever after”, ANDREW TALBOT from Expat Financial Planning, recommends ways to smooth the path towards a united financial future.
“Multiple surveys have shown that the most common area of conflict in a relationship is money. Everyone has a distinct and different attitude towards money, often learnt in childhood,” says Andrew.
He recommends a calm conversation over coffee before you move in together, saying it can help set the boundaries and rules regarding spending that will leave both of you feeling secure. “It’s important to outline financial goals and directions together, and to discuss attitudes towards money,” he says. “Often, one person will be a saver who feels safe and secure with a large nest egg, while the other may be more of a spender, someone who lives for experiences and sees money more as a tool.”
Understanding each other’s spending habits and goals and creating a balance is the key to harmony. According to Andrew, most couples start with an independent approach, and gradually adapt a jointly managed approach as the relationship develops and longer-term life goals such as purchasing a home together, having children and saving for retirement come into play.
What about pre-nuptial agreements? Although widely perceived as unromantic – betting against the success of the relationship, perhaps – Andrew says they should be considered, especially in cases when partners enter into a marriage with unequal assets. “For example, if one party has a large family holding or business, it would be suggested that the family protect the business, possibly by looking at a trust or re-aligning the business structure,” he says.
Depending on your tax jurisdiction, the taxman will often reward your relationship with joint allowances to offset tax for married couples. Finally, Andrew recommends that, in marriages between two people from different countries, financial decisions be made with the help of financial advisor qualified to help with tax matters.
Common ways couples manage their finances:
Maintain independence: Set up a shared bank account to pay shared expenses. For example, each partner might redirect a pre-agreed portion of their monthly income from their personal account into the joint bank account. Expenses such as rent, utilities and food would be drawn from this account. Sometimes, one partner may be able to pay a higher percentage if they are earning more than the other.
Split expenses by type: One partner pays for one type of expense, such as the rent or mortgage, and the other pays for entertainment and food, for example.
Jointly managed: All income and expenses are jointly managed and shared.
Tip! Pre-agreed limits on spending, and joint decision making on purchases above specific amounts might provide peace of mind for both partners.
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Do you really know where your money is invested?
Much is written about how to invest your money and the investments that offer the best opportunities for growth. CHRIS POTTER from Chartwell Associates takes a different tack here, outlining the rise of ethical and socially responsible investing.
This investment focus is sparking the emergence of a new industry that operates in the largely uncharted area between philanthropy and profit maximisation.
“There is a growing movement seeking not just growth on investments, but achieving this without disadvantaging people or damaging the environment. Similarly, attention is being directed towards investing in areas and companies that have a direct and positive social impact,” says Chris. Although ethical funds have been around for a considerable time, and these have performed commendably, socially responsible and impactful investing is a relatively new area and one in which Chartwell Associates sees itself as a principal advocate.
Although ethical and socially responsible investments are mostly available to accredited investors only (those that meet an annual income or investment portfolio threshold), Chris says there are a few funds that are available to non accredited investors. “What constitutes ethical investing depends on an investor’s personal views; some may choose to avoid investments in certain industries, such as gambling, alcohol or firearms, or to allocate more to industries that meet their own ethical guidelines,” says Chris.
Ethical investing gives individuals the power to allocate capital toward companies that are in line with their personal views, whether these are based on environmental, religious or political precepts. Indeed, investments can be considered socially responsible for a wide number of reasons, including the nature of the business a company conducts and the way it conducts that business.
Common themes for socially responsible investments include avoiding certain industries (the aforementioned gambling and others, for example), and seeking out companies engaged in environmental sustainability and alternative energy or clean technology efforts. “Companies that treat their employees and suppliers fairly, or source supplies in an environmentally sustainable manner, could also qualify as socially responsible investments,” says Chris.
According to Chris, socially conscious investing is becoming a widely followed practice, and there are a growing number of funds and pooled investment vehicles available for retail investors. “Mutual funds and unit trusts provide an added advantage in that investors can gain exposure to multiple companies across many sectors with a single investment.” However, he does caution that just because an investment touts itself as socially responsible doesn’t mean that it will provide investors with a good return.
Impact investments are investments made with the intention to generate measurable social and environmental impact alongside a financial return. “Impact investments can be made in both emerging and developed markets, and can target a range of returns from below market to market rate, depending upon the circumstances,” says Chris.
“The glue that binds those who operate in the impact investing industry is the shared conviction that creative investments can play a crucial part in addressing social and environmental challenges.”
6225 5707 | chartwell-associates.com
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