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Cross border Financial Planning


This quote from J F Kennedy might be well known and much quoted, but very rarely is it ever applied. It is all too easy to forget past miscalculations and we all too often choose to ignore or disregard what the future may hold when the present seems so sanguine. Your financial security seems encouraging when markets are on the rise, inflation and interest rates are at a low and you have a secure income.

However, if the history of the financial world has taught us anything, it is that we cannot afford to rest on our laurels. The world of finance can change in an instant. Take for example, the deep and swift global recession of 2008-2009, or the sub-prime mortgage crisis, the flash crash of 2010 or the unpegging of the Swiss Franc in February of this year. More recently, events in Greece and China have shown us yet again how volatile financial markets can be. Those who had not planned carefully before these events occurred may have incurred significant losses as a result.

There are of course certain safeguards and provisions we can take, although nothing can ever guarantee total exception from global financial events. Whilst it may not seem that important today, in the long–run making the effort to plan your financial security today will pay off when the tide turns, as inevitably it will. We just don’t know in advance how or when. It is often harder to attempt to repair what has been done than to mitigate the chances of it happening in the first place. The same is true with investments: without sufficient forecasting and preparation during the good times, an unexpected event (whether the birth of a child, sudden illness or death or simply a change of employment which may involve relocation) will mean your financial security may not be as secure you thought.

Let’s take an example. When the Swiss Franc started to rise against the Polish Zloty, there were over half a million Polish homeowners who had previously taken out Swiss Franc-denominated home loans, with the perception that it was a safe (and low cost) way of borrowing money. However unbeknown to them, by borrowing in Swiss Francs they had unnecessarily increased the risk of their mortgages for which they had signed. So when the Swiss Franc rose against the Zloty, what they owed the bank grew substantially in comparison to the value of their property, causing financial ruin to many as a consequence. This situation may have been avoided had they been made aware, by sound and thorough financial planning, that there was an additional and substantial risk in cross currency mortgage financing

So, before you sit back and enjoy those sunny days, make sure that your financial ‘roof’ is in proper order to protect you from the bad weather that you will no doubt have to ride out at some point in the future.

Please note: This article should be seen as general guidance only and you should not act upon the information herein without first obtaining professional advice specific to your individual circumstances. Blackden Financial S.A. accepts no responsibility for any loss incurred by any person either taking action or refraining from taking action as a result of the information contained in this article. For further information please feel free to contact us for further information.

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