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Foreign land: What to tell your clients about offshore investments

Financial planners say the key to wealth is a diversified portfolio - but clients are nervous about allocating money to offshore markets. We speak to Fiducian financial adviser Geoff Wilbow and senior analyst Jai Singh for their thoughts on foreign investment.

Video transcript below:

Donna Sawyer, Wealth Professional
Donna Sawyer:
 Financial Planners agree a good investment portfolio is a diversified portfolio, but convincing nervous clients to allocate some of their nest egg to offshore markets can be tricky. Fiducian Financial Advisor, Geoff Wilbow says it’s important to educate clients on the value foreign investment can add over the longer term.

Geoff Wilbow, Fiducian
Geoff Wilbow:  I think the important thing for planners is to understand what foreign markets can do for their clients.  And they can give them diversification, it can give them exposure to an economy like India which you know we sit in an economy with 23 million people or population, you know there is 400 odd million people in the Indian middle class.  
 
Jai Singh, Fiducian
Jai Singh:  The issue that clients have today is where they seem to break that nexus, they seem to make the investment decision themselves and they look to make decisions which actually may have a positive impact in the short term, but long term they can cause real issues.  So in terms of the volatility, I mean each asset class has its own characteristics and there is good and bad with everything.  But when they, they need to be combined in a way which is effective for the client and it depends on the client’s needs, only an advisor can really do that.
 
Donna Sawyer:  Senior Analyst Jai Singh says investors with a long term view should consider the growth prospects offered by India.
 
Jai Singh:  India is as I said a long term proposition.  You know the data that has come out and has been out for a while on India is that it’s at least a 20 to 25 year process of industrialisation.  So right now you know they have got the second largest population to China, but within 20 to 25 years they will have the largest population in the world and with that as well, the age demographics are extremely positive in that you know at least 65% of the population is under 35.  So labour force participation rate is a major component of economic growth and economic growth we feel at Fiducian is a key driver of equity prices.
 
Donna Sawyer:  And with investors particularly cautious about Europe and the US, Fiducian’s Geoff Wilbow says developing nations may be more attractive to clients for the time being.
 
Geoff Wilbow:  When they do often want to have some foreign investment, they are saying things like ah, but we don’t want it in India.  And to some extent they are saying we don’t want it in the US, although I think avoiding the US is not necessarily a good thing.  So India and of course other developing markets, China, Brazil etc. are places that people are starting to realise are the growth areas of the future.
 
Jai Singh:  Advisors are cautious which is a good thing and a lot of advisors that we deal with typically put their money into the fund first before they allocate their clients.  But as a house, we have always been very conservative and we have always put the client first.
 
Geoff Wilbow:  Our role is to understand how we can diversify the client’s portfolio and what role a place like India has in that.  And so I don’t it’s the job of a planner to be going and trying to pick the stocks or pick the managers in India.
 
Donna Sawyer:  This is Donna Sawyer reporting for Wealth Professional.