The problems in the Eurozone, not to mention the US, are creating much uncertainty. While company fundamentals remain positive, stockmarkets themselves tend to react adversely to uncertainty, as we?ve seen happen recently. So what should you do if you have money to invest?

For people who are not yet invested, a fall in share prices could work in their favour because if you can buy when prices are lower, you have greater scope for capital growth when markets recover. You would though have to be prepared for the possibility that, after you invest, markets could fall further before they rise again. You therefore need to be able to hold your investments for a suitable amount of time.

History shows us that most people are too nervous to invest in falling markets and that by the time the situation has improved, and they do have the confidence to invest, they have missed a significant part of the potential upside gains.

Whether you are a new or an existing investor, the key thing to remember is that returns are driven by your time in the markets rather than market timing.

Investment is only one side of wealth management, tax planning is another key part and very important when it comes to protecting your wealth and after tax income.

Most tax savings opportunities involve some sort of investment structure. Bank deposit accounts, unfortunately, do not offer much in the way of tax planning.

Locally authorised and approved investment bonds are used by a great number of expatriates in Europe to protect themselves from tax. I?m not talking about hiding money in tax havens, but in a similar fashion to ISAs in the UK these products are recognised as legitimate tax efficient investments by each country.

Whereas the tax benefits of ISAs protect investors from tax on their income and on gains, locally authorised investment bonds can also offer tax breaks, particularly in France and Spain.

For example, with careful planning in Spain locally approved investment bonds offered by EU based, non-Spanish companies will not only protect your wealth from tax on your investment income and gains but can also be structured in a manner that immediately removes your assets from what can be pernicious Spanish succession tax, and can help mitigate, or for some, take their assets outside, UK inheritance tax.

In France locally authorised investment bonds are known as assurance vie, although they are not exclusively offered by French companies. If you choose an assurance vie which is offered by an EU based non-French company, you can minimise the tax liability on your investment income and gains, sometimes significantly. They can also help to mitigate French succession tax.

A further non-tax benefit of assurance vie in France is that on your death it will not be governed by the Napoleonic code and therefore you can choose to leave it to whoever you wish, whereas the distribution of non-assurance vie assets is strictly governed under French succession law. This is a very important issue for many people who have children but wish to leave all their assets to their surviving partner, or those who have children outside the marriage.

Investment bonds are widely used throughout Europe and therefore are very effective from a tax perspective in the event that you choose to move to another country, including from the UK to Europe or from Europe back to the UK.

In essence, the tax benefits of these vehicles can extend well beyond purely protecting income and gains from local taxes, but this is dependent on your country of residence.

The dilemma for people who are too nervous to invest at the current time is that they could be missing opportunities to lower the tax bill on their investable wealth, and also that their estate could be liable for more inheritance/succession tax than necessary should one or both spouses die before they have the confidence to invest in the investment bond structure.

Is there a solution? Many investment bonds are known as ?open architecture? and so you can choose from a myriad of funds and asset classes. This means that investors who may not have the confidence to invest in stockmarkets at the moment can work with their adviser to put together an investment programme that they are comfortable with, and immediately benefit from the tax advantages available from these products.

These bonds are flexible in that once you have set them up with certain assets you can change them in the future, often at little or no cost. So you could start off with little or no direct exposure to equities but increase the exposure in the future when you feel more confident about market conditions. You can of course also make changes as and when necessary if your circumstances or objectives change.

If you already have an investment portfolio but you are waiting for markets to improve before moving into an investment bond to generate the tax advantages, the ?open architecture? approach would enable you to replicate most investment strategies so that you can dispose of your portfolio and move into the investment bond and immediately generate the tax benefits, without being out of the market when the asset classes recover.

Then there?s the currency issue. On the one hand the UK?s economy is making it hard for Sterling to improve, but on the other hand you may expect the Eurozone problems to weaken the Euro. Some British expatriates may be holding off investing right now either because they are not sure whether their investments should be in Euros or Sterling, or because they think the exchange rate should improve in future and are waiting until it does before converting Sterling to Euros.

Again though, deferring the decision to invest in the hope that the exchange rate improves can put many into a position where they are exposed to more tax than they need to be.

There is a misconception that by transferring into European authorised investment bonds you need to transfer into Euros. Although that is the case with some products, it?s certainly not the case with all of them and you can elect to invest in Sterling, Euros or indeed most other major currencies. It?s also possible to invest in Sterling and switch to Euros later or vice-versa, so you could invest now in Sterling and then switch to Euros when you?re happy to do so. Likewise, if you later return to the UK you covert Euro investments into Sterling then so your assets continue to match your liabilities. It may also be possible to have a mix of currencies in one bond, which would help reduce currency risk.

To summarise, if you are delaying your tax planning strategies because of nervousness about asset classes or current exchange rates, there are solutions available to help you, however, you need to speak to an experienced and qualified adviser such as Blevins Franks.

Statements relating to taxation are based upon current taxation laws and practices which may be subject to change.

By Bill Blevins, Managing Director, Blevins Franks

4th August 2011