Breaking Down The Barriers To Investing For US Clients
At the end of its first year, Coutts’ investment service for US clients continues to benefit from our established expertise.
4 min read
US citizens living in the UK can break through the barriers to investing and make the most of the growing economy through a unique Coutts service.
It can be difficult for them to take advantage of the current strengthening economic conditions due to the extensive bureaucracy that comes with their status.
But Coutts can help with an investment management service we have been offering for a year now – part of a unique suite of products for UK-based Americans that meets all their banking, borrowing and investment needs from one place.
It includes access to investment portfolios, which use a reference currency of sterling. They invest clients’ capital in equities in the UK and wider developed and emerging markets for long-term capital growth.
Their performance has been strong in the 12 months since launch – our US growth portfolio rose 15.8% in its first year.
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Coutts established investment expertise
The US portfolios are based on the same process and expertise as our established UK investment service.
Coutts portfolios are performing well generally, with a typical sterling balanced portfolio rising around 4.7% in the first half of this year and 12.2% in the calendar year of 2016.
A key factor behind this has been European equities which continue to do well, while our positions in healthcare and technology are also paying off. We prefer European and Japanese equities as they remain relatively cheap, particularly compared to US equities, and prefer corporate bonds to government bonds which are sensitive to rising interest rates and inflation.
We believe the outlook for global equities this year remains positive too, largely because the US economy continues to support growth.
There are risks that we continue to monitor. The UK election result and ongoing Brexit negotiations have created uncertainty, an election in Germany is approaching in September and President Trump could pursue increasingly protectionist trade policies.
But on the whole, we believe we have positioned our portfolios well for the improving global economy.
The Organisation for Economic Co-operation and Development predicts economic growth of 3.5% in 2017, while the World Bank has upgraded its UK growth forecasts to 1.7%. Meanwhile, the European Central Bank (ECB) raised its GDP growth projection for the eurozone to 1.9% in 2017 and 1.8% in 2018.
This all creates a compelling opportunity for investors, and US citizens in the UK can boost returns further by taking advantage of the current weakness of sterling – which fell following the UK’s decision to leave the European Union.
In our view, the currency will rise to a level close to historic norms in the medium term making now a good time to buy it.
Inflation has constrained UK cash returns
Source: Barclays Equity Gilt Study 2015
Keeping cash erodes returns
US citizens in the UK often keep their cash in deposits to avoid the bureaucracy involved in investing.
Cash deposits have their own benefits. They are reasonably secure – avoiding the potential risks that can come from investing – and easy to access.
But in the current low interest rate environment, this is not producing good returns over the long term.
Over the 10 years to the end of 2015, UK cash returns after inflation were negative and lagged equities and bonds – those who kept hold of their cash actually lost money. While cash returns were more positive over 20 and 30 years, they were still much reduced.
This issue isn’t going away any time soon. Despite UK inflation unexpectedly dropping to 2.6% in June, we believe it will continue to constrain interest rates and restrict the value of cash.
Our wider ‘one-stop shop’ service for US clients in the UK also taps them into Coutts’ broader range of first class products and services, including succession planning and philanthropy support.
Benefits include the ability to take into account clients’ non-UK income when considering the affordability of a mortgage, helping them buy property in Britain, and the chance to use an ISA – unusual for US citizens.
Also, while we do not give tax advice, we understand the complex web of challenges our US clients face, such as calendar year and foreign bank account reporting and the need to convert everything into dollars. We are part of a network of relevant service providers, including accountancy firms, so can refer clients to the right people to help with these challenges as and when needed.
It is a truly international offering with accounts available in 27 currencies, 0% non-sterling transaction fees on cards when used abroad and multi-currency debit cards. Many of these services are not provided by US banks.
The value of investments, and any income from them, can go down as well as up and you may not get back the full amount you invest. Past performance is not a reliable indicator of future returns. All data is sourced from Coutts & Co and valid as at 28/07/2017.
Our US investment portfolios have returned 15.8% since launch. They are part of our suite of services for US citizens based in the UK that meets all their financial needs.
About Coutts investments
With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.Discover more about Coutts investments