I am still surprised by the clarity and pragmatism of NRI children today. They seem to know exactly where they are going and what it takes to get there. As parents, we have an important role to play in supporting their dreams, rewarding their commitment and giving them their best chance.

While I am learning every day, I want to share with you, four lessons that I live by to help my boys realise their potential.

• Promoting non-academic learning

I am a strong believer in sports, music and vocational education as an effective way to channel your child’s physical, mental and emotional energy.

By enhancing their agility, fitness, determination and focus; sports provide a great avenue for children to challenge themselves both physically and mentally. Similarly, musical lessons or art classes are an outlet for their imagination, helping children to flex their creative muscles.

Educating your children about money management before they start to make their own financial decisions is an often overlooked but important lesson. Vocational education at HVAC Training HQ or work experience is another a great way to prepare them for a better future by giving them a taste of working life.

Working at Zurich in the Middle East, I am proud to get involved in initiatives that recognise and nurture young talent – whether that is helping skilled fast bowlers at the Zurich Pace Lab or budding investors through our Investars program.

• Nurturing a strong value system

As NRI parents, we tend to focus on academic excellence, however it is equally important to shape their value system.

Honesty, generosity, hard work, resilience and patience are among the qualities that we want to nurture in our children and should be modelled by us as parents. Appreciation of cultural nuances and diversity to instil respect and tolerance are equally important. In the UAE, children have the unique advantage of being exposed to a diverse set of people. This in itself is a powerful teacher.

Encouraging participation in community initiatives is another great way to raise a child with a strong value system.

• Be involved

Balancing that delicate line between over indulging and being involved is a constant challenge for NRI parents.

Listening to your children, learning what inspires them and supporting their goals while giving them room to grow and be independent is not always easy to achieve but we must try.

• Make it possible

Like most NRIs, I have a strong savings discipline and started putting money away for Avi and Vir shortly after they were born. However, with the rising cost of almost everything, it is important to ensure I remain on-track to support them right through to university.

It is important to consider however, that sending your children to college will involve costs above and beyond tuition fees – accommodation, books and other resources, food and travel are not small expenses and will impact your finances if not accounted for.

Tools like a savings calculator will give you a sense of how much you will need to save and a qualified financial professional will help you to navigate through the various savings options available.

Our future certainly looks bright! We are raising a confident, intelligent and spirited generation of leaders. Holistic learning, a strong value system, steady involvement and financial preparedness are the rules I’m living by – my mantra for helping Avi and Vir build a better tomorrow.

As we approach the end of Season 12, I sit here in the Zurich office having thoroughly enjoyed the past few weeks of cricket and I wonder…’what makes a winning IPL team?’

It is about the pitch hitters!

Six different teams have won the IPL – so behind these victories has the engine been a confident pitch hitter, throwing caution to the wind and sending the ball over the boundary with frequent abundance?

The West Indies Chris Gayle has the record for the most IPL sixes at an impressive 292 and the highest score at 175 not out. In two seasons, Gayle made 733 and 708 runs, including a 30-ball century against Pune Warriors. But with his support cast inconsistent, his team didn’t even make the play-offs. So having the strongest performing batsman, in terms of past performance, doesn’t seem to be the key to winning the IPL.

Is it then about the economical bowlers?

We all love to see the ball clear the boundary rope and be caught in the crowd. But equally we love the tense last over duels between bowler and batsman, the cut and thrust of a run chase in the final moments of the contest. So is the crucial factor then to have the most economical bowler in your team? Australian Andrew Tye is current holder of this plaudit.

Tye was bought by Kings XI Punjab in the 2018 IPL auction. He went on to win the Purple Cap for the 2018 IPL season for taking the most wickets (24) during the season and at an incredibly miserly level  of economy. But Chennai Super Kings won in 2018, so despite Tye’s efforts he did not end up on the winning IPL team. So it’s not then about having the best bowler, based on past performance.

What can NRI investors learn from the winning IPL team?

A quick Google search of ‘what is the best IPL team?’ throws up Chennai Super Kings as a candidate and the statistics support this. They have won the IPL three times, joint most for any team – but importantly they are the only team in IPL history to defend their crown.

A key reason for their success has been through building a balanced team, rather than having the single best players – either batsman or bowlers. They have also been incredibly consistent at maintaining the same core to their squad and not looking for huge overhauls from one year to the next. MS Dhoni has demonstrated patience, a key trait for investors also and he clearly doesn’t like to make many changes to his squad. Arguably he would like to play with the same XI for most of the matches.

What can NRI investors learn from the IPL?

As NRI investors, the temptation can be to try and cram a portfolio full of funds that have the best past performance, effectively like looking to select Chris Gayle 11 times! This kind of squad selection would have huge potential for great one match performance, but what we have seen over eleven IPL season is that a balanced and consistent approach to building a team has prevailed.

As an NRI adviser, we need to be thinking like MS Dhoni and the Chennai Super Kings. It’s about recognizing that your clients need attacking options in their portfolio, giving the potential for growth – but these need to be balanced with more defensive asset classes such as fixed income, property and cash. All assets come with inherent risk-reward characteristics and it’s about getting the right balance between them to suit your client’s needs. Some have a greater chance of reward but, as you’d expect, carry greater risk in trying to get it.

Get the balance right

So while over the years CSK have successfully blended the attacking skills of batman like Shane Watson and Suresh Raina with the excellent bowling of Doug Bollinger and Imran Tahir – you should really be advising clients along similar lines with their investment portfolios.

The performance of different asset classes, as with cricketers, will naturally vary over time and, as each asset has its own unique characteristics, wider market conditions and world events will affect them differently. Holding a diverse range of assets in line with financial goals and risk tolerance will help minimize the impact of a single asset class on your client’s portfolio and will help take advantage of opportunities across the market.

Investing and IPL season 12 – Challo!

As an IPL fan and NRI adviser you should be helping your clients to think about blending different asset classes together, making sure they are globally diversified – like the best IPL team. And like the great man himself, MS Dhoni, you need to reassess your client’s portfolio every so often and think about if it is still working together as a team.

Remember, it’s all about allowing your client’s portfolio to be firing on at least some cylinders, from season to season – no matter what is going on in the world. It’s not about which team will come out on top on 12 May 2019, but how they got there.

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These clients are finding they can no longer default to their historical portfolio anchors of property, gold and cash. Instead, they need to be more rational in their asset allocation to be able to adapt to a new landscape.

Various reasons are driving this:

• Real estate has fallen out of favour among NRIs since India’s banknote demonetisation policy was put in place in late 2016. This removed from the economy a lot of extra cash that was being invested in property. Also, falling rental yields (now at around 5% to 7%) have dampened what was previously a key incentive to tie-up funds in rental property.
• The appeal of gold has gradually been eroded. Once an investment safe-haven for NRIs, the gold price has remained stable while Indian import duties introduced two years ago have made it less viable to buy this precious metal to take back to India to sell.
• The appetite among NRIs to accumulate savings in cash has reduced due to rising inflation rates.

It’s not surprising to see a growing number of NRI clients confused about what to do with their money. Yet, while diversification seems the ‘right’ answer, it remains a difficult concept for NRI clients.

Beware the behavioural pitfalls

We believe three simple, but important, approaches can help NRI advisers guide the investment behaviour of their clients towards the right direction:

1. Stay focused on a current, pre-agreed investment strategy and don’t deviate from a previously-defined risk profile.

This involves blocking out the “noise” given the excessive news and opinion that creates fear and heightened emotion (especially in falling markets).

Attempting to move in and out of the market when you hear good and bad investment news can be costly. Numerous research studies show that the decisions investors make about when to buy and sell funds cause those investors to perform worse than they would have had the investors simply bought and held the same funds. The problem is, it is impossible to consistently predict when good and bad days will happen. If you miss even a few of the best days, it can have a lingering effect on the value of your portfolio. The equity market falls in December 2018, followed by the strong rally in January and February 2019, show that often the best and worst days in markets appear close together.

This also highlights a need to spend time “in” the market, rather than try to “time” the market. If you invest regularly over months, years and decades, short-term downturns will not have much of an impact on your ultimate performance. Instead of trying to judge when to buy and sell based on market conditions, taking a disciplined approach by making investments monthly, or quarterly, will help investors avoid the perils of market timing.

2. Avoid succumbing to investment biases to which NRIs, in particular, seem prone.

One of the most common is a herd mentality, where investors are influenced by – and follow – decisions of friends and family.

This influence appears to be based on a view (often unproven) among NRIs that the individual has done their research and is confident in their view on an investment opportunity. Overconfidence is one of the most harmful behavioural traits an investor can exhibit. Equity investing, by its nature, is an act that requires patience and humility.

Overconfident investors enter a market expecting an immediate result, which the market may not produce. If the overconfident investor does not achieve the desired result, he/she may quit altogether, which is dangerous, or double-down in an effort to achieve the return that he/she feels is due. The market is not in an investor’s control, but that individual’s reaction to it is. Achieving long-term returns in the stock market is less about being gifted and taking the advice of confident friends and family, and more about being process driven.

3. Create investment goals that are clearly-defined and realistic, based on a long-term plan. This helps investors to avoid worrying about the markets, since most of the volatility will be irrelevant to the average NRI in achieving his/her objectives.

It is natural to set a benchmark against which we gauge performance. For most investors, keeping score means comparing their returns to those of an equity market benchmark. Think about that though: what has an arbitrary financial benchmark got to do with an NRI client’s future hopes, dreams and goals?

For NRI investors, their progress towards long-term goals is the benchmark, rather than an impersonal and highly-volatile index like the BSE Sensex or the NSE Nifty. Investor research (and indeed our own observations at Zurich) shows goal-based investors are more likely to stay the course during tough times, and may even save at higher rates as they are doing something that is personally meaningful.

Ultimately, in what is one of the most confusing times ever for investors globally, NRIs must remember that investing is the easy part; the hard part is controlling day-to-day behaviour. As a result, taking time to assess and make long-term decisions is the best starting point in managing any market volatility.

For more information on how to help your NRI customers to management market volatility, check out our latest blog on Zurich IQ or contact us via Zurich.ae

On the one hand, they must navigate the volatility and macro-economic uncertainty impacting investments across assets and geographies; on the other, their burden also includes the upcoming election plus tax and other matters back home.

Facing multiple challenges, these clients are seeking guidance for all aspects of their financial planning in 2019. In short, many NRIs in the UAE share four concerns:

• Tax and wealth planning issues
• The importance of risk management
• Diversification and long-term investment planning
• How to stay ahead of inflation

What keeps NRIs awake at night?

These result from several fundamental, day-to-day issues relevant to most – if not all – NRIs.

1. A dilemma for NRI clients relates to the ‘what next’ question, given their temporary residence status in the UAE.

Unlike in some countries where a track record of employment can give a foreign national right of abode, NRIs in the UAE have no such rights without certain visas.

This makes forward planning critical. Yet it calls for important decisions that these individuals understandably find difficult to make while currently in the UAE. For example, should they set up their own business in India? If so, when? Do they even have the capability or experience to run it? And if they set something up before they return home, how will they manage it? Alternatively, if they don’t want to set up their own business, how will they earn income in India? Do they need to secure a job before making the decision to leave the UAE? What is the impact on their current job and family security in the meantime?

Whatever the choice, there are various wealth planning and tax considerations that will need to be part of an NRI’s decision-making process.

2. Another question-mark for NRIs in the UAE is healthcare.

Although NRIs have medical insurance, many only have basic cover. Further, they need to plan for when they move back to India, either to work or retire.

However, the ability to secure coverage is always a nagging concern as people get older, as is the affordability of healthcare with age.

An NRI client will therefore need to weigh the pros and cons of buying a healthcare plan now and continuing to fund it before they move to India, compared with the risks of waiting.

Saying this, it is worth NRIs also factoring in the specific claims statistics we see. For example, cardiovascular disease accounts for over two-thirds of all deaths in the UAE. Further, we observe that more than 80% of our claimants suffered a critical illness or passed away when they were under 60. Read more about claims in the Middle East.

This also acts as a safety net that NRIs can factor into discussions about risk management and diversification.

Linked to healthcare is the consideration of emotional support in old age. This is relevant to NRIs, given the cultural shift from children (in previous years) accepting responsibility for parents when they get older, to children potentially living in a different city or country.

3. NRIs also need to understand tax implications from income in India.

A lot of NRIs will continue to own income-generating assets in India, such as rental yield from property or interest from fixed deposits. This creates considerations around the scope and extent of the individual’s tax liabilities back home.

This gets exacerbated at times like now, when retail banks are directly approaching NRIs with ‘offers’ to lend them money if they remit the funds to India to invest in fixed deposits.

In addition to tax, such decisions must be taken with a view to risk management, inflation, diversification and long-term investing.

While some of these borrowing opportunities might seem attractive at first glance, an NRI needs to carefully review whether they make sense from several perspectives, considering tax, foreign exchange and interest rates. Another factor is whether there is a meaningful use for investing additional – and potentially costly – funds.

4. Bridging the investment knowledge gap is a further talking point NRIs should address with a financial professional.

Inflation is a common topic of discussion at the moment. The problem for most NRIs – relating to areas of concern above – is they are either under-insured for the future or over-insured now.

Another aspect of inflation for NRIs is the expectation of future interest rates in India, since this is where they will likely use the savings they accumulate while in the UAE.

Further, other important considerations at this stage of the market cycle include:

• Thinking long term rather than getting caught up in market hype
• Diversifying and adopting a risk level they can live with
• Tuning out the noise to set realistic expectations

Find out more about inflation

For more information on how to help your NRI customers, contact us via Zurich.ae