Luke and Cynthia Beermann of Dubai are prototypical expats who have spent the last 15 years trotting the globe, accumulating countless memories and a healthy nest egg along the way. Their daughter, Hannah, 12, has lived in five countries and is an A student at the American School in Dubai. But until recently, the Beermanns had given little thought to how they would pay for her college expenses.
"I think we are ahead of the game compared to many people," says Mrs Beermann.
"And yet we are still worried."
That panic, familiar to many parents, was magnified by the financial tremors that shook the Gulf, and the rest of the world over the past year. "For the first time, I actually knew kids who couldn't go anywhere they wanted because the parents could not afford it," says Mrs Beermann.
Therefore, the couple resolved to incorporate their college savings into a comprehensive investment plan. It's a wise move for all parents, whether they consult a professional adviser, as the Beermanns did, or opt for a do-it-yourself approach. The key is to get started as soon as possible.
"It's like climbing a mountain. The longer it is planned, the easier the climb," says Alwyn Owens, a senior consultant with Holborn Assets, a financial advisory firm based in Dubai.
For Americans like the Beermanns, the best vehicle for reaching their goals is often a 529 plan. A 529, so-called after the relevant portion of the Internal Revenue Code, is a tax-friendly plan specifically designed to encourage saving for college expenses.
There are two types of 529 plans: prepaid plans and savings plans. A prepaid plan is essentially a hedge against inflation, as it allows parents to buy tuition credits for future use at today's prices. This is no small thing, as for the past 50 years the cost of tuition in the US has increased at an average annual rate of almost 8 per cent, nearly twice the pace of inflation.
A 529 savings plan is more of a conventional investment vehicle, with the advantage that the earnings accrued in the account are not taxable as long as they are used for the beneficiary's eligible expenses, which usually include tuition, housing, books and computers.
All 50 states in the US sponsor a type of 529 plan, typically offering reduced tuition for public universities in those states. There are also broker-sold plans that are almost always of the savings type.
Whatever the variety, "the bottom line is, there is really nothing better" than 529 plans for college savings in the US, says Vince Truong, an adviser in Dubai who has earned the certified financial planner designation offered in the US. Mr Truong is advising the Beermanns to consider a 529, and is helping the couple to understand its complexities.
One loophole available to US expatriates is that anyone can establish and contribute to a 529 plan for a child. This is important, because not all expats maintain residency in the states, meaning they would not qualify for the state-run plans
However, a grandparent, other relative or even a friend can set up a plan on behalf of a child. This approach comes with an added benefit. When the child begins to apply for financial aid, the university will not consider the assets in the 529 plan as part of the family's financial need if the account is not in a parent's name, Mr Truong says.
However, a 529 is not without its pitfalls. One key thing to remember is that any money withdrawn from a 529 plan and not used for college expenses is subject to a 10 per cent penalty. It's also important to pay attention to the fees involved, as some broker-sold plans charge hefty fees, which create a drag on earnings.
Further, an account holder can only change the investment options once each year, so it is difficult to adapt to market conditions.
In the UK, by comparison, there is not a structured mechanism devoted to college savings. This is because, historically, students who qualified for university were exempt from tuition fees, a tradition that has come to an end in the past decade (Scotland excepted). And with governments and universities increasingly strapped for funding, the burden is shifting even more to students and their parents.
"We are moving inexorably towards the US model," says Andrew Clare, a professor of asset management at the Cass Business School in London. Like other experts, Mr Clare says British parents should employ an investment mix similar to one they would use for their own retirement - one that starts rather aggressively when university is more than 10 years out and gets progressively more conservative as commencement approaches.
By the time the child is within a couple of years of university, the investments should be almost entirely in bonds and other assets that are not subject to wild market fluctuations.
Mr Owens, with Holborn Assets in Dubai, says he encourages his clients in this situation to look at a selection of offshore funds that can offer British citizens considerable tax advantages (offshore investing for Americans is significantly more fraught with peril).
One option he suggests for clients is the Vision Plan, offered by Generali International out of Guernsey, because it offers more than 80 types of funds and investors can shift among them as their priorities and circumstances change, Mr Owens says.
Canadian parents overseas are in much the same situation as British, in that their college savings efforts need to be largely self-directed. The government offers residents the opportunity to invest in a Registered Education Savings Plan (RESP), which is similar to the US 529 in that it enables earnings to grow tax-free.
However, Canadians who are non-residents are not allowed to contribute to a RESP. One solution is to have grandparents or other relatives establish the fund, as anyone can set one up as long as the beneficiary is related by blood or adoption. If the parents return to Canada at any point, they can start a separate RESP and transfer all assets from the other account, provided the beneficiary remains the same.
The Canadian plan is also arguably more generous than the US because the government will match a portion of the first $2,500 invested each year. Withdrawals are taxed in the name of the student. Since most students have little or no income, the earnings are generally tax-free, or close to it.
@Email:breagan@thenational.ae
RUGBY CHAMPIONSHIP FIXTURES
September 30
South Africa v Australia
Argentina v New Zealand
October 7
South Africa v New Zealand
Argentina v Australia
Mobile phone packages comparison
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The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
BULKWHIZ PROFILE
Date started: February 2017
Founders: Amira Rashad (CEO), Yusuf Saber (CTO), Mahmoud Sayedahmed (adviser), Reda Bouraoui (adviser)
Based: Dubai, UAE
Sector: E-commerce
Size: 50 employees
Funding: approximately $6m
Investors: Beco Capital, Enabling Future and Wain in the UAE; China's MSA Capital; 500 Startups; Faith Capital and Savour Ventures in Kuwait
Fixtures (all times UAE)
Saturday
Brescia v Atalanta (6pm)
Genoa v Torino (9pm)
Fiorentina v Lecce (11.45pm)
Sunday
Juventus v Sassuolo (3.30pm)
Inter Milan v SPAL (6pm)
Lazio v Udinese (6pm)
Parma v AC Milan (6pm)
Napoli v Bologna (9pm)
Verona v AS Roma (11.45pm)
Monday
Cagliari v Sampdoria (11.45pm)
ALL THE RESULTS
Bantamweight
Siyovush Gulmomdov (TJK) bt Rey Nacionales (PHI) by decision.
Lightweight
Alexandru Chitoran (ROU) bt Hussein Fakhir Abed (SYR) by submission.
Catch 74kg
Omar Hussein (JOR) bt Tohir Zhuraev (TJK) by decision.
Strawweight (Female)
Seo Ye-dam (KOR) bt Weronika Zygmunt (POL) by decision.
Featherweight
Kaan Ofli (TUR) bt Walid Laidi (ALG) by TKO.
Lightweight
Abdulla Al Bousheiri (KUW) bt Leandro Martins (BRA) by TKO.
Welterweight
Ahmad Labban (LEB) bt Sofiane Benchohra (ALG) by TKO.
Bantamweight
Jaures Dea (CAM) v Nawras Abzakh (JOR) no contest.
Lightweight
Mohammed Yahya (UAE) bt Glen Ranillo (PHI) by TKO round 1.
Lightweight
Alan Omer (GER) bt Aidan Aguilera (AUS) by TKO round 1.
Welterweight
Mounir Lazzez (TUN) bt Sasha Palatkinov (HKG) by TKO round 1.
Featherweight title bout
Romando Dy (PHI) v Lee Do-gyeom (KOR) by KO round 1.
Motori Profile
Date started: March 2020
Co-founder/CEO: Ahmed Eissa
Based: UAE, Abu Dhabi
Sector: Insurance Sector
Size: 50 full-time employees (Inside and Outside UAE)
Stage: Seed stage and seeking Series A round of financing
Investors: Safe City Group
RESULT
Deportivo La Coruna 2 Barcelona 4
Deportivo: Perez (39'), Colak (63')
Barcelona: Coutinho (6'), Messi (37', 81', 84')
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
The specs: 2019 Audi A7 Sportback
Price, base: Dh315,000
Engine: 3.0-litre V6
Transmission: Seven-speed automatic
Power: 335hp @ 5,000rpm
Torque: 500Nm @ 1,370rpm
Fuel economy 5.9L / 100km
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
If you go...
Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.
Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
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MATCH INFO
Uefa Champions League, last-16 second leg
Paris Saint-Germain (1) v Borussia Dortmund (2)
Kick-off: Midnight, Thursday, March 12
Stadium: Parc des Princes
Live: On beIN Sports HD
The specs: 2018 Audi RS5
Price, base: Dh359,200
Engine: 2.9L twin-turbo V6
Transmission: Eight-speed automatic
Power: 450hp at 5,700rpm
Torque: 600Nm at 1,900rpm
Fuel economy, combined: 8.7L / 100km
UAE SQUAD
Khalid Essa (Al Ain), Ali Khaseif (Al Jazira), Adel Al Hosani (Sharjah), Mahmoud Khamis (Al Nasr), Yousef Jaber (Shabab Al Ahli Dubai), Khalifa Al Hammadi (Jazira), Salem Rashid (Jazira), Shaheen Abdelrahman (Sharjah), Faris Juma (Al Wahda), Mohammed Shaker (Al Ain), Mohammed Barghash (Wahda), Abdulaziz Haikal (Shabab Al Ahli), Ahmed Barman (Al Ain), Khamis Esmail (Wahda), Khaled Bawazir (Sharjah), Majed Surour (Sharjah), Abdullah Ramadan (Jazira), Mohammed Al Attas (Jazira), Fabio De Lima (Al Wasl), Bandar Al Ahbabi (Al Ain), Khalfan Mubarak (Jazira), Habib Fardan (Nasr), Khalil Ibrahim (Wahda), Ali Mabkhout (Jazira), Ali Saleh (Wasl), Caio (Al Ain), Sebastian Tagliabue (Nasr).
Final results:
Open men
Australia 94 (4) beat New Zealand 48 (0)
Plate men
England 85 (3) beat India 81 (1)
Open women
Australia 121 (4) beat South Africa 52 (0)
Under 22 men
Australia 68 (2) beat New Zealand 66 (2)
Under 22 women
Australia 92 (3) beat New Zealand 54 (1)
