Swimming with sharks.
That’s often what you’re doing when you get financial advice as an expat. And it could cost you as much as 15pc of your hard saved nest egg.
Rules for financial advisers vary hugely from country to country. Is your adviser honest and upfront about how much their advice will cost you – or are they hiding it away in layers and undisclosed commissions?
This year, more than a dozen clients of a now closed financial adviser, Continental Wealth Management, based in Alicante, Spain, are taking its director Stephen Ward to court over hidden charges and advice they allege amounted to a scam.
One client of CWM told the Daily Telegraph she wanted cautious investments but was put in high risk products that lost her pension fund thousands of pounds. On top she later found out £5,000 had been taken in fees and commissions.
When she decided to cut her losses and leave the investment she was charged another hidden fee – the separate company that held her money demanded a £2,500 exit charge.
Commission-based advice was banned in the UK in 2012 after the financial watchdog ruled it encouraged advisers to sell products or services a client may not want, need, or be in their best interests.
But it is still common practice in many countries where expats choose to go for work or to retire, such as Spain, Australia, the US and the UAE. And wherever there are wealthy expats there are those flocking to relieve them of their hard earned cash.
Many charges can be hidden by commissions. Your adviser may tell you their advice is ‘free’ because they don’t ask you to hand over a fee to pay them. This is never true. You still pay them, but in a way that is less transparent – and what you can’t see you can’t count.
Your adviser may charge you a commission by taking a cut from your original investment that you aren’t told about, or the negative impact it will have on your nest egg. But it doesn’t end there. Unscrupulous advisers will want to make as much money from you as possible. So as well as charging you a commission, they will take hefty kickbacks from other companies in exchange for selling you their products and services; fund managers, pension trustees, investment platforms, introducers.
Every extra company involved in the ‘advice’ you get will cost you more money, because the commission those companies pay to your adviser to effectively bribe them to sell you their products are added onto the fees and charges you pay for those products.
Commissions can be eye-watering, where up to 15pc of your retirement fund disappears before it is even invested, although this may not show in your valuation.
Plus, if your adviser is really just a salesman flogging products based on whoever will pay them the most, you are likely to end up in an extremely unsuitable investment where you go on to lose chunks more of your savings.
Forewarned is forearmed. Find a financial adviser who will tell you upfront and in writing exactly what total charges you will pay for their advice and each product they recommend. Check that when those fees are taken, they are correct.
And remember, if an adviser tells you they don’t charge for their advice – run.
Brite help expats with their UK pensions and investments by reducing fees – we’ll never hide charges from you. We receive no commissions from anyone.