Five Questions You Must Ask Your Expat Financial Adviser

Many expats choose to move abroad to earn more money and save for an enjoyable retirement; at some point they will therefore need to speak with an expat financial adviser.

However, this is easier said than done since most expats do not have extensive financial experience and will need to rely on recommendations or advertisements in their local media.Everyone is aware that this course of action could leave them open to dealing with a shark – and we will come to this issue later in the article – which could leave them thousands of pounds out of pocket.

Also, while this article is aimed at British expats, there’s food for thought for expats of all nationalities.

The first step is to find an honest expat financial adviser – and they do exist!

Question one: Ask for their experience and qualifications

This question does appear to be really basic but many people do not check qualifications and instead rely on recommendations or the fact that their financial adviser appears to be a nice person.

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While the qualifications for a financial adviser working in the UK are strict and require lots of work to obtain, that’s not the same situation in many parts of the world.

Indeed, some countries do not have a regulation system in place so the adviser may not have any qualifications at all.

However, it is important to ask for proof of qualifications and for the adviser’s experience and then check thoroughly that what they say is true. If they claim to have been regulated, then the regulator concerned will have a record of that adviser and their activities.

While on this subject, expats looking for independent financial advice should also be wary about visiting websites that claim they are a member of a regulated body and display the relevant logo. This may not be true, and the site may be fraudulent in its aims.

While asking about their experience, it is also worth checking the adviser’s terms of business. If they provide you with a contract, ensure it is checked thoroughly. If details of a regulatory body is given, check that the address is the same as the official address.

It’s quite easy for a financial adviser working overseas to use another firm’s license which may be applicable in another country or even claim to have a licence when it’s actually in a very similar name. If they do claim to be regulated, then check who is ultimately responsible for the advice given and whether it is covered by any local regulations.

If the adviser has a certificate of their qualifications, then ensure it is not only original but that the exams claimed are actually valid. Also, check that the name and address is the same as the person about to give the financial advice, or if it applies to their company or employer.

It’s also worth checking the certificate because it will specify their financial advice qualifications, particularly in pensions. Expats should not be shy about asking for an original reference from a professional examining body or asking for proof of membership.

While it is easy to create a fake membership certificate, most honest financial advisers will also hold membership cards and while a fake certificate will look impressive, the original will often have gilt edging.

If the financial adviser claims to have worked in a regulated country such as the USA or the UK, then their credentials can be checked with a former employer.

Question two: Ask for references

Perhaps the most important indicator for expats looking for independent financial advice is to ask the adviser for references, for example from three of their happy clients, and then contact them to ask what they think.

This will, in turn, mean that you should also be happy to give your name and contact details as a reference for any of the adviser’s future clients so they can also check with you.

If the client cannot be contacted or they sound unsure about some aspects of the financial advice, then be aware that they may not be independent and may be working for the adviser.

Under no circumstances should an expat believe any customer testimonials that they read on an adviser’s website or literature. Unless there is a way to verify who the client is by speaking with them independently, then these customer testimonials are effectively worthless. They also may be out of date.

Question three: Have you been FCA registered?

For those expats speaking with a financial adviser who is claiming that they have UK experience and were registered, this can be easily checked.

This can be done by contacting the Financial Conduct Authority and checking their register for the adviser’s details. Again, if a previous employer is listed on the register then it makes sense to check with them that the adviser actually did work with them and did a good job.

Check the Financial Services Register here.

Question four: Are you a member of a professional body?

We touched upon this briefly in question one. In many countries an independent financial adviser should be registered with a professional body which means they have to meet a minimum entry qualification and then abide by a code of conduct. Again, details of current and previous members of the professional organisation will be available for public examination.

However, care should also be taken because many professional organisations allow various levels of membership which does not mean that the member actually dispensed financial advice and instead enjoyed various aspects of membership, such as accessing cheap insurance, for instance.

This means you really do need to check with the professional body about their membership levels – and if it appears to be a social organisation, then membership of it is effectively pointless since it’s not a professional one.

It is also worth pointing out that the professional body should have a record of the financial adviser’s qualifications.

Question five: Ask for their fees and contracts

It’s essential that you understands how much you will be paying either for the advice (which is the situation in the UK now), or whether the adviser is charging a percentage on the amount to be invested.

Expats should always be wary of a financial adviser who says their charges will amount to a small percentage, as they may be using hidden charges.

Also, any contract that is offered for examination should be relevant for the country in which the expat is residing, otherwise the contract itself is worthless – unless it is for UK investments which are regulated by the FCA.

It’s also important to have a report that comes on the employer’s headed paper with a list of recommendations for investments, along with the name of the financial adviser giving the advice and details of any regulatory body or professional organisation.

Expats who are making an investment need to be aware of how the potential financial investment is going to be made on their behalf and they need to have any reasons for that investment to be detailed.

The financial advice should also take into account the expat’s future and current plans and appreciate how much risk the investor is prepared to take with their investment plan to reach a certain financial goal.

All of the product costs should also be detailed, as should the financial adviser’s earnings and whether they are being paid a fee or, as is the case many countries, earning a commission from the product being sold.

Again, the actual fees of the products being recommended should also be broken down and not just listed as a 1% charge, for instance, because the expat investor needs to appreciate what they are paying for.

The bottom line for all expats looking for independent financial advice is to ask the questions because it’s often the only way to find out exactly how experienced and qualified the adviser is.

Also, do not be shy about doing some research on the adviser before meeting with them, as this may help with avoiding potential headaches and expensive mistakes.

However, it should also be appreciated that in some countries, the adviser does not need lots of qualifications to give financial advice or information on financial products and they may be competent in helping with financial planning.

Anyone dealing with a British-qualified financial adviser should appreciate that there are certificate level qualifications so they can dispense information on mortgages, savings and life insurance products.

The next level is a diploma and they can offer comprehensive financial planning and investment advice.

Anything above a diploma means the financial adviser has lots of experience and has striven to gain the extra qualifications which should work in the expat’s favour.

How to deal with a shark

For expats living and working overseas, the world of investments and financial advice can appear to be confusing but there are some tell-tale signs about whether they are dealing with a professional or a shark.

The world of financial investment for expats is not an easy one and with British investors able to access their pension pots from the age of 55, a lucrative trade in luring gullible investors to part with their hard-earned money has sprung up.

Expats are looking at things like QROPS or moving their savings abroad but they run huge risks with untrained and unregulated financial advisers who can destroy an expat’s savings pot and dash their future hopes and dreams – be careful to avoid the sharks and deal only with experienced and qualified independent financial advisers.

It’s not just those advisers with experience of the British financial system and regulations; Australian expats should use advisers who are aware of their country-specific pensions set-up and US expats need to be aware of declaring their overseas investments to the Internal Revenue Service.

There’s no doubt that many expats are being ripped off by financial advisers who not declare their commissions and charges and then invest money in suspect funds.

Indeed, an investigation by the Daily Telegraph last year revealed that many expats are being exposed to higher risk investments that are unregulated or lightly regulated with the financial adviser receiving huge commissions.

In addition, expats are being charged up to seven times more in commissions and investment charges than they would be if they lived in the UK.

For instance, suspect financial advisers will claim that the expat needs to invest in bonds – and these cover a multitude of investments including investment bonds, insurance bonds, bonds for pensions and a bond for a five-year investment, for instance.

The expat will be told by their adviser that investing in bonds is not only cheap (particularly if they claim that charges on the investment are just 1%) and tax efficient but also free.

Nothing in life is free

If the word ‘free’ is used, a klaxon horn should be sounding because nothing in life is free – as we all know.

Also, expats need to be aware of any adviser talking about ‘tax-free income’ and ‘gross roll-up’ particularly if they claim that the investment will generate 5% or more per annum. This is unlikely to be the case – and if it were, then everyone would be buying bonds because they would be surefire investment winners.

It should be noted by expats everywhere that since the introduction of fees for financial advice have been brought in, the sales of bonds have fallen substantially.

The reason why some financial advisers promote bonds is that they receive a huge commission from the bond provider who then adds this commission as a charge on the investment to be repaid over several years. It’s unlikely that a financial adviser will tell the expat investor that this is the situation and it will undermine the investor’s hoped for returns.

Also British expats particularly need to be aware of any bond fund provider which is based in Eire, Luxembourg or the Isle of Man because they are beyond the reach of the UK’s Financial Conduct Authority.

Unfortunately, there is no definitive way of determining whether a financial adviser is as good as they claim or a fraudster – but a little bit of common sense when asking the questions detailed here will surely go a long way in helping expats find a good financial adviser.


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