If you’re an expatiate and thinking about making an international investment or starting a QROPS on the back of advice provided by an international financial adviser, before you do, spend 60 seconds reading this. It may save you a lot of time and money.
UK regulated adviser, Russell Hammond APFS , Senior Partner & Chartered Financial Planner with AES International, shares his four top tips for expats who are considering taking the step of investing their hard earned expat income.
Fundamentally important as any organisation that you engage with must be suitably regulated to be able to provide you with the advice that you need on a particular area of financial advice. There’s something much more holistic, and considered, about the advice you’d get from a regulated rather than an unregulated (or loosely regulated) entity. In the world of quick, slick, on-line branding any organisation can come across as highly respectable when the converse may actually be the case. Solid regulation for firm and adviser cuts through all of that. Don’t be tempted to work with an adviser just because he is located geographically close to where you are living. Will he still be living there in 2,5,10 years time? With the advent of on-line meetings, and email, needing an adviser to be living in the same street, town or city should not be a key reason for availing of his services.
There are areas of the world where, on the face of it, the regulation would appear quite robust, however, in reality this isn’t quite the case. Firms may choose to base themselves in these jurisdictions as it is easier to be regulated there than, for example, in the UK or Australia.
Indemnity Insurance and or Adequate Capitalisation
Unfortunately, for all the best will in the world things can, in exceptionally rare circumstances, go wrong. The financial crisis of 2008 highlighted just how fragile seemingly solid institutions can be. A key question to ask your prospective adviser is whether they carry adequate indemnity insurance cover, and or are adequately capitalised.
I don’t know of any other industry where one individual can advise another individual on matters of such huge significance where the advising individual is not properly qualified to able to do so. Now, being suitably qualified doesn’t make one ‘the fountain of all knowledge’, nor does it mean that everything touched turns to gold, however, what it does mean is that there is a firm foundation of understanding and awareness, on matters that are of such great importance. The adviser is also much more likely to have the confidence to know where the assistance of other professionals is required, and where to go to, in order to address any shortfall in his or her understanding. Poor investment advice may come as a result of adviser greed for generating commissions on funds, however, it may also be down to ignorance on how to construct a sufficiently balanced portfolio using tried, tested and proven investment methodology such as Modern Portfolio Theory and Efficient Frontier (combining different assets to reduce aggregate risk and improve overall return).
Refuse Commission Based Advice
Sometimes I feel like I go-on about this too much, however, it is only because I regularly come across heart-breaking examples of clients that have been royally miss-sold by commission hungry sales people who work hard to present a polished, initial, highly professional and slick sale only for the client to be forgotten about and left to drift from (typically) year 2-3 onwards. Further, it often results in a portfolio being put together that is expensive and doesn’t represent good investment advice as per that which is required to generate consistent and robust long term return.
Any adviser, worth his salt, should be willing to work on the basis that they only get paid for as long as you remain happy with how the investment is performing. Commissions are a total nonsense and should be outlawed worldwide. OK, rant over. 🙂
Concerning the offshore bond structures 90% of my clients have their assets within offshore wrappers such as those provided by Old Mutual International. Thus, I’m not against the idea of using an offshore bond structure, however, the adviser must always opt for a non-commission structure from Old Mutual International or any other provider. Independent, fee based, advisers have no allegiance to any structure / company / bank as they’re not looking to generate commissions – all they want is the best performing, cheapest, most compliant structure, available, to satisfy their client’s particular needs over the long term.
If you remember just one thing from these tips, make sure that it is that you insist that your adviser structure your offshore investment bond on a fee only basis, with no minimum investment period and no lock ins / exit fees.