For many years I have been advising expats and their families. Throughout this, there has always been an issue that regularly arises.

The Problem:

Non-UK based Financial advisers selling commission-based investment and pensions products to expats. Unfortunately, it is often the case that disclosure rules are not followed. Therefore the client is not told how much the advice is costing them.

Moreover, some of the pensions and investments sold include  an Offshore Investment Bond. Bond providers allow them to be sold to clients with initial commission payments of up to 7% of the investment/pension value. To repay this commission and generate profit, the Bond provider often charges a percentage based fee, usually 1% annually. This, in addition to other investment associated costs such as Bond administration charges, underlying investment costs, and trading and ongoing advice costs can rack up. Should the account be closed within a redemption period, a deducted proceeds fee covers unpaid costs.

Often, once the Bond has been created and the money is invested, the adviser will disappear and not provide the ongoing service they offered. Additionally, the underlying investments themselves may not be appropriate or safe for the client. We have witnessed multiple unregulated collective investment schemes fail over the years. This is a result of the client not being informed of the risk involved.

So, what can be done?

Firstly, if you are unhappy with the received advice, complain to the firm that sold you the investment or pension. If you remain unhappy with the response, you should investigate what protections you are afforded in the country where you received the advice. You could also investigate who regulates the advising firm and contact them if there are no independent adjudicators. For example, the UK has the Financial Ombudsman Service.

Quite often in the cases that I have witnessed, the expat has not been able to find any recourse. Consequently they have had to try and make the best out of a bad situation. A service we offer is helping clients understand what they have been sold, the total costs involved of what they have and what they should do with it going forward.

The Next Steps:

To clarify, there can be large penalties for withdrawing money. Therefore, we will consider the cost of leaving the plan compared with switching away. Should it be appropriate to stay within the Bond, we can help you invest the funds into an investment strategy that is properly aligned with your tolerance towards risk, future objectives and overall financial plan. Should you wish to withdraw the funds and would like to reinvest them, we can advise you on an appropriate fee-based investment strategy that does not involve commission or exit penalties.

If something like the above has happened to you, please contact our team at Cross Border Financial Planning.  An initial consultation is at no cost or obligation.

Philip Teague

Cross Border Financial Planning

Cross Border Financial Planning do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. The value of investments can fall as well as rise. You may not get back what you invest.