How risky is entrusting your savings to an expat IFA?

Published:  25 Sep at 6 PM
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Safety and security are essentially important for newly-arrived expats, especially where pension pots and savings are concerned.

Moving overseas for either work or retirement is the dream of many Britons seriously fed up with their homeland’s politics and weather, but keeping hard-earned funds safe isn’t as easy as it seems. For workers and retirees in the UK looking to invest their savings, laws are in place which remove the majority of risks and regularly inform about the rest, but the same isn’t true for expats overseas. British consumer protection laws are amongst the world’s most stringent, but they stop at the white cliffs of Dover, thus leaving expats unprotected from scams, mis-selling and downright deception.

Finding a reliable offshore financial advisor, especially in locations popular with British retirees, is a lottery with comparatively few winners. It’s not just the IFAs themselves nor the offshore insurance companies who need watching, it’s the overseas jurisdictions, as few take the correct line with expat money managers and some are equally blameworthy as well as fully aware of their complicity. Protecting your pension pot after you arrive overseas is the number one priority which can make or break your plans for a successful retirement. It should also be remembered the majority of IFAs working in popular expat destinations are not legally allowed to do so.

The first and one of the biggest issues is finding a genuine IFA who will give advice when needed and is not reliant on commissions from offshore providers to fund his own lifestyle. In 2012, Britain’s Financial Conduct Authority banned the taking of high charges and commissions, but both are still common practice in the vast majority of expat hubs worldwide. Figures as high as 15 per cent of the total investment are still being creamed off from expat pension savings, almost always without being fully explained in an uncomplicated manner. The real danger of large commissions is that they result in unsuitable, expensive and often dodgy financial products being mis-sold by IFAs simply to increase their personal bank accounts and often resulting in major losses to the client.

Again, British law prevents unregistered, unauthorised IFAs from working in the UK and also insists on a Diploma Level 4 qualification, equal to a degree. Sadly, many overseas destinations popular with expats have no such regulations and aren’t concerned about protecting expat investors, meaning that many so-called IFAs are not only unregistered and unqualified, they’re also working illegally without permits. Unfortunately, recommendations from other expatriates shouldn’t be taken as proof any expat IFA is the genuine article, and attempting to verify an expat IFA’s legality is mostly a fruitless exercise. The best way to guard against being scammed out of your hard-earned pension savings is to remember the internet is your only friend, along with your own ability to learn enough to be able to research any investment suggested by a recently-introduced expat IFA.

New arrivals are most at risk, with doing basic research before you leave the home country giving you just enough ammunition to counter suggestions disturbing to your gut instincts. In many cases, IFA-speak is a language invented to deceive, with a genuine IFA more than happy to explain the terminology to you at least twice. Offers to fill in forms for you, thus leaving you to simply sign on the dotted line, should ring alarm bells with even the most unwary, as it gives dodgy IFAs the freedom to dump your money into whichever fraudulent investment scheme pays the highest commission. Perhaps the best way to ensure your money is safe is to choose a destination whose banks give a reasonable interest rate on cash deposits, thus leaving the financial gambles to those who enjoy a flutter!
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