Arriving to work or retire abroad, you’ll probably have been cautioned against the less desirable parts of the country you’re entering. Where the pickpockets are most likely to steal your wallet. Restaurants that overcharge tourists. But you probably weren’t informed about potentially unscrupulous financial advisors.
Expats can be attractive to financial advisers usually for one of two reasons; they are working abroad in a high earning, low tax environment; or they have arrived to retire in a foreign country with all of their life savings in tow.
Combined with a lack of familiarity of the rules and their rights outside of their home jurisdictions, these attributes can make expats extremely vulnerable to improper or inappropriate advice.
Lawyers, never known to miss a trick, are increasingly convinced expats have been, and continue to be, mis-sold overpriced and poorly performing pensions on a large scale. Pension litigation – where investors fight for compensation in group claims against retirement firms, fund managers and financial advisers – is forecast to see huge growth. (1)
This is because pension mis-selling follows an all too familiar pattern, though hard to see when it’s happening to you. Overseas sales people commonly advise on pension transfers, with expensive investments like life bonds and structured notes to expats.
Working expats are targeted with long term savings contracts requiring monthly or annual contributions. In some cases, a 20-year contract could generate fees to the advisor of 50% of the first year’s premiums. (2)
If you’ve retired abroad, the mis-selling tends to work like this: (2)
- a fee to transfer your UK pension which can be as much as 15% of its value
- an expensive offshore bond “wrapper”, costing up to another 2% a year
- underlying investments, uncommon funds like fine wine and land bank schemes, but more often so-called ‘life bonds’ sold by insurance companies that can cost you another 2% a year
- other hidden commissions or fees for the ‘free’ advice you received for all this.
In this cookie cutter process, your needs as an individual may not be at the forefront of the advice you receive.
Thoroughly check any financial adviser before you start and get explicit costs. If you have, or think you have a UK pension, get a pension review from a quality independent financial adviser as soon as possible.
Contact Brite Advisors USA today for low cost, transparent advice.