Swimming with sharks. That’s often what you’re doing when you get financial advice as an expat. And it could cost you as much as 15% in year one of your hard saved nest egg.
Rules for financial advisers vary hugely from country to country. Is your advisor honest and upfront about how much their advice will cost you – or are they hiding it away in layers and undisclosed commissions?
This year, more than a dozen clients of a now closed financial advisor, are taking its director to court over hidden charges and advice they allege amounted to a scam.
Commission-based advice was banned in the UK in 2012 after the financial watchdog ruled it encouraged advisers to sell products or services a client may not want, need, or be in their best interests.
But it is still common practice in many countries where expats choose to go for work or to retire, such as Spain, Australia and the UAE. And wherever there are wealthy expats there are those flocking to relieve them of their hard earned cash.
Many charges can be hidden by commissions. Your advisor may tell you their advice is ‘free’ because they don’t ask you to hand over a fee to pay them. This is likely not true. You still pay them, but in a way that is less transparent – and what you can’t see you can’t count.
Your advisor may charge you a commission by taking a cut from your original investment that you aren’t told about, and they may not explain the negative impact it will have on your nest egg. But it doesn’t end there. Unscrupulous advisers may try to make as much money from you as possible. So as well as charging you a commission, they may take hefty kickbacks from other companies in exchange for selling you their products and services; fund managers, pension trustees, investment platforms, introducers.
Every extra company involved in the ‘advice’ you get will cost you more money, because the commission those companies pay to your adviser to give the advisor an undisclosed incentive to sell you their products are added onto the fees and charges you pay for those products.
Commissions can be eye-watering, where up to 15% over of your retirement fund disappears in the first year before it is even invested, although this may not show clearly in your valuation.
Plus, if your advisor is really just a salesman flogging products based on whoever will pay them the most, you could end up in an unsuitable investment where you go on to lose chunks more of your savings..
Forewarned is forearmed. Find a financial advisor who will tell you upfront and in writing exactly what total charges you will pay for their advice and each product they recommend.
Check that when those fees are taken, they are correct.
And remember, if an adviser tells you they don’t charge for their advice – run.
Brite Advisors USA help expats with their UK pensions and investments by reducing fees – we’ll never hide charges from you. We receive no commissions from anyone.