Choosing the Right Financial Adviser

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If you are an expat looking for independent financial advice, the one sure outcome is you will pay for the privilege.

But forking out for good advice is often a money-saver providing you have picked the right adviser from the outset.

Too many tricksters say they are financial advisers when they do not have the qualifications or experience.

These unscrupulous fraudsters may have the trappings of a professional, but they either charge eye-watering fees or pick up big commissions from selling unregulated or unsuitable products and services.

Picking a trusted adviser varies between countries.

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Some places, such as Britain, the US and Australia have strict government regulation, while many others have no rules, which means anyone can set up as an IFA.

Wherever you are, ask your adviser some key questions before handing over any cash.

Different types of financial adviser

A financial adviser is someone who can help you make the right decisions about the best way of saving, investing and protecting your wealth.

Although some expense is involved, an adviser should offer value for money by giving an expert insight to your finances.

Financial advisers come in three types for expats:

  • International independent financial advisers (IFA) – An IFA should offer the best products from across the market that match your personal financial circumstances.

IFAs are regulated in the country where they give advice, which means they must pass exams and apply for a licence before they can advise on pensions or investments. Regulated advisers also abide by independent ombudsman rulings if customers have complaints that they cannot resolve with the IFA.

  • Restricted advisers – Restricted means the advice is specific to products and services offered by the bank or financial firm the adviser is tied to.

Restricted advisers are also regulated.

  • Non-regulated advisers – Anyone can set up as a financial adviser in some countries, but they are unregulated and customers have no redress to an ombudsman if they are given poor advice.

Ask:

  • Are you regulated?
  • Who is the regulator?
  • How is my money protected with you?
  • What happens if I have a complaint that we cannot resolve?
  • What are your qualifications?

How much does financial advice cost?

There’s no such thing as a free lunch, and in the financial world this is doubly so. Time is money and if you are consulting an adviser, they will need you to pay them.

Some countries outlaw commission, so IFAs charge for their time, like a lawyer.

If an IFA is offering free advice, beware because that probably means the provider is paying a significant commission which is bumping up the price of the product.

If an IFA is charging, the price will vary according to where you are, their qualifications and experience.

In Britain, basic pension advice for someone approaching retirement costs between £1,000 and £3,000.

Financial advisers charge in three ways:

  • Percentage fee – A straightforward charge like 1% of the total fund value a year for investment advice, so the cost of an IFA managing a £500,000 fund is £5,000. A typical arrangement would be to pay a set-up fee and then an ongoing annual management charge.
  • Fixed fees – A set fee for specific advice, such as setting up private health cover
  • Hourly rates – Like professional fees charged by lawyers. Keep an eye on the clock and what the adviser is offering for the money.

Ask:

  • How much will your advice cost?
  • What do I get for my money?
  • Will the product provider charge any additional costs?
  • Do you give face-to-face advice?
  • Will I receive a written report of your recommendations?

Why take advice from an IFA?

You might as well ask why speak to a lawyer about legal problems or why go to the doctor if you are ill.

Some financial products are complicated and many people are not confident they can make the right decision about how to proceed without some professional insight.

Financial advisers deal with some key aspects of expat finances:

  • Residence status and tax planning – These go hand in hand because expats cannot confidently make financial decisions if they are not certain where they are resident for tax.

Many wrongly consider they are not UK resident for tax just because they have lived abroad for a while, but this may not be the case.

Good IFAs will have back-office support from lawyers and tax experts who can settle any tax residence doubts for expats.

  • Pensions and retirement – Expats can benefit from the Qualifying Recognised Offshore Pension Scheme (QROPS), which may provide a tax and investment for retirement savers.

But complicated rules surround transferring a UK pension overseas that can easily trap the unwary. Many international IFAs specialise in QROPS.

  • Investments and savings – Non-residence status can open some new horizons for investors with a wider range of bonds, funds, markets, commodities and currencies.
  • Protection – Standard UK life insurance, income protection and critical illness policies will not cover expats, so they need to take expert advice about the cover available where they are living.

Specialist providers do offer portable cover to expats on the move.

  • Private health cover – Outside Europe, health services can be patchy and expensive. Many countries demand expats have adequate private health insurance on arrival. Even employer plans are not comprehensive and sometimes need topping up.
  • Wills and inheritance – Estate planning is notoriously difficult for expats who are likely to have expensive assets such as homes in more than one country. Dealing with this starts with making a will and continues with setting up ownership to match succession laws.

IFAs generally offer expert help with wills and inheritance.

  • Mortgages – Expats often find arranging mortgages a problem because few lenders are willing to take them on as customers. A financial adviser will know which lenders will consider applications from expats and can often ease the process.

Ask:

  • Which products can you advise me on?
  • Does your firm give tax and legal advice or is the work passed to someone else?
  • If someone else is involved, are they regulated and qualified to give the advice?

Do I have to speak to a financial adviser?

In most cases, expats are free to make their own decisions about their finances and do not have to consult an adviser.

Some specific exceptions are pensions and investments.

In the UK, the law says expats must take third party advice from a financial adviser or an advice service like Pension Wise before moving pension funds worth more than £30,000 to a QROPS.

Many pension and investment providers will want to see a written recommendation report from an IFA before agreeing to open an account with a new customer.

Finding a financial adviser

There’s not fool proof way to finding a trustworthy financial adviser.

However, if you are cold-called – that’s approached out of the blue by phone, email or text by an advice firm –  then the possibility the adviser is a scammer is high.

Personal recommendation is a good way to find an adviser, but because someone you know is satisfied with the service they have had does not mean you or someone else will have the same experience.

Advice firms offer international, national and local services.

Try searching online and compare quotes and information about services from two or three firms before making a final decision about who to go with.

Checking credentials

Regulated financial advisers will always be registered with the financial authority in the country where they work.

Always ask for their registration and check this out online through the regulator’s web site or by calling the regulator.

Do not rely on logos and registration details displayed on web sites or headed notepaper as these can easily be added to fool customers that a business is bona fide.

Spend a few minutes searching the adviser’s online presence.

Most will have a web site, a Facebook page and maybe a Twitter account. Searching the adviser and the firm they work for by name on Google will quickly highlight any complaints.

Information and Guidance

For more information complete the Get Advice form here

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Expat Pension Transfers Guide

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