A guide to losing money to a financial salesman
If you have been investing money regularly in the stock market over the past 1, 3, 5, 10, 15 or more years, you have made a decent profit - haven't you?
If you had started with $2000 and invested $2000 per month over the past year in a global stock index, you would have invested a total of $26,000, and by July 31, 2021, it would have grown to $29,506. By "global stock index" we don't mean a single country's stock market performance, we mean an average of virtually every country's stock market over these durations (such as the MSCI World All Share). That means the good, the bad and even the downright ugly. If you had done the same thing over the past 20 years, you would have invested $482,000, and by July 31 2021, the money would have grown to $1,187,424. Great returns...
Hang on, you are saying you didn't make that kind of money?
What? Over the past 1, 3, 5 or 10 years, you didn't make a profit? If that's the case, a financial salesperson likely sold you something to benefit them, not you. Something second, or even third best, such as an insurance linked 'offshore pension'.
Recently, a teacher contacted us and like many expats, he was sold an offshore pension by a British "gentleman" (why are they always British and male? - it shames us) and he asked us to look at his policy. Here's what we found:
- The fees this teacher is paying are crushing: roughly 5% plus per year!
- The surrender penalties are also huge.
- If he wants to withdraw his money, he will lose practically everything.
- The "adviser" who sold him this policy received a huge commission from the product company, which they will recoup over time from the teacher's account.
And that's why they want to keep the teacher's money and why the penalties are so high if he wants to get out of his scheme. In fact, the provider will bleed him slowly, so they can recoup the salesperson's commission and their own fees. The massive and hidden commission the adviser was so hungry for has cost him plenty and the teacher had no idea...because he was never told the truth.
You can imagine the conversation when the teacher and the adviser first met:
"Hello," said the suavely dressed Brit. "Let me introduce you to some offshore pension funds. You will make a lot of tax-free money. Have a look at these performance charts." The adviser probably then showed the teacher some funds that had spectacular recent returns. "We will get you into these great funds, don't worry" he said. And thereafter the adviser set up a monthly purchase plan having filled in all the paperwork for the teacher to save him the trouble. "Just sign here..."
With his account set up the teacher began to purchase these previously hot funds. But does he have exposure to U.S. stocks? No. Does he have exposure to European stocks? No. And why doesn't he have exposure to the world's two biggest markets? Well, apparently the adviser said neither of those markets had recently done well, so he didn't bother adding them. He needed to dazzle the teacher so he didn't look beyond his bluff. And if he had shown him a diversified global portfolio, he might not have made the sale, because more modest returns might not have distracted him quite so well away from the massive commission and ongoing fees of the fund! That is how it begins - and ends. Things rolled downhill from here for the teacher ...as they do for every misguided expatriate investor the world over.
How much money has the teacher lost?
Between 2013 and 2021 he added money monthly to his pension. His contributions totalled $79,902. But guess what, his portfolio is only worth $58,012 today. Globally, most of the world's markets have rocketed since 2013. But our teacher has lost money. He is not alone... There is a pandemic of similar cases amongst expatriates. We see cases like the teacher's every single week when new clients approach us to review their pensions, investments and savings policies. In fact, our teacher's example is so typical because it is the case with most offshore investment platforms that the fees are outrageous and the portfolios are created by commission-hungry salesmen. It would have been tough to lose money since 2013. But our teacher's so called "adviser" found a way.
Have you got any of these toxic policies?
If you are invested with life insurers in Isle of Man, Guernsey, Dublin, Cayman Islands, Mauritius and Bermuda in any insurance linked offshore pension, your story may be similar. Now let us tell you something creepy. If you have invested with any one of these life insurers, we can tell you what you own. No, we can't read your mind... But we know when different geographic sectors had their time in the sun. So if you started your policy in 2007, you have a huge emerging market stock component (Brazil, Russia, India and China). You might not own much else. Are we right? If you started in 2010 or 2011, your portfolio will be stuffed with gold. If you started in 2016, your portfolio will be filled with U.S. stock funds. It could also contain some emerging markets, if you began halfway through 2016. Emerging market stocks have had a strong run in 2016. The U.S. has been the best performer for a decade. Your adviser will ignore Europe and Developed Asia. Instead, he will prefer to wow you with rear view mirror driving. That kind of practice can cause an ugly crash. So no, our teacher is far from alone. His story is all too familiar. Does it sound familiar to you too? If so, don't panic...
What can you do?
Know that commission hungry sharks (IFAs or bank assurance salespeople) prowl expatriate waters posing as financial advisers. These predators often have low morals, almost no technical financial knowledge - or both. Don't invest in the products they punt or the fashionable investments they vend.
We build you a diversified, low cost portfolio. Because so many expatriates have been affected as our teacher has, and because so many expatriates own pensions and investments that are actually costing them money, we offer the same review service as we offered to our teacher in the form of our no obligation and free X-Ray portfolio review.
Having read the above, if you are worried about your holdings, you are an expatriate, and you have any form of pension, investment or savings solution, please request for our no obligation and free X-Ray portfolio review: firstname.lastname@example.org
We will review and benchmark your holdings and report back to you with our findings - they will come with no obligation and no charge. Once we can clearly see the situation you are in, we will be happy to discuss your options, answer your questions and help you deal with any issues.
As part of your free X-Ray we will show you if you can: -
- Cut your costs
- Improve your returns
- Gain greater financial flexibility