The Trouble with Financial Advice for Expatriates
Financial advice for expatriates is not hard to find. If you are a professional working internationally, we expect you have had some interaction with an offshore financial salesman in your career. Regrettably, the industry is rife with mis-selling, unsuitable advice and exploitative practices.
We are bringing regulated financial advice to an international market to raise standards and provide welcome salvation for expatriates.
Here are our Top Five grievances with offshore financial salesmen which we are sure will resonate with you....
1. (Undisclosed) Commission Based Sales
Financial salesmen work for the hands that feed them. With poor or non-existent regulation in some parts of the world, financial salesmen are able to sell unsuitable structures and investments and not transparently disclose what's in it for them. The priority of most offshore financial salesmen is to sell the products most lucrative to them rather than working for you - the client - to find the product that best suits your needs.
Commissions are often taken by offshore financial salesmen from both the product provider (typically an insurance company in Isle of Man, Guernsey, Ireland, Mauritius, Cayman Islands, Bermuda etc.) as well as the investment managers for selecting their funds (Tilney Bestinvest, St. James's Place etc.) or structured products. The result is higher fees you - the client - and a clear conflict of interest in the advice process.
What makes it worse is the number of people and companies who take a cut from your investment. With offshore financial salesmen (and the levels of management above them), insurance companies, fund managers and the reps who distribute the products to offshore financial salesmen there are too many pockets being filled by the money you have worked hard to accumulate. Transferring your pension or making an investment through an offshore financial salesman is like opening a box of sweets at a children's party as all the hands dive in to grab what they can.
We are part of a regulated group meaning that we DO NOT take commissions. We work independently for our clients to find the best solutions for their needs. Our financial advice model is based on ensuring the prosperity of our clients before our own. Our remuneration is transparent, agreed up front with the client and dependent on a long-term relationship of continued advice and service. We have cut out all of the parasites who feed off investments to deliver the most cost effective solution that ensures the best potential for long term growth.
2. Regular Savings Plans
There is nothing wrong with making a plan to save regularly but there is a lot wrong with the kind of insurance-based regular savings plans sold in the offshore industry. These work by paying commission to an offshore financial salesman based on the total premiums paid over the term of the plan - e.g. if you agree to save $1,000 a month for 20 years, the salesman will be remunerated up front according to a premium of $240,000 which is the total amount you have committed to saving ($1,000 x 12 months x 20 years).
The provider indemnifies this commission with a surrender penalty so if you can't fulfill your commitment as your circumstances change (and most people's circumstances change at some point in a 20 year period) then you will pay a surrender penalty to reimburse the provider for the offshore financial salesman who sold you the plan.
These products are eye watering expensive, and in our experience, very few people continue paying the premiums for the whole term eventually paying a penalty when they wish to access their savings.
We advocate saving regularly as sound advice to reach financial freedom and the retirement you deserve. Our solution is not to tie you in to products but to provide flexible cost effective platforms that are secure and accessible. You can start with as much as you can afford and then top up regularly or in ad hoc amounts. You will always have access to your money and there are no penalties or commitments whatsoever.
3. High running costs on investments
The lack of regulation means offshore financial salesmen are free to sell investments that would never be allowed in a regulated market like Europe or the UK (usually they sell whatever pays them the best commission). We have seen funds sold with a 5% entry fee and total expense ratios (TERs) of 3.5% - and that is just for the cost of the fund, the cost of the insurance wrapper and pension (QROPS) trust adds another 1 or 2% to this meaning that you will need annual growth of more than 5% just to keep your head above water.
We do not sell crap. We do not take commissions which means we only have one interest and that is finding the right investments suitable for your risk profile and long-term goals. We are licensed to advise on investments and would not recommend anything that wouldn't be approved in regulated markets like Europe and the UK. The running costs on portfolios we recommend cost 0.2% which is more than 3% less than most funds sold by offshore financial salesmen.
The compounded effect of this over the long term should not be underestimated. Let's use the example of $100,000 invested for 15 years with a target rate of growth of 6%. On a TER of 3.5% the sum would grow by just $44,829 compared with interest of $132,961 on a TER of 0.2%. That is growth of THREE TIMES the amount!
4. Lack of Regulation
Unfortunately, your vulnerability to unscrupulous offshore financial salesmen is the result of one main factor - your location. Working in remote places means offshore financial salesmen can trip in to see you without having to worry about licenses, qualifications or regulation. They rely on their skills in charm and persuasion to talk you into the kind of products we have highlighted above. If the sh*t hits the fan you will be lucky to find them and certainly won't have a regulatory body to turn to if the advice was given to you in a remote part of the world.
All advice we give must pass a rigorous compliance procedure. This was a deliberate move to bring regulated advice to expatriate professionals across the globe. We have a fundamental belief that your geographical location in the world should not be a barrier to receiving fair, transparent and truly independent advice and an exemplary level of service you can trust.
We are not just talking the talk. The proof is in our transparent fee-based advice that is focused on building long-lasting relationships rather than looking for a quick sale before moving on to chase the next commission payment.
5. Long Term Suitability
Quite often products such as insurance bonds used to hold investments or overseas pension transfers (QROPS) are recommended without consideration for your future circumstances. Financial salesmen are only interested in the here and now (and the commission they can make up-front) on the assumption that they won't be working with you for the long-term.
We have experienced clients returning home or moving elsewhere and suddenly discovering that they are liable to pay taxes on these structures or that the underlying investments need to be changed as they are not permitted in their new country of residence. Furthermore, the surrender penalties (which exist to indemnify the commissions already paid to the financial salesman) trap you into a no-win situation.
Our priority is to give independent financial advice and suitability based on your current circumstances and your future plans. We only recommend solutions which are secure, flexible (with no surrender penalties), internationally portable and are good value. Our model is based on your long term prosperity and our ongoing relationship, not on the short term goal of making an initial commission.
If you are an expatriate working overseas and the above has resonated with you then please get in touch for an informal and confidential chat: firstname.lastname@example.org If you are already working with a financial salesman then we will happily give you a second opinion to highlight whether or not your current plans are suitable for your needs.