Avoid being stung by a financial salesman
Moving abroad is a dream, there are millions living and working in another country than their home country but there is a sober side to relocating, especially for those retiring in the sun – how to keep your hard-earned money safe!
Getting financial advice overseas can be fraught with danger. Consumer protection rules in Europe and the UK, which are some of the strongest in the world, stop at the boarding gate in the airport. Be aware not all jurisdictions take such a strict approach to financial consultants, and that a lot selling their services to expats are not all they seem.
If you are thinking of making the leap – or already have – check the list below, compiled by Expat Beleggen, a transparent performance fee-charging consultant with Certified Pension Planner status to make sure you are working with a reliable adviser, not a rogue.
How to protect your pension pot abroad
1. Beware of commissions
One of the biggest dangers are hidden commissions and charges for investment advice and products. Banned in Europe and the UK, they are still common practice elsewhere in the world and eat chunks out of a lifetime of savings. Expat Beleggen, which specialises in financial advice to expats, has seen examples where commissions of double figures as high as 15% being charged.
Large commissions not only steal your nest egg, but they also encourage mis-selling of unsuitable and expensive financial products (which is why this practice is banned in Europe and in the UK). Hundreds of expats who retired in Asia to enjoy their later years are instead fighting for compensation in one case, in which they claim they were mis-sold bonds with charges so high they could be left with nothing to live on.
Performance fee-based advisors, like Expat Beleggen, which charges an overall flat fee of 0.5% per annum (0.4% annual management charge and EUR 150 annual membership fee) are a much safer option because you know how much it will cost you.
If you must go with a commission-charging firm, get them to document and give you clear and exact details of how much of a kick-back they are getting because of selling you a certain product. This way you can shop around other advisers to compare rates. Ultimately the more being paid in fees or commissions, the less you must live on in retirement.
2. Ask for proof of professional status
In Europe and Britain, all financial advisers must be authorised and regulated to do business. They also must be qualified. Your host country will have a similar system.
Find out which body regulates those who work in finance where you are and make sure your adviser shows you proof that they are legally entitled to advise you. No legitimate adviser will mind. Your retirement nest egg is too valuable to entrust to charlatans.
3. Show me the money
Ask for examples of how they have managed other client's money – a good financial adviser should be able to provide the figures and evidence.
How much money has your financial adviser made or lost you money in the past? Ultimately, if your adviser is making more from your investments than you are, there is a problem.
4. Are they a real pro?
In Europe and Britain, as well as being authorised and appropriately qualified, all advisers should be members of professional bodies, which help police their conduct and provide additional training and support.
The Chartered Insurance Institute (CII), for example, is the leading body in the UK. To gain Chartered status requires extra exams and testing and is extremely well regarded and globally recognised. Ask if your firm has the relevant mark of excellence for your jurisdiction, and if they don't, ask why not.
5. Put them on the spot with an awkward question
Protecting your money should mean no questions are off the table. Sometimes advisers who have flown close to the wind with European and UK rules wash up in expat communities trying to start afresh. Ask them outright why they moved to your host country, and what kind of reputation they left behind. Google is your friend here. Clients of a firm in Asia have found out the hard way – by losing millions – those plush offices and a slick sales patter are not the way to pick a financial consultant.