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Mistaking a Salesman for a Financial Advisor


Buy any product (offshore savings plan/portfolio bond) or investment fund via a 'financial salesman' and you will be charged commissions and that can't help but have a distorting effect on 'the advice' you receive. The financial salesman is paid on commissions by the providers of financial products in Isle of Man, Guernsey, Dublin, Mauritius, Cayman Islands, Bermuda etc. That is a system that can be anything but corrupting. There are only very few really good financial advisors out there but they are working with a system that does them no favours at all.

Imagine you bought a property and the real estate agent who sold it to you not only took the traditional 3% upfront commission on the sale, but also insisted on charging 1% of the possible rental income every year for as long as you owned this property. Furthermore, what if you then found out that the 3% upfront commission and the 1% annual levy had not been set by the real estate agent, but by the developer of the property? And that elsewhere in the area there were identical properties for sale from another developer that would have cost you only an upfront 0.5% but your real estate agent hadn't shown them to you. You would be horrified, wouldn't you? But that's the kind of thing that happens an expatriate in Asia, China, Middle East and beyond buys a product or investment fund via a financial salesman. If you buy, say, an investment fund from a salesman, you pay an upfront commission of a percentage of the money you are investing and then a commission for every year that you continue to hold the investment they suggested you buy.

What this system means is that many of the expatriates out there never meet a real financial advisor: they meet commission-hungry salesmen masquerading as advisors! These salesmen can also find themselves utterly unable to stop suggesting that you buy and sell things when you might be better off doing nothing at all. Note that if they look at your portfolio and say it looks just fine they get nothing. If they look at it and say you should sell everything and buy some new funds they could make themselves 5% of the value of your investments. The upshot is that the only way you can be absolutely sure you will get unbiased financial advice is to reject commissions and insist on paying for performance fee based advice. This is what we do when we consult other professionals. Do you pay your notary an upfront percentage of the value of your will when they write it for you? Of course not. You just pay them a flat fee for their time.

As far as we can see it should be exactly the same with financial advisors. They have taken lots of exams to get qualified and they should be seen as respectable professionals and paid accordingly. There are only a very few good and excellent financial advisors out there and we can't see why they should see anything else as reasonable. Unfortunately not everyone agrees with us. Well, when we say not everyone, we mean not everyone who is a financial salesman. It is fascinating stuff when people get this angry and this personal with our opinions here, so you can be sure they know they are standing on shaky ground but the really striking thing about it is that not one person actually makes a real argument in favour of the commissions system they use.

All advisors now have to offer you the choice of paying by commissions or paying a fee but we think you are best off using advisors that only charge a performance fee, not least because the more of you that choose this option the more financial salesmen will be tempted to make the shift out of the commissions system. At the moment, performance fee-only financial advisors aren't that easy to find, however Expat Wealth At Work has been offering this level of financial planning advice for more than 12 years and the result is that 95% of our clients stay with us for more than a decade. Due to these financial salesmen, we have long suffered the scourge of a bad reputation: lumped together as commission hungry salesmen and barely higher up the food chain than used car dealers. However, we belong to a new generation of financial advisors: we have developed a client centred service - one which is focussed on achieving the clients' financial objectives rather than maximising commissions. As such, we offer a performance fee based service with full transparency on costs. Plus, we are highly qualified.

Expatriate clients are cost-sensitive and an expert financial advisor will prove their worth - whether it's in building your pension pot, saving you costs during the process or ensuring that your money works harder and lasts longer. Let's talk more if you're interested: hello@expatbeleggen.com