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How to find a trustworthy financial advisor

Managing your investments while living abroad can put you in a uniquely vulnerable position. It’s not uncommon to come across rogue financial advisors so we have put together this overview to help you differentiate between the trustworthy advisors and those you should avoid

Written on 28 October 2021

Managing your investments while living abroad can put you in a uniquely vulnerable position. It’s not uncommon to come across rogue financial advisors who stand to benefit from where you put your money, as well as unregulated firms who are hiding fees in the small print.

In the UK, the FCA provide regulations to help keep you and your money protected, but overseas they have little to no jurisdiction. It’s up to you as the consumer to seek out financial advice you can trust, and that will help you make the best decisions when it comes to your finances.

To help you get started, we’ve put together some key things to look out for when finding financial advice you can rely on.

While many financial advisors operate with complete integrity, there are some whose intention is to take advantage of consumers. It is therefore important to know how to spot a rogue financial advisor from the off.

Here are a few things to be aware of when hiring a financial advisor.

Be mindful of fee-free advice

One thing to be especially cautious of right from the start is anyone offering you so called ‘fee-free’ investments -- this is an investment with no initial fees or ongoing management charges. No professional will ever truly work for free, so the question then becomes: where is their money going to come from?

If they aren’t up front about it, they may be planning to earn a commission from the product (your investment), or from hidden exit fees. It can sometimes feel awkward to ask questions like ‘How much are you getting paid for this, and where will that money come from?’ But it is perfectly legitimate to ask and can reveal crucial hidden information.

‘Friendly’ advice

If you have an established bond and ‘friendly’ connection with a financial adviser (as can sometimes feel perfectly natural), be wary of any attempts by that financial advisor to put social pressure on you to invest your money in any particular way.

You need to be able to rely on an advisor’s impartiality, if they have been incentivised to up-sell a financial product, their advice is unlikely to be in your best interests.

Flexibility about returning to the UK

During a preliminary meeting with a financial advisor it’s also a good idea to discuss any plans you may have to return to the UK in the future.

In many cases, you may not be able to continue working with your firm and will have to switch to an UK-based FCA regulated firm when you do. A financial advisory firm may claim to be able to advise in the UK, but if they are not on the FCA registry then this is not the case.

Also be aware that some financial options that are available to you as a non-UK resident may be subject to additional taxes if you return to the UK (or move to another country), or potentially even additional charges. Before making a decision always ensure you have clarified any known or likely future plans and have had these incorporated into any recommendations or advice.

If you are an expat only temporarily, you should always factor this into any consultations you have while living abroad.

Spotting hidden fees

Some financial advisors will strive to produce a competitive-looking quote by hiding some of the fees they intend to charge you. Watch out for vagueness about where the money is coming from. They might tell you, for example, what they are being paid but not how much of that you’ll be paying, or even whether or not their payment will be the full amount you are charged. Some more commission might go to the company the advisor works for.

Payment structures like this are perfectly legal providing they are clearly disclosed up front but can end up drawing significantly from your investment if not properly scrutinised.

It’s important to ask questions around fees from the first formal meeting. The financial advisor will have a very good idea of any charges, so don’t be afraid to get specific, and don’t be afraid to get it in writing. Verbal agreements (even recorded ones) won’t always stand up in the face of a contract, so always get your full fee structure confirmed in writing after your first official meeting.

Here we go into more detail about how to best spot hidden fees and charges of financial advice >

Non-UK firms claiming to be FCA regulated

The FCA (Financial Conduct Authority) have extremely minimal jurisdiction outside the UK. If a non UK-based firm is claiming FCA credentials, this is a big red flag because it is almost certainly untrue and means they are purposefully skewing the truth in order to provide peace of mind.

You should always double check any financial advisor claiming to have FCA credentials appears on the official FCA register, or if not there on their local state register.

Outside of the UK, each individual jurisdiction will have their own regulatory financial body with different implementations of EU rules and regulations. One thing you can rely on FCA regulations for as an expat living overseas is pension transfers into other schemes such as QROPS, though it is still extremely important to determine the fee structure as any investment or pension transfer outside of the UK is vulnerable to being diminished by commissions and fees.

Discover more about the role of the FCA and British Expats >

Best practise, second opinions and confirming concerns

If it sounds like a ‘no brainer’ investment opportunity, it has probably been designed by someone to appear that way. It sounds obvious, but if something seems too good to be true, it probably is. Your best option is to secure a second opinion from a different independent advisor.

Financial advisors will sometimes only provide half a quote with the caveat that the completed investment decision will be confirmed at a later date. They do this to make their plan seem preferable when compared to others. The costs that are later added can also look extremely similar to the first set of costs and be confused as the same thing – this is all part of their tactic to conceal what you will really end up paying. An experienced financial advisor will usually have a clear overview of potential charges, costs and commissions very early on in your consultation process – it is never too early to get clarity on this.

It’s also vital to read and reread anything you are asked to sign, as any rogue financial advisors may try and sneak additional structural costs by you, which, once you’ve signed, you’ll be unable to contest. If you don’t understand what you’re being asked to sign, even with practises like recorded conversations becoming more and more common to increase transparency, avoid signing it.

Be sure to check the company details (and whether they are actually allowed to provide advice where they say they are), any investment options you might have, the overall tie-in period (if any), and whether there is a cool-off period for changing your mind.

How to find the right financial advice

If in doubt, at any point during the consultation process, get yourself a second opinion from another financial advisor. Once you leave the UK and the jurisdiction of the FCA becomes significantly reduced, corroborating your information and knowing where to look for warning signs can be a game changer.

Finding a financial advisor you can trust can be a difficult process, with everyone telling you that they are the right choice. What you need is a personal introduction to someone you can trust, who has your best interests at heart.

Typically, expats use our services to ensure peace of mind regarding financial decisions, but also to seek second or third opinions on advice they’ve already received.

If, after the consultation, you wish to continue using the services of the firm we introduced you to, you will be provided full details of the potential fees and charging structures, and will also be under no obligation to proceed with the advice provided.

Some example questions to ask (and what to listen out for)

So, in summary, here are the key things to ask whenever you’re seeking independent financial advice:

  • Where is their money coming from? Will it be taken from your investment, or are they getting a commission from somewhere else that may skew their judgement? And...
  • Can you get a break down of those fees and potential costs in writing?
  • Do you feel like your advisor will take it personally if you decide not to invest a certain way? Does the investment feel like a ‘no brainer’? If so, you may want to examine whether they are behaving professionally, or trying to pressure you.
  • If you return to the UK, will you be able to keep working with this firm? Will their recommended financial products be subject to penalties or additional taxes if you return to the UK? If you’re only temporarily abroad, you may want to consider investing in someone you can stay with long term.
  • Are they claiming to be FCA regulated, and can they back up those claims?