Avoid becoming the victim of bad expat financial advice

Despite the fact that David Cameron vowed to abolish the Financial Services Authority (FSA) if he came to power, it remains the regulator of the financial services industry in the UK, and it supposedly protects those who are given financial advice in Great Britain.

But who can British expats rely on for protection once they move abroad?

Expats can be particularly vulnerable to poor financial advice because the rules relating to the industry differ from nation to nation, and the products and solutions they can potentially benefit from differ from those they are perhaps used to in the UK. Therefore it’s difficult to judge an advice giver, or the advice they give.

The good news is that within the European Economic Area at least, there is a pathway for expats to follow to ensure that the advice they are given is from a regulated company.

What’s more, there’s a certain amount of simple and common-sense due diligence that any expat can do in relation to a financial advice giver, to ensure they are regulated, qualified, recommended, experienced and independent.

Have you heard of ‘passporting’?

The Markets in Financial Instruments Directive is an EU law created to provide concordance in terms of the regulation of investment services across the 30 member states of the European Economic Area (that’s all EU member states plus Iceland, Norway and Liechtenstein).

As part of the Directive the concept of "passporting" was introduced, and it’s this concept that expats need to be aware of and understand, because it governs how anyone giving them advice needs to be regulated.

Essentially, it describes the right to conduct financial financial services across the EEA, based on a single authorisation or approval from a nation within the EEA.

An offshore independent financial adviser (or IFA) based in the EEA should therefore be regulated somewhere within Europe; common countries for regulation include Belgium, Ireland and Germany because other member states deem them to have the best regulatory practices and procedures in place.

Once regulated therein an advisory can give advice. They can also have a branch office elsewhere in Europe for example, from which they may advise expats too, and because of passporting they can legitimately advise expats in other EEA countries.

Where is your financial adviser regulated?

When someone presents themselves to you as a professional financial advice giver, you’re perfectly entitled to question them with relation to their regulatory status. Therefore, if you’re speaking to an IFA, ask them where they’re regulated, and ask to see proof of their regulation.

If you want to take your research a step further, visit the web pages of the financial services authority in the nation in which they claim to be regulated, and double check their registration.

Further questions to ask your expat financial adviser

QUALIFICATIONS

Every nation has different rules relating to how qualified a financial adviser needs to be to gain authorisation, but the UK is a world leader in terms of the qualifications it requires financial advisers to have. Therefore, if you’re speaking to a British adviser abroad, you can gauge their industry education based on the British qualifications they have.

The vast majority qualify in the UK before working abroad, where they may also need to be locally qualified for regulation purposes.

The Chartered Insurance Institute, Personal Finance Society, ifs School of Finance, Chartered Institute of Bankers in Scotland, CFA Society of the UK, Chartered Institute for Securities and Investment, Institute of Financial Planning and the Pensions Management Institute are all relevant awarding bodies in the UK.

TESTIMONIALS

If your IFA is good at their job, they are highly likely to have a list of satisfied clients, from whom you can request a testimonial. In addition, the larger brokerages often offer new clients the chance to request a reference from any of the large financial institutions through which they put client business.

Take up any offers of references and testimonials to see how well the adviser and their brokerage are respected.

EXPERIENCE

You can ask your adviser how long they’ve been qualified and giving advice, and you can research the brokerage to see how long they’ve been in business.

You will be able to see how long they’ve been regulated when you request details of their regulation, and you will be able to see how long they’ve been qualified when you request details of their qualifications.

INDEPENDENCE

Finally, you need to ensure that your adviser is independent rather than tied to one financial institution. This is very easy: all you have to do is ask. An independent adviser will make it very clear that they are able to advise you on suitable products from the entire financial market place, whereas a tied adviser will have to make it clear that they can only offer to "sell" you products from the bank they work for.

What to do if you're given bad financial advice

Assuming you’ve conducted the above suggested due diligence and determined that you’ve been advised by a legitimate company, your first point of contact if you have a complaint will be the compliance department of the brokerage.

If a mistake has legitimately been made, it is absolutely in the financial brokerage’s best interests to rectify the situation. They will not want an outstanding complaint open against them, they will not want the bad publicity associated with such a complaint, and they have the means to put right most mistakes as well.

They should have indemnity insurances in place, and they will ideally have good relationships with the financial services companies they work with, to ensure that they can undo the mistake, put you back to where you were (financially speaking) before the mistake was made, and satisfactorily address the problem.

However, it can take time to have the situation assessed and a solution found. You may need to have patience, but the company must keep lines of communication open with you, and tell you exactly what they are doing to investigate your complaint.

If you don’t feel heard, or the company allegedly at fault does not help you, you can go directly to the financial services company they placed your business with, and the body the brokerage is regulated by and raise your complaint to both.

Serial expat Rhiannon Davies is the editor of Shelter Offshore, home to expert expatriate advice about banking, saving, investing and living offshore.