Choosing A Financial Adviser


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Many people take financial advice to protect their assets from tax and inflation, so that they can hopefully enjoy a long and comfortable retirement. What many Britis

Many people take financial advice to protect their assets from tax and inflation, so that they can hopefully enjoy a long and comfortable retirement.

What many British expatriates do not realise is that their choice of adviser will probably be one of the biggest decisions they will ever make.

Do you choose your existing UK adviser or an adviser based in Spain/France/Portugal/Cyprus?

Before you even start discussing your financial affairs with any adviser, it is critical that you find out whether they are competent and legal. Why? Well because if they are not, if anything goes wrong with the advice that they have given you, you do not have any recourse against them, no one to complain to and no representative body to assist you.

Using a UK adviser

Many people have built up a good relationship with the adviser they used in the UK (or wherever their home country is) and it is natural for them to wish to continue using the same person. However, there are a few reasons why this may not be advisable.

The first issue is regulation. In the UK your independent financial adviser (IFA) has to be regulated by the Financial Services Authority (FSA) ? the UK?s independent watchdog that regulates all financial services in the UK. This would have provided you with protection when you were resident in the UK. However, is the adviser regulated to give advice to people living in your current country of residence? Unless he has many clients in Spain/France/Portugal/Cyprus, to the extent that he has sought regulatory permission from the FSA to extend his services into Spain/France/Portugal/Cyprus, this is very unlikely.

So while the advice he provides you with should be of an FSA standard, unless the adviser is legitimately using an EU financial services passport into Europe you may not be covered by their Professional Indemnity Insurance if you have any recourse against them for the advice that they have given you.

In addition, you will have no recourse to the FSA or the UK financial services Ombudsman.

The second issue is that a UK adviser is unlikely to be familiar enough with the tax and investment rules in Spain/France/Portugal/Cyprus. In essence most UK advisers are trained specifically to only advise UK resident clients. He may wish to keep you as a client and not admit this to you, but without the full local knowledge needed his recommendations are unlikely to be appropriate for you now that you are living in Spain/France/Portugal/Cyprus. We have seen many cases of negligence arising from UK advisers trying to hang on to the clients who have moved overseas.

Even if your adviser does thorough research on Spain/France/Portugal/Cyprus before making his recommendations, he will probably not keep up to date on every single change in the Spanish investment and tax regulations. It is highly unlikely that he will be in a position to inform and advice you accurately on an ongoing basis. Often even small legislative and taxation changes can impact the advice given to clients.

Using a locally based adviser

It is sensible to use an adviser based in your country of residence. Ideally you want to find one who you would be happy to continue working with over the coming years and who is well placed to deal with your current and prospective financial issues.

Again, regulation is paramount. Some people presume that just because their adviser is British and worked as an IFA in the UK for many years, that he must be reliable and regulated – but this is not necessarily the case. In some cases advisers have left the UK because they had run into trouble or did not want to comply with UK regulation and purposely chose countries with less regulation in which to offer their services.

The best solution?

Spain/France/Portugal/Cyprus has its own regulation system but the UK FSA is considered one of the best regulatory authorities with the world. Under the terms of the EU?s Insurance Mediation Directive (IMD) it is possible for regulated UK advisers to establish businesses in other EU countries providing they set up their business correctly.

Through the Directive, therefore, it is possible for an adviser to be regulated both in the UK and here in Spain/France/Portugal/Cyprus. This is the ideal situation for a British expatriate who needs financial planning involving both countries ? even if you are permanently resident here in Spain/France/Portugal/Cyprus you may still have UK assets resulting in issues such as UK inheritance tax, estate planning for your UK beneficiaries, your UK pension etc.

Always ask your adviser for proof of his regulatory status. When it comes to the FSA you can verify this for yourself on their website You can check whether the firm is fully authorised and regulated by the FSA. In addition, if you click on the ?passports? link at the top of the firm?s page you can check whether it can legitimately advise you in Spain/France/Portugal/Cyprus. You can also use the ?individuals search? to search for your adviser to check that he is personally regulated.

Advice on UK pensions

In order for an adviser to legally give advice on UK pensions, he must be regulated by the UK FSA. No UK insurance company would grant him terms of business to recommend their pension products if he were not.

When it comes to QROPS (Qualifying Recognised Overseas Pension Schemes), note that pension transfers are heavily regulated by the FSA. For an adviser to make recommendations about whether it is appropriate or not for you to transfer out of your current UK pension arrangements and into a QROPS, he must be authorised in the UK by the FSA to provide pension transfer advice.

It is also important that your pension adviser is authorised to give advice your country of residence, for example through the Insurance Mediation Directive mentioned above ? just being authorised in the UK is not enough. Another reason why it is important to use a locally based adviser, rather than a UK one, is that he must understand and be fully up to date with the local tax rules to ensure your pension is structured to be as tax efficient in Spain/France/Portugal and Cyprus as possible.

It is important to check your pension adviser?s regulation status to ensure he is fully authorised to provide advice to you. This way you will have full recourse should something go wrong, including protection from the adviser?s Professional Indemnity cover.

by David Franks, Chief Executive, Blevins Franks

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.