Expats Pay Rip-Off Fees For Offshore Financial Advice

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British expats who retire abroad have been warned to watch out for financial advisers who charge them rip-off fees for managing their money.

The UK government has issued an alert to expats about paying unlicensed and unregulated financial advisers up to 15% of their fund values.

The problem, say ministers, is overseas financial advisers are not constrained by the same rules as UK IFAs and often offer poor value for money advice in return for astronomical charges.

Someone retiring overseas withdrawing an average £30,000 pension pot could fork out £4,500 for advice which is free from the Money Advice Service or Pension Wise.

Ministers allege that expats are ripped off because they do not fully understand the contracts they enter into, which often include hidden charges.

Preying on expats

They also warn that advisers are poorly trained, offer a limited range of products and target expats to prey on even though they offer products and services from reputable companies.

“It’s not the products that are the problem, but the people selling them and the fees they charge,” said Harriett Baldwin, Economic Secretary to the Treasury.

“British financial advisers have to go through rigorous training before they can recommend products to customers, but this is not the case overseas. Many so-called advisers in retirement destinations like Spain, France and Portugal are no more than salesmen looking to make a financial killing rather than offer any real advice.

“I would warn any expat to carefully check out any adviser and the companies they work for before parting with any money or signing any agreements.”

The government says the warning covers Qualifying Recognised Overseas Pension Schemes (QROPS), savings and investments, such as offshore bonds.

No safeguards

Pensions minister Ros Altmann explained the best course of action for expat investors is to work with a lawyer who can check any contract for catches.

“Expats are not protected by British consumer safeguards, which means they are unlikely to have any official body to complain to if the deal goes wrong. They are also extremely unlikely to see the return of their money,” she said.

The UK’s Financial Conduct Authority (FCA) banned firms from paying commission to advisers in 2012. Instead, they charge a fee for advice which is explained in a carefully worded document given to prospective clients.

Advisers working in overseas financial jurisdictions have no such constraints, even if they are British.

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