If you have been living abroad for some time, an Independent Financial Adviser (IFA) have likely approached you already. You may have taken out a savings plan or investment plan with them. It is also possible that you are no longer in contact with the Adviser. Old financial policies usually are located in jurisdictions such as the Isle of Man, Guernsey, Jersey, Malta or Gibraltar. If any of these locations sound familiar, then you have an existing expat policy.
Many Expats may have had their policy for over 5-10 years. Your financial goals have likely changed since you took out the plan. Your attitude towards risk could also be different as you approach closer to your retirement. When was the last time a qualified Financial Adviser reviewed your investment portfolio? When was your allocation last updated? What are the costs of your plan? When is your policy maturity date? These are just some of the questions our Advisers can answer within a few hours of speaking with them.
Every client has the right to change Financial Adviser. It ensures clients can monitor the service and performance of their Adviser and take action if they are not satisfied. Many Financial Advisory firms do not advertise this to clients. At Cameron James, we are transparent about this. For example, if your car kept breaking down, you would likely change the mechanic rather quickly. Financial advice should be no different. You should not put up with a poor level of service or performance.
Whether we like it not, money is essential. It can also provide security and opportunity for you and your family. For example, a well-managed retirement or education fund can alleviate stresses or create opportunities. In our opinion, you should feel confident asking your Financial Adviser any question about your policy. If you do not feel comfortable, you will not ask the questions you want. It will eventually lead you to become less connected with your investments.
We hear a similar story from clients who join us from another Financial Adviser. Their Adviser was proactive and took a real interest during the early months or years. However, their communication then dried up. After reviewing the clients’ investments, there was a recurring theme. In the majority of cases, the previous Adviser received an opaque commission of circa 7% for setting up the policy. Once the paperwork had been signed, they were paid their commission and moved onto the next client. This commission-based advice model can be damaging to client results.
At Cameron James, we only operate on a transparent model of advice. You will always know exactly how much we are being paid, allowing you to make an informed decision. Moreover, our charging schedule motivates our Adviser to look after their clients with the same level of care an attention on an ongoing basis.
With any Existing Expat Policy – There are three parties:
The contract between yourself and Investment Company cannot be changed unless you terminate your portfolio, which may incur penalties. The relationship between you and your Financial Adviser is changeable though. So if you are ever unhappy with the level of service or performance, you always have the freedom to talk with your feet and move Adviser. There is no penalty or charge for changing Adviser.
This change of Adviser is completed with one A-4 form called a Change of Agency (COA). This informs your investment company that you would like to turn off the servicing light for your Old Adviser and turns on the servicing light for your New Adviser.
The ongoing servicing is effectively moved from your Old Adviser to your New Adviser. This allows to review your policy in detail, including your charges and portfolio allocation. Our Adviser will then send you an Advice Report outlining our recommendations for improving your policy performance and or reducing your costs.
You are under no obligation to accept or implement the changes though this is your choice we will offer our professional advice. Change of Agency’s (COA) are common in the Expat market and take up to 48hrs to process.
There is no cost for reviewing your policy. We will provide you with a detailed Advice Report outlining what you could do to improve its performance. The decision is then yours. You can either leave the policy like it is or, if you wish to take our advice, we will implement the changes for you and keep you updated on an ongoing basis. There are no hidden costs. All costs are the same for all clients. So if you are joining us from another Financial Adviser, you are not disadvantaged. All of our costs are displayed in our Transparent Fee Schedule.
Whatever the reason for your relationship breaking down with your old Adviser, it is harming your financial future. You need to know your policy is being looked after and that your Financial Adviser is on top of it. You can also learn from the previous Adviser relationship and set clear expectations with your new Adviser.
Your New Adviser can review the start of your policy and work out exactly which charging schedule you are on. Which this information they can investigate how to reduce the costs on your investment portfolio. For example, on maturity of your plan (typically 8-10 years since you signed the paperwork) it may be optimum to transfer the capital onto a lower-cost platform solution.
Your new Financial Adviser is not accountable for the previous investment decisions. It allows them to provide an unbiased opinion on your portfolio. Your former Adviser may not have wanted to admit that certain investments had been a wrong decision and so continued to advise you to hold them in your portfolio. This inability to sell a losing position is because of an emotional impulse as opposed to logic. It is commonly known as The Breakeven Fallacy.
Losing positions that are substantially down (30-50%) rarely turn a significant enough corner to break-even but they provide a profit. However, losing positions do not always indicate lousy wealth management advice. You may have invested before a correction in the markets, which is entirely beyond their control. Also, a well-diversified investment portfolio will naturally have uncorrelated winning and losing positions to spread risk.
The table further highlights the problem of ignoring poorly performing assets. A 40% loss requires a growth rate of 67% for it to return to its original investment value. Once an asset reaches a 50% loss, the percentage rise needed to break even is 100%.
Few Financial Advisers openly discuss this with clients as they are concerned their clients will be angry about any portfolio losses. We prefer to be upfront and treat our client’s money with the same honesty we would treat our own. Positions that are substantially down needed to reviewed by your financial adviser carefully.
If you are reading this page is likely your portfolio performance has not been excellent. That will understandably have damaged or ruined your trust in Financial Advisers and wealth management. Starting fresh allows you to move forward with your policy and focus on the future.
Firstly, you will need to complete the Letter of Authority (LOA) . Secondly, you will need to have at least one 45-minute consultation with our Financial Adviser. That will allow them to understand your goals and objectives for your investment with a Fact Find. You will need to read the Advice Report before signing and returning by email to implement the updates.
You may have trusted your previous Financial Adviser and a review of your policy may bring to light new information. Mainly, how much your old Adviser may have been paid for setting up your investment. Some clients dislike hearing such information even if it is the best course of action to rescue their finances.
A Financial Adviser Fact Find will typically be completed during your consultation with your Adviser. It provides a snapshot of your existing financial situation and a clear picture of your financial goals and objectives. A diligently completed fact-finding process lays the foundations for robust financial planning advice. A fact find also helps highlight the areas of your financial planning that are complete and the areas to work on.
A commission-based Financial Adviser will typically receive a one-off commission of 7%on day one of your investment. A fee-based Financial Adviser will usually charge a transparent flat fee of between 1-3%. The fee percentage will depend upon the size of your investment. In our experience, fee-based Adviser’s form longer and more mutually beneficial relationships with their clients than commission-based Advisers.
That is because fee-based Advisers are incentivised to continue delivering high-quality service to their clients on an ongoing basis. Whereas, a commission-based Adviser is often only incentivised to receive their commission and move onto the next client. At Cameron James, we believe transparent fee-based advice provides the best client outcomes. Learn more about what is included in our service at our Transparent Cost Page .
Not everyone needs a Financial Adviser. Individuals in your home country may have a more straightforward financial situation. They bank, save and have their mortgage all with the same bank they have used since they were 16. They also automatically save into a pension scheme each month through their employer. As an Expat, you have many advantages of living abroad, but financial planning requires you to take the initiative. There is no UK bank and it is unlikely that your employer is providing you with a free pension scheme. You require global mobility with your financial planning.
Financial Advisers in the UK must be qualified and regulated. Outside of the UK, Financial Adviser regulations and qualifications vary. In established countries such as the United States and Singapore, Financial Advice is strongly regulated. In other parts of the world, there are no regulations at all. In our opinion, it is unwise to work with an unregulated or unqualified Adviser.
At Cameron James, all of our Advisers are qualified to UK RDR Level 4 standards. We do not allow any Advisers to provide financial advice until they have completed all of their qualifications. In addition to this, we are EU MiFID regulated. This regulation means our advice is overseen and monitored by the highest level available in Europe. So with us when you pay for financial advice, you know you are receiving the highest level of advice.
The UK has some of the best Advisers in the world. However as an Expat, UK Advisers will have little knowledge of your requirements such as International SIPPs or QROPS . As a non UK-resident, UK Advisers are typically also unable to provide you with Final Salary or Defined Contribution pension transfer advice. Even if they were legally able to advise you, they do not have terms of business (TOB) with the international providers that would accept you as a non-UK resident. Expats need to work with a Financial Adviser who has cross border knowledge of your UK pensions and your new country of residence.
Financial Advisor spelt with an ‘o’ is typically used in the US. While Financial Adviser spelt with an ‘e’ is more common practice in both the UK and Europe. The two are interchangeable, though and should not affect the level or quality of advice that you receive. As a UK company, we always spell it, Financial Adviser.
Old Mutual International (OMI) was previously called Royal Skandia before 2014. OMI is the international arm of Old Mutual Wealth. Old Mutual Wealth overseas assets of £125.5 billion (2016) and is also part of Old Mutual plc, a FTSE 100 group that provides a diverse range of financial services. Over the past two decades, OMI has been a leading provider of expat portfolio bonds and is the most common provider.
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Many Expat clients feel frustrated and want to close their Old Mutual Portfolio Bond. That is often because the performance has not been in line with their expectations. In some cases, the portfolio may have lost money. However, closing an Old Mutual Bond can carry substantial exit penalties that your Financial Adviser may not have explained to you. We advise getting in touch with us to complete a thorough review of your portfolio bond. We will advise you of your options, and you can then make a more informed decision. In some instances, it may be more advisable to update the portfolio allocation and remove any bad investments. It helps clients to avoid high exit penalties.
If your policy has a large surrender charge, this suggests your original Financial Adviser was paid an opaque commission. This commission is why you cannot close your plan without penalty and move to another provider. Old Mutual International (OMI) will have paid your original Financial Adviser 7% commission on day one of the policy. As such, OMI needs time to recuperate this commission through your annual charges which are typically 1.5% pa. At the end of your 8-10 year term, OMI will have recuperated sufficient charges to cover the original commission and provide themselves a profit.
Old Mutual International does also offer Independent Advisers the option to work a transparent model of advice with no opaque commission. In these scenarios, your exit penalties with Old Mutual are significantly lower. An Old Mutual bond and commission are not always all bad. Some IFA’s may have received a 7% commission but then serviced the client for ten years with excellent portfolio growth. In our experience, though, the majority of commission cases results in a poor level of ongoing service and portfolio performance.
At Cameron James, we do not allow our Advisers to open any portfolio bond on a commission basis. We prefer to work on a transparent model where clients know exactly how much we are being paid for our advice. We hope you have found this article useful. We look forward to helping you understand how to improve your old financial policies.
Our FAQ section includes the questions asked by our existing Expat clients. If you don't see your question - Ask us and we'll answer it.