Expat Commission Pirates

Published / Last Updated on 20/10/2023

What to look out for in an offshore or expat financial adviser, some advisers overseas may charge large commissions for the simplest of services.

10 years ago, I shot a video in connection with ‘commission pirates’ and this has since moved on in the UK.  Commissions for pensions and investment ADVICE was banned in 2013 replaced by adviser fees in the UK.  In short, a financial adviser must disclose its fee (% of fixed or time costed) when offering pensions and investment advice.  Commissions can still be taken for certain types of products such as life insurance.  Have you ever wondered why our television screens are filled with instant, phone in life insurance advertisements from as little at £5pm?  Yes, it’s the commission. 

So, no commissions on pensions and investments in the UK but what about if you move or already live overseas?

Expat Advice Trap

Just because the UK has fee disclosure this does not mean that overseas advisers do.  Some countries will have some sort of fee or commission disclosure, but many do not.

As classic example is if a UK adviser and an Overseas adviser requests an illustration for the same product for the same client.

  • UK adviser illustration quotation will contain details of any fee or commission (if any) deducted via investment charges and payable to the adviser or a fee deduction of zero if pure fee-based advice.
  • Overseas/Expat adviser will receive an illustration quotation will usually contain no details whatsoever of any fee or commission payable to the adviser.  You are in the ‘dark’.

In some recent client enquiries, we received:

  1. Expat in Dubai who had been sold an offshore savings/retirement plan (Isle of Man) by an expat adviser but after paying in c$6,000 pm for 2 years was dismayed to see that there were exit penalties when cashing in of some $50,000 and
  2. Expat in New Zealand with a UK defined benefit pension subsequently transferred c£500,000 to a UK SIPP (UK adviser working with a NZ adviser) and then inside the SIPP the expat NZ adviser had invested all the pension monies into an offshore investment in the Isle of Man and when the client looked to cancel the offshore Isle of Man investment and invest in UK funds, was also dismayed to learn of £45,000 in exit penalties.

The simple answer to why the penalties?   Hidden commissions that had not been and were not required to be disclosed to the clients with the providers deducting them from the investments when cashed in early.

Beware Expat Commission Pirates.  Not all expat advisers are ‘bad’ but check before you invest.

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