MOST expats who buy investment policies from a broker or financial institution don’t fully understand what they are buying.
It can be difficult navigating the financial services minefield and it is important to find someone you can trust who will have your best interests at heart.
There are many professional and well qualified advisors out there who can provide a valuable service, but you must do your due diligence.
Getting the wrong advice could cost you a lot of money.
There are eight important questions you should ask before you sign on the dotted line.
First, how safe is your money?
If you are making an investment, opening a savings account or buying shares, you should never pay the money directly to a financial adviser or broker.
Any transfers you need to make should go directly to the financial institution with whom you are investing.
They will then will pay a management fee or commission to an adviser where applicable.
If an adviser or broker asks you to transfer any money directly to them for any reason whatsoever, DON’T DO IT, and question them closely about any advice they may have given you already.
If you do hand over a cheque to your advisor, the cheque should be made payable to the financial institution you are investing with.
Secondly, you need to make sure your adviser is experienced and has a good reputation.
Chances are, if the brokerage your adviser works through has many hundreds or even thousands of clients, you can be fairly sure they are professional, reputable and have a solid reputation.
Go to the company’s website and also search for the advisors name on either www.thepfs.org or www.ci.co.uk if they are from the UK, as all qualified advisors will be on these databases.
Your broker should also offer a regular review and an on-going service which will show you the types of products available and keep you informed of any relevant updates and news.
There are many reasons why you should consider offshore investing.
Offshore investment companies have far more flexibility when it comes to investing in alternative currencies, they can make use of diverse markets, and they can benefit from different hedging mechanisms.
Also, offshore returns can be accumulated free of tax, which means the potential returns will be far greater.
A good, internationally focused, financial adviser can help you determine whether offshore investing is applicable and appropriate to your specific needs.
You should also look at tax-friendly investments.
Usually ALL returns in an offshore investment plan are tax free.
The fifth question you should ask is what will happen to your offshore investments if you go home.
This will generally depend on your home country.
If you are a British citizen investing in a savings plan a regular basis, you can continue to keep investing in the same way if you move back to the UK.
But if you are from the USA, you will be slightly more restricted, and you won’t be able to increase your contributions or switch funds.
In general terms, taxation should only apply to growth that has been made on your investment after you moved back home.
Also, any tax liability would most likely only arise when you cash in your investment.
A good offshore independent financial adviser will be able to answer all your questions.
Item number six on your list of questions should be does your advisor offers a Portfolio Management Service.
All too often, investors are put into funds at the beginning of their plan and, unless they are savvy enough to follow market trends, they will be left in those same funds for the life of their policy.
This does not make financial sense over the long term because attitudes to risk change, and markets and regions suffer both ups and downs.
There are also new funds and regions opening up constantly which present new opportunities.
Unless you are kept informed of these changes, you’ll miss the boat.
The benefits of subscribing to a management service can include having access to new funds and trends and, hopefully, avoiding the downfalls while exploiting the markets which offer the best opportunities.
You must also ask how much the advice is going to cost you.
Very few brokerages work on a fee basis, and most will get their money from the financial institutions they give your business to.
A reputable financial adviser will build his reputation through the number referrals he receives and, depending on the number of clients he or his company has, you can be pretty sure that if the numbers are high the advice is good.
Finally, you need to know if your advisor is giving you good advice.
A professional advisor will offer a ‘fact find’, which gives an up-to-date snapshot of an individual’s financial circumstances, and a ‘Reasons Why Report’ explaining why the advice is given.
You should make also make sure your advisor can go the distance.
The Bayswater Group has developed a Financial Exercise, which has helped clients to assess whether or not they have the right balance of ‘risk-reward’, based on their current and future financial requirements.
It also shows whether or not the level of service they were receiving was a ’holistic’ approach .
For further information, email email@example.com
*Colin Johnson, Cert PFS (CII) BA/BSc Hons, is a director of The Bayswater Group.