Exposed: the rip-off investment 'advisers’ who cost British expats billions

[R123]

Exposed: the rip-off investment 'advisers’ who cost British expats billions

Following decades of financial scandals, Britain has become a safer place to invest. The standard of financial advice has improved and so has transparency. Sales commissions are all but banned, and, as a result of this increased openness, the cost of investing has fallen.

But much of that protection falls away once investors leave our borders. Many of the 5.5 million Britons who emigrate, retire overseas or work there temporarily find they are stepping back into a financial Wild West. High-risk investments, often lightly regulated or not regulated at all, are commonplace – as are huge commissions paid to the salesmen who recommend them.
Today a Telegraph Money investigation sheds light on a multi-billion pound industry in which savers are regularly paying up to seven times more in investment charges and commissions than they would in Britain.

Recent pension changes, giving those over 55 free access to their entire pension savings, increase the risk. Not only will many existing expat retirees access their money – and need somewhere to invest it – but others will be encouraged to move abroad as a result of being able to take their pension pot in one go.

They will be attractive to a global industry of “financial advisers”, many of whom claim links to established British firms but who are in fact barely regulated and relatively untrained.

In one case seen by Telegraph Money, a Briton working temporarily overseas was urged by his “financial adviser” to transfer a final salary-type pension, worth hundreds of thousands of pounds, into a risky fund where none of his retirement benefits would retain their guarantees.

The charge for this risky manoeuvre was more than £45,000, or 12pc of the value of the pension.

In another case an investment was sold where, after five years, the saver was faced with an exit penalty of 99pc of their fund. Trying to withdraw capital would, in effect, result in its complete loss. In another example investors paid commission of 7pc to the salesman.

Scores of savers who invested abroad have contacted our offices to say they were not made properly aware of the charges, risks and commissions involved.

Some of the firms involved in the provision and distribution of these savings plans are foreign arms of British regulated companies, while others have deliberately adopted similar-sounding names.

By setting up operations overseas, financial firms can sell investments to British savers without being regulated by the British watchdog, the Financial Conduct Authority.

Savers are particularly at risk in regions such as Asia, Africa and some countries in eastern Europe, where there is little or no financial regulation. Providers and salesmen can legally deduct large upfront commissions and hire salesmen with few recognised investment qualifications to sell their products.

Sarah Lord, head of financial planning at Killik & Co, a British FCA-regulated firm, said: “The operation of offshore advisers, in the main, is totally unscrupulous. In many offshore jurisdictions, such as Dubai and the United Arab Emirates, there is very little requirement for disclosure of remuneration, with up to 15pc of assets being advised upon being taken in hidden commissions. The requirement to demonstrate suitability is negligible.”

A former employee of a large international advisory firm told Telegraph Money how he and his colleagues sold investments with no financial training other than a week-long course. While on the course, he claimed salesmen were instructed how to “psychologically manipulate customers into handing over their money”.

He said: “We were told to prepare clients’ paperwork and put it in blue folders. But after [the customer] had signed on the dotted line we’d slip extra pages into the folders that they hadn’t seen before, which included details of the charges. It felt wrong. However, the life assurers [that supplied the products paying high commissions] were as guilty as [we] were of mis-selling and overcharging.”

Full story: http://www.telegraph.co.uk/finance/personalfinance/investing/11726158/Exposed-the-rip-off-investment-advisers-who-cost-British-expats-billions.html

[7by7]

Always remember the old maxims:

• Caveat emptor
• If it sounds too good to be true, then it probably is.

[Rancid]

I mean surely they know the British banking industry is completely honest and above reproach. I mean didn't central banking begin in the UK and look what a blessing that has been to bankers everyone.