The Value of a Second Opinion

Fiduciary Wealth Team

How do you price the value of receiving good financial advice? It is probably easier to quantify the cost of bad advice. Industry experts claim that over a 20 year period British expats may have lost in excess of €100m as a result of negligent financial advice. This is probably a conservative estimate. You do not have to be financial savvy to come to the conclusion that some of the financial advertisements in the expatriate press are downright misleading. Sadly Spain remains an unregulated market where unregulated advisers abound and where both regulated and unregulated advisers, in equal measure, can and will mislead the public to drive sales.

You may have already come across adverts promising to convert your UK Pension into cash before you reach normal retirement age even at 18 years of age. How ridiculous is that? There are those who profess to be able to pay 100% of your pension as a tax free lump sum yet all they are doing is arranging for the payment to be received gross but they gloss over the fact the payment is liable to tax in your country of residence.

It is not unusual for expats to seek the advice of an unregulated firm without having first verified the firm’s credentials and ensure they carry professional indemnity insurance. More worryingly they seldom seek a second opinion and this often proves fatal. During the course of our travels we have spoken to many expats seeking a second opinion and these are some of the common problems we have encountered.

UK Offshore Bond
A client who exited the UK to establish residency in Spain was sold a UK offshore bond by their adviser on the basis they would avoid being liable to tax on any withdrawals. Not only was the advice inappropriate it exposed the individual to a potential massive tax liability in Spain.

Tax Residency
A client was advised that the best way of avoiding taxes on their considerable wealth was to register as non resident despite being permanently resident in the Spain. As a result of disclosure arrangements the Spanish tax authorities were alerted to the fact that he was in receipt of income from undeclared offshore bank accounts which resulted in a significant tax liability coupled with fines and an investigation opened to uncover worldwide assets. 

Asset Management
A client was very pleased with the tax advice he had received however the firm did not have the in house expertise to manage his portfolio so the asset management had to be outsourced to a third party. Even though they were not accountable for performance as introducing agent they were more than happy to receive an on-going commission. The investment management proved disastrous with losses far outweighing any tax benefits.

A client was advised to transfer his UK Pension into a tax wrapper within a QROPS for cost efficiency. They were then told to invest in unregulated funds to maximise returns including viaticals which are high risk and illiquid and no attempt was made to diversify risk across asset classes. The client found out that the tax wrapper and unregulated funds had been used to maximise commissions which totalled some 12%. They were then advised to establish a trust in Guernsey from which to receive the pension to avoid paying tax on income in Spain. Needless to say once the transaction had been completed the adviser was never to be seen again.

Don’t be the victim of bad advice seek a second opinion. Make the right decision and speak to someone now. Remember if it sounds too good to be true it probably is. For an appointment to discuss your requirements in detail contact Tel: 956796911 or email