Over the years there have been some very sad stories emerge in Spain regarding expats losing large amounts of their savings or pension funds due to so called 'financial advisers' and their damaging lack of integrity, knowledge, experience and ethics. Perhaps the worst example of this was the equity release scandal which reached its height around 12 years ago. This horrendous idea entailed (usually retired) expats remortgaging their properties to a high loan to value ratio (sometimes as high as 95%) in order to "avoid Spanish inheritance tax". The funds were then placed into inappropriate, high risk, high commission paying investments that were supposed to fund the mortgage payments but which inevitably (come the financial crisis of 2008) collapsed. This resulted in the investor a) losing their investment, b) having a mortgage to pay c) often being in a position of negative equity and d) having to live with terrible financial and emotional stress caused.
The stories don't end there though. In Alicante on the Costa Blanca there was a firm called Continental Wealth Management or CWM who closed in 2017 having left a wake of destruction behind them. Their unqualified 'advisers' arranged for UK pension transfers to be placed in high risk investments, usually completely inappropriate for the client. The result? Suspended, locked funds where the likelihood is all money will be lost or large losses suffered due to complicated derivative structures being used (meant for experienced investors only). Again, a very sad state of affairs.
From my point of view, I have dealt with a number of clients who have been the victims of bad advice. Normally I will attempt to recuse what is left of their portfolios and put them back on track. Sadly I cannot perform miracles and unlock suspended funds or change the value of risky 'structured notes'. But there are often more liquid investments still in place which can be restructured into well performing, much more appropriate investments.
I have heard some misguided complaints sometimes though. Such as "I was put in a risky Spanish compliant bond" or "my pension was transferred to a rip off QROPS" or "the pension trustees lost my money". Whilst I understand the frustration and anger of victims it is important to know that it is not the fault of the holding structure (bond, platform, SIPP or QROPS) that monies have been lost or reduced in value. These are perfectly legal and often very beneficial financial instruments. It is the poor investments that have been placed inside them that have caused all these issues. Of course I understand there is an argument that the providers of such structures should show a duty of care to their customers, but ultimately the fault lies with the giver of the investment advice in the first place and their complete lack of client focus. For example, I have arranged many portfolio bonds and international pension transfers to similar holding platforms which have performed very well - because the underlying investments are appropriate for the client, have solid track records and are EU based and regulated (unlike the exotic rubbish that has caused so many problems in the past).
These days regulation for financial services across Europe has, thankfully, become a lot stronger. The risky investments of yesteryear are largely gone along with the unqualified supposed 'advisers' who sold them. In fact the EU regulatory framework for investment advice (as opposed to insurance based advice) is now so strong that the required license in this field (MiFID 2) is only held by a small number of firms in Spain (ourselves included). This license is now needed for ALL EU pensions (including QROPS and SIPPs) and you may find your current firm does not hold it. If that is so, please feel free to contact us for further information.
With regulation in Spain and the rest of the EU now much tighter it will be almost impossible for rogue salesmen masquerading as advisers to operate. Commission based remuneration for professional independent financial advisers (IFA) is slowly fading away and being replaced by fee based models as in the UK. However it is still important to make sure you deal with a properly licensed and regulated firm and an adviser who is qualified and experienced to give financial advice in Spain.
Do you hold poorly performing investments? If your investments are performing badly or you have had bad advice please get in touch for a free, no obligation review of your portfolio. Hopefully we can make the necessary adjustments to put it back on track. Please contact us for further information by filling out the form below or calling me direct on +34 951 390 201
Patrick Macdonald ASCI
International Financial Adviser
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