FCA Pension Transfer Consultation

Offshore Independent Financial Adviser


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What is an offshore independent financial adviser (Offshore IFA) ? Is it just a buzzword and, in regulated financial services, does independence actually mean independence in reference to the term offshore independent financial adviser?

If you want to miss out the technical and legal stuff then just go the end of this article to establish if the offshore IFA, who is advising you, is actually independent or just using the term.

Independent versus Restricted

 (Applies in UK to regulated advisers, but does not apply to most (95%) of offshore independent financial advisers)

We have consulted the FCA (Financial Conduct Authority) website:

Independent IFA

The FCA state “The rules set out a new definition for independent advice, which is unbiased and unrestricted, and based on a comprehensive and fair analysis of the relevant market. This is designed to reflect the idea of genuinely independent advice being free from any restrictions that could affect their ability to recommend whatever is best for the customer.”

Restricted IFA

The FCA state “Advice that is not independent will need to be labelled as restricted advice; for example, advice on a limited range of products or providers ” and then go to say “It is not acceptable for a firm to make a recommendation for a product that most closely matches the needs of the consumer, from the restricted range of products they offer when that product is not suitable”

Best Practice – Both for an offshore IFA and UK IFA

Ideally, in the offshore independent financial adviser market, advisers should look to do the best for their clients. If this means that their products or services are not able to properly match their clients’ needs, then they should refer to other firms that can help. There are networks like OpesFidelio  that provide offshore independent financial adviser’s with the necessary access to the whole market.

Critically, when do the above FCA rules apply to an offshore independent financial adviser?

Never, if they are simply working outside the UK or have a partner firm in the UK but are actually giving the advice from a firm outside the UK.

How, then, can an offshore Independent financial adviser offshore claim to be independent?

Outside the world of UK regulation, where the term “independent“ has a classification which the regulator regulates and asks advisers to follow specific rules that are enforceable, the term “independent“ can be used by pretty much anyone – unfortunately!

The term independent in the UK is a fiercely protected word which is largely devalued outside the UK, since it can be used  by anyone.

So, when I meet an offshore independent financial adviser outside the UK, it pretty much means nothing

We don’t want to insult all those people who have qualifications outside the UK who work to Best Practice and put their clients first and behave in an independent fashion accessing the whole of the  market. The trouble is that for every one of these diligent advisers, there are literally tens of advisers who claim to be independent and are nothing of the kind and are acting outside of any enforceable regulation.

Enforceable being the key point as some regulators take no part in client complaints; we have even seen a case where a major fund failure resulted in sanctions by the non-UK regulator being merely to instruct the guilty party to study for 6 months before being allowed to manage clients’ money again! No compensation was paid to the clients.

What would an offshore independent financial adviser look like if modelled on the UK term of independence and who followed best practice rules?

There are a number of ways the public can quickly assess this and if any 2 of these points become an issue with your adviser then he/ she is probably not a regulated offshore independent financial adviser! If the number of points starts rising to 4 or more, then you need a second opinion on any advice before you take action.

  1. The offshore independent financial adviser works on a fee basis and takes no commission, and no hidden charges.
  2. The offshore independent financial adviser is named in person on a regulatory website in the UK or the US as a CF30 or Investment adviser (Do not confuse this with a firm simply being listed – you need to check the actual name of the adviser who is giving you the advice). If they are not, then check for the advisers individual name on the regulatory website in the country you are receiving the advice in (e.g. if you are in Spain, then your adviser should be listed on the Spanish CNMV website in name). Failing this then check that the firm name is listed on the regulatory website in the country you are receiving the advice in , and then have one of the listed directors confirm in writing that the advice you are receiving from the offshore independent financial adviser is regulated in the stated country. Any of these should be normal due diligence, and most advisers will happily provide this information.
  3. Following on from this, if the offshore independent financial adviser offers advice to UK residents then it should be LOCATED in the UK, and not passported into the UK (See point 3 on the list below to see for more on this) with just the name of a firm listed on the FCA website as EEA Passported in.
  4. The offshore independent financial adviser provides a fee agreement BEFORE any work is undertaken and stipulates the fee in a monetary amount (and percentage where appropriate). The offshore independent financial adviser, such as Tailormade Pensions may even publish the fees online- though few do.
  5. That the solution is not a bond, a bond wrapper, nor a life company based outside the UK or the USA, unless there is a very good tax reason for the recommendation (pensions are NOT a good tax reason in practically any country in the world)
  6. A UK adviser must complete CPD every year, and have a licence from an approved body. A US adviser has similar requirements. Ask to see the licence of the Offshore Independent Financial Adviser in his / her name (not the firms) and then phone up the body that issued it in the UK or the US. (See 6 on the list below of what you should be cautious of). Failing this, check that the firm name is listed on the regulatory website in the country  in which you are receiving the advice,  then have one of the listed directors confirm in writing that the advice you are receiving from the offshore independent financial adviser is regulated in the stated country. Any of these should be normal due diligence, and most advisers will happily provide this information.
  7. It may have awards. Make sure they are genuine awards that can be cross-checked with the award publishers independently in the country of origin which must have a regulator

 What may suggest the offshore Independent financial adviser is not what they appear?

  1. Offers free financial advice ( means commission on a sale ) or claims the advice is paid for by the product provider.
  2. Check that the firm that is regulated is the firm that is providing the advice in full. If at any time the signature blocks, or advice, or applications forms appear to be for another firm then reject that adviser until provided with further evidence. If the advice from the UK is based on one set of fees or a specific provider, make sure the application is not for another completely different set of fees or provider with the infamous line, “all the costs are limited to  1% per annum”. If you hear this, then you should seek a second opinion from another regulated adviser.
  3. Says it is an Appointed Representative or Tied Agent of a firm registered solely in the UK as an EEA Passported firm. (This is not to be confused with a UK firm that has passports out to other European countries). The latest wheeze is to have a firm with life insurance regulation set-up in Spain, Portugal, Gibraltar or Germany who then applies under EEA regulation to passport into the UK as a life insurance adviser. This life company gets an FCA life assurance only passport licence, which is then used by unscrupulous advisers outside the UK to claim UK regulation on investment products and pensions. It is not, and many people are being conned.
  4. Lists “Providers” or “Partner companies” on website (Typically pension firms, insurance firms and investment firms). This is to add some sort of credibility to the firm but actually does the opposite. Most real offshore independent financial adviser firms will not advertise any provider of financial services or specific trustees at all. The reason is because they are independent!
  5. All recommended advice solutions, whether regular savings, investment or a pension. Involve the purchase of an offshore insurance bond. These are based out of the Isle of Man, Dublin, Cayman Islands or Luxembourg. Ask for an alternative solution before you proceed.
  6. Do not accept membership of any organisation as proof of qualification or regulation (Anyone can be a member of the CII or the PFS or CISI – a bit like a golf course has luncheon membership without the ability to play golf. The organisations have house members too, no requirements for any professional qualifications apply)

Pensions and the offshore independent financial adviser

UK pensions are a key area for advice for expats and will continue to be. However, those in funded final salary schemes will only be allowed to transfer if the transfer advice is provided by a UK FCA registered adviser who signs it off.

Anyone transferring a pension needs to double check the points made above in the two lists. It is, unfortunately, now common practice for overseas firms to be using a combination of the above techniques to make people believe they are dealing with a partner of, or associate of, a UK regulated firm or individual.

People have lost as much as hundreds of thousands of pounds as a result of taking poor advice, which they thought was connected to UK regulated advisers from an “Offshore Independent Financial Adviser” when it turns out neither is true and they have actually been advised by a non-regulated firm with a similar name or trading name offshore that can be simply shut down if the balloon goes up.

 
Offshore Independent Financial Adviser – End

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

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