A financial adviser is an invaluable resource for expats in effectively managing your finances.
When it comes to making important investment decisions, particularly around the complexities of cross-border transactions, a financial adviser assists with analysing the pros and cons. They will make sure you understand all the tax implications and don’t have the puzzle of trying to work out which option is right for you.
Let’s look at how financial adviser fees work, and the added value in securing professional financial advice.
Why Appoint a Financial Adviser?
A financial adviser covers a broad spectrum of advisory services and tailors their work to your requirements.
As an overseas expat, it is worth verifying with any prospective advisers that they are experienced in the arena that is most relevant to you; for example, this might be international conveyancing, expat investment portfolios or cross-border retirement planning.
Whether you are looking to purchase property, expand your investment portfolio or need to budget for lifestyle changes, expert advice will ensure you make the right decisions!
Benefits of Working with a Financial Adviser include:
- Confidence in future planning
- Having professional advice about which products to choose from
- Understanding the tax regulations and how to structure your finances most efficiently
- Saving time and stress, trying to compare different options and understand how costs and interest rates compare
- The ongoing support and assurance of being able to consult an expert who knows your personal situation, when making important decisions
- Help with applications, documentation and making changes to your asset portfolio.
How Financial Advisers Earn Their Income
When appointing an adviser, it is important to ask questions about financial adviser fees and what to expect.
Fee structures for financial advisers usually depend on the type of work you would like them to carry out for you, and whether this is a one-off or ongoing relationship. Typically, this structure is divided in two different ways, and sometimes a combination:
- Annual or quarterly fees – this structure will be relevant if you work with an FA regularly, and is typically a percentage of the value of the portfolio they manage.
- Fixed fees – if you have a short-term project completed by your adviser, their charges should be agreed beforehand. This could involve work, such as making a new investment or setting up an annuity for you.
Understanding Financial Adviser Fee Structures
Making decisions that impact your future is important, and so too is understanding the financial adviser fee structure.
If you bank in a different currency, check with your financial adviser in which currency their fees are payable, and whether you can agree to a fixed conversion rate. If not, it’s worth keeping an eye on currency fluctuations, so you know whether your costs will go up or down!
A financial adviser is required to explain their fees thoroughly in advance, confirming:
- What costs are payable, when, and how often
- How they calculate those fees
- How long the fee agreement will be in place for, or what scope of work it covers
- How the costs quoted are broken down
Usually, you will need to sign and return a copy of a document explaining your financial adviser fees, to confirm that you have read, understood and agreed to them. Don’t ever feel pressured into signing paperwork there, and then – good advisers will be more than happy for you to take it away to have a read in your own time, and seek legal advice if you would like to.
If you’re using a financial adviser in your new country of residence as an expat, make sure you understand the paperwork, and use a local translator if this isn’t in your native language.
What it Means to Work with a Financial Adviser
When you’re considering different types of adviser, keep an eye out for financial advisers that are not tied to any brands, products or financial services providers. You want an adviser that provides truly bespoke advice and can recommend products or services from any provider they believe are offering the best value or the right solutions for your financial needs.
Hidden Fees Explained
There are a few ‘hidden fees’ to watch out for – these are costs usually rolled into your agreements which are not visible to you. If you are in any doubt, ask for an itemised fee breakdown, so you know exactly what you are paying for.
Financial advisers manage your investments for you – this can range from monitoring their growth, advising on new opportunities or risks, and recommending changes to your portfolio in line with your plans.
However, investment platform fees can be a ‘hidden’ cost and are charged by those platforms your adviser uses to manage your portfolio. As with hidden fees, any reputable adviser would make sure you were well-informed not only about their own fees, but also those of the providers and platforms.
Pension Transfer Fees
If you plan to transfer a pension or even consolidate multiple pensions into a more manageable pot, there may be additional fees, such as:
- Bank transfer fees.
- Fees charged at crystallization.
- Annual trustee fees
- Early redemption fees
It is important to understand both the initial and the ongoing fees associated with pension transfers. A reputable adviser should be providing this level of information as standard practice.
If your investment portfolio includes stocks and shares, your adviser may suggest buying new shares or selling existing ones. There are lots of fees involved in this sort of transaction; broker fees and commissions, trading costs and administrative charges.
If you are unclear about charges, or whether there is a most cost-effective way to manage your investments, it is always wise to ask for a thorough breakdown of what you are paying for. This should be explained and disclosed in full by your adviser.
Key Factors to Look for in Your Financial Adviser Agreement
Reading through a financial adviser agreement, for expats who aren’t necessarily well versed in technical terminology, can be a daunting task. If anything is unclear, always ask for an explanation – a good adviser will never hesitate to clarify.
Your agreement should cover all the aspects of billing mentioned above, as well as:
- What advice, practical services, and support your financial adviser is including within those fees – for example, quarterly or annual reports, update meetings or yearly investment reviews
- What is included within that work, and the fees chargeable for any additional work requested.
- How regularly your portfolio will be analysed
- What level of control your adviser has – whether they need your written consent to make changes to your investments, for example. This is usually called ‘discretionary’ or ‘non-discretionary’.
- How your legal relationship works; in what capacity your adviser has the authority to act on your behalf
- When your agreement will come to an end or fall due for review.
- What will happen if costs increase, or if the adviser’s fees change?
Financial Adviser Accreditations & Regulations
When you’re managing your finances from overseas, particularly if you have properties, retirement funds or investments in the UK, it is essential to make sure you’re working with a properly regulated adviser.
Never be shy about asking which accreditations or regulatory bodies your financial adviser is registered with. This is merely conducting your due diligence and making sure you are confident to pay for advice and services from this adviser. Any reputable adviser will be registered with and be bound by the regulations of the regulatory body in their particular jurisdiction at a minimum, and may possibly have regulatory permission that allows them to operate farther afield.
Different countries have different regulatory bodies, so for expats, it is well worth knowing which organisations oversee your country of residence. The supervisory authorities set out standards for how fees can be structured, how reporting must be carried out, and guidelines for members to adhere to.
For help, support and advice on any aspect of trustworthy and reliable financial support, get in touch with our team at Lawsons Equity today.
Lawsons Equity – Financial Advisors Malta
As a privately owned firm with no ties to any products or providers, accredited and regulated to the highest of standards, Lawsons Equity provides tailored, transparent advice for expats.
Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.
Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
The value of investments and income from them may go down. You may not get back the original amount invested.