Friday, 11 February 2011

Ten things they won’t tell you about QROPS

The concept of QROPS is excellent, the quality of advice often lacking.

It doesn’t apply to all ‘International Financial Advisers’ but it applies to most. Some are guilty on all ten counts!

  • They put all their QROPS through one provider
There are four QROPS jurisdictions which justifiably dominate the market (Guernsey, New Zealand, Malta and Isle of Man) and between them cover the vast majority of client needs and wants. But many advisers deal with just one provider in one jurisdiction. This clearly is not in the clients’ best interest.

The reason these advisers do it is to lessen the admin burden, which frankly they should deal with anyway, and in many cases they receive extra commission sometimes call a ‘volume override’.

  • They put all investments through one company
Given that the QROPS exists through a Trust Deed, it is in effect a ‘wrapper’ The substance of the arrangement is the investment within the QROPS. Future income and fund values will directly be affected by investment performance. It is therefore vital that the adviser takes note of each individuals need.

It may surprise you to learn that many advisers put all or nearly all investments within a QROPS to the same investment company. I expect that you guessed why by now! They get a ‘volume override’. The more they place with one company the bigger the payout. But was it in the clients’ interests. – I doubt it!

  • They deny the existence of ‘In-Specie’ transfers
One particular discussion I had really sums up what I believe to be blatant misselling!

I had a conversation with an English guy now living and working in Spain who was telling me about his Self Invested Personal Pension (SIPP). Naturally, I asked if he had considered transferring to a QROPS. He told me that he was very happy with the investment returns in his SIPP and that his ‘adviser’ had told him that it wasn’t possible to transfer the assets in his SIPP to QROPS!

This advice is wrong

Such a transfer is possible and is known as an In-Specie transfer, this is perfectly acceptable and clearly good advice where the individual is pleased with his investment performance. He has ditched the ‘adviser’! Please don’t get the wrong ‘adviser’ email me

  • They can’t tell the difference between the rules and their own business plan
In many of the big companies, advisers who operate from their offices are told the rules. In many cases they not the QROPS rules but the rules applied by ‘company policy’

There is one in particular I’ll tell you about. A well known company, you have seen their adverts, tells its ‘advisers’ that the minimum sum for transferring to QROPS is £100,000. That is their business plan not the rules. Just a piece of corporate arrogance!

  • They refuse to disclose commission
You may not pay it directly by writing a cheque but you pay for the commission through charges. So why won’t they disclose how much they are making?

The requirement to disclose commission in the UK started in 1993. It is something that we all accept and take for granted. But many advisers in Spain not only don’t disclose, they arrogantly refuse to tell even when asked!

  • They don’t even fully disclose charges
I recently read a report on behalf of one of my readers who contacted me through www.financial-pages-in-spain.co.uk . In a 17 page report charges  were mentioned a number of times but there was no table showing the total. That would seem reasonable or a single paragraph setting out the costs.

On reading it again, I found that although a complex financial structure was recommended there were no fund charges disclosed. This is key since, for example, cash fund charges should be low but ‘fund of funds’ are expensive. The adviser has a duty to point these out!

  • They tell lies about jurisdictions they don’t recommend
Lets be frank, they are talking about New Zealand!

There are a number of ‘big’ financial advice firms who are constantly knocking NZ QROPS. Yet again they fail to understand the rules. All QROPS, irrespective of jurisdiction have to send annual reports to the UK taxman (HMRC) up until the client has been UK non-resident for five full and complete tax years. After that the QROPS can adopt the rules in their own jurisdiction.

New Zealand always allow people who are non resident to have a capital return of their funds up to 100% of the value. It’s their rules and it is legal, above board and allowed.

You have a choice accept the HMRC approved list of QROPS providers or listen to a few salesmen who want to sell their product and don’t want you to take New Zealand. I will recommend you to advisers who are open minded and who will listen to your needs, if you email me.

  • They don’t write you an individual report
I raise this issue as it has been mentioned in feedback from several readers. Feedback is always welcome.

One client wrote ‘I am not certain that this company really knows who I am, it was clear that it was a mass produced document with a few of my details added’. You would think as they are taking your money (undisclosed commission) they could give you some individual attention.

  • They use the FSA as a marketing tool NOT a regulator
There are many examples of why this is true. Already mentioned are examples which would not be tolerated in the UK. But they are in Spain and they do get away with it.

Non-disclosure of commission, failing to declare all charges clearly and refusing in-specie transfers are all rule breaches in the UK. Most British people have of the FSA and it gives comfort to them when advisers are authorised by FSA. Little knowing that many, not all, advisers use the FSA for marketing recognition then ignore the rules!

I know FSA advisers who do obey the rules and I am happy to give you a recommendation. The same is true of advisers regulated in Spain by the CNMV and DGS authorising agencies. Please email me for details.

  • They charge an up front fee before they will talk to you
This is very definitely a small minority. They tell you that if you go-ahead with their recommendations the fee will be rebated. That of course merely puts you under pressure to buy from them!

10 bad practices for you to avoid!

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QROPS will be right for most people who have moved from the UK to work or retire and who are unlikely to return. Just be careful from where your advice comes and I can recommend advisers who do not fail any of the above.
Please contact me for a recommendation.