Are you getting the right financial advice?
In recent months I have come across a number of instances of so called ‘predatory’ firms offering financial advice, with particular emphasis on pensions – offering to unlock cash for clients from a Qualifying Recognised Overseas Pension Scheme (QROPS). This advice has, in all cases, been inappropriate and offered without any proper procedure other than establishing pension values. Regrettably some clients have proceeded with the transfers but, fortunately, others came to me and I was able to offer advice which encouraged a change of direction for the benefit of their current or future circumstances and finances.
These are the main reasons why I have been alarmed:
- The clients have received either wholly or partially inappropriate advice to transfer their funds.
- The firms concerned have no regulation in France and, therefore, they are not accountable for any loss on the part of the client either now or in the future.
- The high level of fees that these firms are charging over and above the commission which they will be receiving from the investment provider.
It seems that the advice trail begins with the client contacting the firm on the basis that they believe that they will receive professional and appropriate advice. The pension details are then established and without exception (in the cases I have come across) they are advised to transfer the pensions to a QROPS. This has happened on every occasion I have discovered, despite the fact that in a number of instances final salary schemes were involved. It is usually wholly inappropriate to transfer from such schemes due to guarantees that are in place. However, all individual circumstances vary and indeed so do final salary schemes.
A final salary scheme is a pension that is part of a previous employment and carries with it guarantees which need to be carefully examined and compared against the alternatives. In two cases where I was consulted the final salary schemes were public sector and under practically no circumstances would I recommend a transfer out of this due to the solid guarantees in place. The advice was given by the original advisers to transfer and, fortunately, the clients all had rethinks and left their pensions where they were.
In addition to this, the firms are asking for 5% (of the pension fund) as an upfront fee plus an annual percentage fee for “managing” the pension. The business is placed with a reputable investment house that pays commission to the advisers in addition to this, but there is the strong chance that constituent funds are used, which also pay additional commission! There is a great reduction in the overall pension pot for the client due to this systematic charge after charge and the effect is debilitating to the end result for the client.
Unfortunately, these firms are high profile in terms of advertising and if anyone has made a Google search then the next time that they visit any general site there will be a banner suggesting you click for “independent advice on releasing your pension”. Anyone with interest is redirected and it goes from there.
The fact is, if you are resident in France you are only protected by regulation from the French authorities ORIAS and ANACOFI CIF. Terms of Business may be offered but if the advertising firms don’t display or confirm membership they should be avoided by anyone who has a concern for their future.