Sadly, Spain – the leading British expat destination in Europe – is rife with scams and scammers. The Costa Blanca, Costa del Sol, Costa Brava and everything in between are crawling with what the Spanish regulator calls “chiringuitos” – literally “bar flies”. And you can see why: wherever there is food – whether fresh or rotting – they congregate in large swarms. They are not proud – they will nibble your chips while still on your fork; sip your sangria off your straw; suck the sweat off your shirt and crawl into your underpants to see if there is anything tasty in there.
At least the flies have a little more dignity and respect.
Becoming an expat in Spain is fraught with difficulty. First, you have to learn to drive on the wrong side of the road, then you have to learn Spanish – or Valenciano or Catalan (you can see why so few Brits bother). Then you have to come to terms with the heat: long, hot summers with temperatures well up into the 30s and 40s are fine if all you have to do is lounge beside the pool, drink beer and plan your next outing to the local chippy. But if you are working, being too hot all day is no fun.
Many Brits are naturally suspicious of the Spanish and seek out British professionals whenever they can: builders, plumbers, pool maintainers, car mechanics and manicurists. And you can understand why – most Brits can barely manage things like “my loo won’t flush”, “the pool’s turned green”, “our car won’t start (or stop)” and “I want nails like Kim Kardashian”. So when it comes to “how do I invest my life savings” they don’t really stand a chance.
The problem is that most Brits in Spain are outside their comfort zone. They are in a foreign country and so they cosy up to other Brits because that makes them feel safe – and they don’t quite trust the natives anyway. Quite apart from the language barrier, Spanish bureaucracy can seem somewhat intimidating and, well, foreign. So when it comes to managing their life savings and retirement provisions, the Brits either actively seek out British advisory firms, or feel relieved and happy when they are cold-called by them.
There’s no shortage of “advisers” – they lurk everywhere: bars, supermarkets, golf and sailing clubs. They are typically charming, well-dressed, friendly and fall over themselves to sell financial advice or what they call “wealth management”. Only that isn’t what they are selling: they are actually selling products. These products are basically insurance bonds (that you don’t need) and investments (that you don’t want). And huge fees for selling you things that you neither need nor want.
With appealing adverts and websites showing happy, good-looking couples with nice teeth, expensive yachts and fast cars, these chiringuitos sell the idea that somehow they can make people wealthy and happy in retirement. The reality is that the chiringuitos make themselves rich by fleecing their victims and destroying their funds.
Before the industry cries “unfair unfair!!”, let me just mention a couple of examples that prove my point:
Premier Pension Solutions (Costa Blanca) – Ark £27 million; Evergreen £10 million; Capita Oak £10 million; London Quantum £3 million
Continental Wealth Management (Costa Blanca) – £100 million
That’s at least a couple of thousand people financially ruined. There are plenty more examples:
There’s quite a wide spectrum – ranging from out and out scammers like Premier Pension Solutions and Continental Wealth Management, to firms that are just plain dodgy, expensive, dishonest and irresponsible. You may ask what the difference is: in practice NONE. Both ends of the spectrum cause damage to the funds – and distress to the victims.
Let’s look at the reality and examine what many advisory firms do and don’t do. We will take the don’ts first:
- they don’t disclose all the fees up front
- they don’t disclose how much commission they will earn from your funds
- they don’t respect your risk profile – and can invest you in high-risk stuff when you are a low-risk investor
- they don’t tell you when the answer to the question “do I need a QROPS” is “no”
- they don’t respect the basic principles of diversity, risk, liquidity and cost
- they don’t disclose whether the firm is regulated
- they don’t disclose whether they are qualified
and now what they do:
- they transfer your pension into a QROPS whether that is in your interests or not
- they put your funds into an insurance bond even though you don’t need one
- they invest you in what they have already decided they want to sell you – irrespective of whether that is what you need
- they churn your investments to maximise their commissions
- they lie about your losses (only “paper” losses)
- they stick you in an expensive insurance bond which will cost you a fortune to get out of
There are, of course, multiple variations on this theme – including things like flogging you whatever fund pays them the most commission that month; flogging you their own fund; flogging you your own grandmother – twice. They flog funds with entry fees, exit fees, ongoing fees and lousy performance. Basically, these advisers have no interest in keeping their clients long term – they are only interested in the initial fees. Once the client realised they have been fleeced, he can take his business elsewhere – unless the firm is Blevins Franks, in which case the victim is stuck with them.
I am often asked the question: “are there any firms you can recommend which won’t rip me off?”. The answer to this question is a resounding “maybe”. There are a few I can categorically recommend against:
Callaghan Financial Services – unregulated
Blevins Franks – unscrupulous
Abbey Wealth – unregulated and unscrupulous
Seagate Wealth – unmentionable