By: DAVID FRANKS
David Franks is an accomplished and experienced practitioner in both UK and overseas taxation. He lectures on taxation issues, in particular in relation to investment planning, and his experience in assisting UK residents to mitigate unnecessary tax liabilities has led to the publication of a number of leading taxation works, including a number of books specifically written for those intending to retire overseas. David holds the Investment Management Certificate and is the Chief Executive and Finance Director of the Blevins Franks Group.
Many people take financial advice to protect their assets from tax and inflation, so that they can hopefully enjoy a long and comfortable retirement.
What many British expatriates do not realise is that their choice of adviser will probably be one of the biggest decisions they will ever make.
Do you choose your existing UK adviser or an adviser based in Portugal?
Before you even start discussing your financial affairs with any adviser, it is critical that you find out whether they are competent and legal.
If they are not, if anything goes wrong with the advice that they have given you, you do not have any recourse against them; no one to complain to and no representative body to assist you.
UK advisers
Many people have built up a good relationship with the adviser they used in the UK (or wherever their home country is) and it is natural for them to wish to continue using the same person.
However, this may not be advisable.
In the UK, your independent financial adviser (IFA) has to be regulated by the Financial Services Authority (FSA) – the UK’s independent watchdog that regulates all financial services in the UK.
This would have provided you with protection when you were resident in the UK. However, is the adviser regulated to give advice to people living in Portugal?
Unless he has many clients in Portugal, to the extent that he has sought regulatory permission from the FSA to extend his services into Portugal, this is very unlikely.
So while the advice he provides you with should be of an FSA standard, unless the adviser is legitimately using an EU financial services passport into Europe, you may not be covered by their Professional Indemnity Insurance if you have any recourse against them for the advice that they have given you.
In addition, you will have no recourse to the FSA or the UK financial services Ombudsman.
Besides this, a UK adviser is unlikely to be familiar enough with the tax and investment rules in Portugal.
Most UK advisers are trained to only advise UK resident clients. Without the full local knowledge needed, his recommendations are unlikely to be appropriate for you now you are living in Portugal.
Even if your adviser researches Portugal before making his recommendations, he will probably not keep up to date on every single change in the Portuguese investment and tax regulations.
It is unlikely that he will be in a position to inform and advice you accurately on an ongoing basis. Even small legislative and taxation changes can impact the advice given to clients.
Local advisers
It is sensible to use an adviser based in your country of residence, one who you would be happy to continue working with over the coming years and who is well placed to deal with your current and prospective financial issues.
Again, regulation is paramount. Some people presume that just because their adviser is British and worked as an IFA in the UK, he must be reliable and regulated – but this is not necessarily the case.
Best solution?
Portugal has its own regulation system but the UK FSA is considered one of the best regulatory authorities in the world.
Under the terms of the EU’s Insurance Mediation Directive (IMD), it is possible for regulated UK advisers to establish businesses in other EU countries providing they set up their business correctly.
Through the Directive, it is possible for an adviser to be regulated both in the UK and here in Portugal.
This is the ideal situation for a British expatriate who needs financial planning involving both countries.
Even if you are permanently resident here in Portugal you may still have UK assets resulting in issues such as UK inheritance tax, estate planning for your UK beneficiaries and your UK pension etc.
Always ask your adviser for proof of his regulatory status. When it comes to the FSA, you can verify this for yourself on their website www.fsa.gov.uk/register.
You can check whether the firm is fully authorised and regulated by the FSA. If you click on the “passports” link at the top of the firm’s page, you can check whether it can legitimately advise you in Portugal.
You can use the “individuals search” to search for your adviser to check that he is personally regulated.
Other issues
Find out what training he has to provide financial advice. Education itself is not a guarantee against inappropriate advice but you still need to know that he has the necessary professional qualifications.
Experience in providing financial advice to expatriates living in Portugal is also important.
Taking advice from an adviser of a larger multi-disciplined firm enables more continuity and depth of service while offering you the ability to benefit from the different areas of specialism within the firm.
Ask to see an adviser’s Terms of Business before making an investment and establish what the complaints procedures are.
Make sure that he has gone through a comprehensive written fact finding process with you before any recommendations are made and that you have received the advice in writing, covering all costs and risk.
Confirm he has Professional Indemnity Insurance.
One final piece of advice is that when making investments, you should never hand the investment money directly to the adviser.
The cheque or bank transfer should be made payable to the investment firm he has recommended.
