Questions to Ask Your Expat Financial Adviser

We often harp on about the importance of seeking professional and qualified expatriate financial advice, because it cannot be underestimated how complex an area of financial planning the offshore world is.  What’s more, your own individual circumstances will guide specific investment choices for you, and all in all, to get as close as you possibly can to the perfect portfolio generally requires professional advice.

If of course you’re investment savvy and you’re quite keen to manage your own finances without intervention – then good luck and best wishes to you.  There are people who have both the time and the inclination to get ahead in the great savings rate alone and unassisted…but for the rest of us, thankfully there are expatriate independent financial advisers!

However, not all financial advisers are as good as each other – just as in any other profession, you have those who are passionate about what they do, and so confident in their own abilities that they take their own advice!  At the same time you have those who are more likely to follow the crowd.  So, how do you sort the wheat from the chaff and determine whether or not you have a good IFA?  Well, here are ten questions to ask your expat financial adviser to see whether they are any good or not!

Assuming you have been through the due diligence efforts of the financial adviser and they have completed a full fact find with you, they will then return to you with suggestions for the development of your personal financial portfolio.  It is at this point that you can begin to question them – prior to this, if you have not felt comfortable with your adviser or you just don’t like them, then we would suggest you go with your gut instinct, because if you don’t you may always feel uncomfortable working with this individual.  If you are satisfied with the credentials of the firm s/he represents, then you can consider contacting the company and asking them to send someone else round to help you.

Once you get to the point where the adviser you have chosen is suggesting investment funds to you, you can begin to pose the following questions to them, and assess them based on the answers that they give: -

1) What is the investment strategy of the fund you’re recommending?

You need to ensure that your IFA can clearly and definitively explain to you how this fund works.  You need to ensure that they speak in plain English and make sure that you are left with a clear picture of how it works.  If your adviser cannot explain it to you clearly they are either lacking in competence and understanding themselves, or they are perhaps trying to hide something.

2) What are the current underlying investments within the fund?

Again, you’re looking to ensure that your adviser can give you a straight, understandable answer that actually makes sense when viewed in relation to the fund.  If what they say either makes no sense or does not relate to your understanding of the nature of the fund…we would suggest this should raise alarm bells.

3) Talk to me about how you have assessed my attitude to risk and how this marries with the fund you’re suggesting.

It is essential that your adviser has taken on board and appreciated your personal attitude to risk, because it is with this fundamental consideration in mind that they should be recommending funds and strategies to you.  If the fund they are suggesting is excessively complex and risky yet your attitude to risk is limited, they are either incompetent or trying to push something on you that does not fit - perhaps for their own personal gains?

4) Can you detail, in plain English, every single cost and fee I will incur as a result of investing in this fund?

This is not only a very good question for testing your adviser, it is a very good question to ask full stop.  You really do need to know what this fund will cost you every step of the way…and by asking the question you see whether your adviser has researched the fund correctly, whether they can answer you directly and correctly, or whether they half heartedly have to sift through the product literature looking for the small print.  If in doubt have the write you a formal letter with the fees and costs laid out clearly.  You not only need this information before you sign up, but you need to make sure your adviser actually knows what they’re letting your money in for.  If needs be, ask them to justify the fees and costs.

5) Can I see the fund’s track record please, and can you explain it to me?

Your adviser will likely tell you at this point that past performance is not an indicator to future potential.  However, you still need to know what that past performance was and when it comes to offshore funds and even some onshore equivalents it is sometimes hard to get your hands on such data.  Well, you don’t want to be fobbed off by that excuse, you want to see the facts – because that data will be logged and it should be available to all would-be and current investors.

6) How does the asset allocation work?

Again, another critical question that you do need the answer to – but can your adviser give it to you?  If yes, and if you check that they are right – fantastic.  If not, what are they trying to hide?

7) Who regulates the fund and the fund manager?

For obvious reasons this is essential knowledge that you have to have.  The most reputable investment and financial advisers will tend to favour the most reputable and best regulated jurisdictions which have the best levels of investor protection in place.

8) How can I get my money out of this fund?

This is again critical knowledge that you have to have.  If the fund you’re being recommended is for the longer-term investment part of your portfolio, it is not unreasonable for there to be restrictions in place on how you can access your cash…however, you do need to know this in advance.  Plus you do need to be able to get your hands on your money if an absolutely dire emergency occurs and you just have to have the money back.  In such a situation you need to know what penalties you will incur.  All of this has to be detailed to you clearly and concisely.

9) What level of investor protection is in place in the jurisdiction in which this fund is regulated?

Following on from the debacle that ensued in Iceland when the country went all but bankrupt and thousands of international investors lost their funds, you need to know what level of protection is in place for your money if anything terrible happened to the underlying institution it is invested in.  Look at the realities and practicalities of any investor protection scheme in place, can it really afford to pay out?

10) Who oversees the management of this fund and who manages the managers?

And finally, you need to know who is behind the fund and the fund managers – is it an internationally acclaimed bank or accountancy firm, or is it a back street office of some tiny finance firm?  Be guided by common sense because a good fund should ideally have the backing and support of leading financial brains.

Whilst seeking the answers to these questions will help you get a feel for the competence of your adviser and the legitimacy and appropriateness of any investment strategy they are recommending for you, make sure you back up all of the answers given with your own research.  At the end of the day, you are under no obligation to take the advice you are given, so if you are still not happy that the advice you have received is right for you, don’t take it and seek further advice and assistance.

And finally, the information contained in this article does not, nor is it intended to amount to comprehensive investment advice.  Before making an investment or applying for any savings or investment vehicle, we firmly believe that you should seek professional advice!