Since the Global Financial Crash in 2008, the UK has continued to evolve its regulatory environment. Today the UK boasts one of the strictest financial regulatory regimes in the world. Sadly, the offshore environment does not yet practice the same level of client protection, although it is moving in the right direction. Most of us have heard the horror stories where someone loses their life savings at the hands of an dishonest person calling themselves a financial advisor, and with the recent introduction of the tightened MiFID rules in Europe, retail consumer protection is rapidly improving but the offshore industry, still has a long way to go. However, there are still companies that charge high commissions and offer risky non-compliant products.
For superyacht crew it’s even harder to find a good financial planning firm, due to the offshore nature of seafarer’s work and many crew not having a fixed abode. In some cases, firms cannot carry out the required verifications checks and therefore very few companies can offer suitable investments.
Beacon Global Wealth Management has recently launched a financial advisory service especially for superyacht crew. Johanna O’Brien, financial advisor, had previously worked in yachting, “I felt there was a gap in the industry for the crew to be able to access comprehensive financial services. A good financial advisor can not only help plan your future, they will help minimise your tax exposure, protect your assets and grow your money.” O’Brien stresses that an ethical and experienced IFA will place the client before any personal gains, meaning they can play an important role in how successful a person is later on in life. Yet an unscrupulous adviser can be the cause of devastating financial loses.
Here are 4 points to consider, when choosing an IFA.
1) Advisor qualifications and a firm’s regulatory status
A firm’s regulatory status will define how well retail customers are protected. For example, companies regulated by the FCA in the UK and under the FSC in Gibraltar should offer a high level of client security. Crew should ensure that their IFA is qualified to a minimum level 3 diploma in financial planning, as this is an entry level requirement for those working offshore. In the UK there is a mandatory obligation by the FCA that all IFAs are RDR level 4 qualified.
2) Is a firm independent or tied?
A firm that is ‘tied’ is only offering a limited amount of financial products. An ‘independent’ would be working across the whole of the market, looking at the most suitable products to fit the client’s needs. Be cautious of advisers who have a direct benefit in funds they are recommending to you, or those that try to aggressively push you into one investment over another.
3) Beware of the high risk, unregulated investments
Before a client even commences an investment, they should have filled out a thorough questionnaire about their financial situation, lifestyle and lifetime goals. Crew should complete a risk profile questionnaire, this will determine how much risk you are willing to take for the return. This ensures the adviser has a detailed picture and will know what the most suitable investments are for you. Some offshore companies may offer investments to inexperienced people that are only suitable for experienced investors (who can make their own informed choices) like bridging finance. Unregulated products marketed as student accommodation and car parks are high risk, and have given poor returns – and at worse huge loses. Funds recommended should always be within your risk tolerance and be fully explained. A well-planned portfolio is tailored to the client and should be diversified across different funds in bonds, stocks, property, and cash plus it can have many tax incentives.
4) Transparency of costs.
Ask how your advisor is remunerated. This should be pre-agreed and detailed in the client agreement. Many products have built-in fees that investors are not even aware of, some of these charges – if not disclosed – can be high and erode the performance of the portfolio. A good IFA will disclose these charges and agree on them in advance. There are three ways an advisor can be paid: fee-based, commission, or a fixed charge. The most common practice is a commission charge upfront, then 1 per cent to 1.5 per cent per annum based on the assets they have under management. Your client agreement should show this and how often you will meet your IFA, generally there will be a review one or two times a year, or before if your situation changes.
Bad advice frequently results in loss of money. A good IFA can be worth their weight in gold. Diligence is key!
The information on this page is intended as an introduction only and is not designed to offer solutions or advice. Beacon Global Wealth Management can accept no responsibility whatsoever for losses incurred by acting on the information on this page.
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