You may not have heard of the phrase, ‘orphan policyholder’ before but the cap fits the vast majority of expat Brits I meet, in one way or another.
Quite often, moving overseas creates the problem in the first place, if the UK adviser is unable or unwilling to continue to advise. There are a number of regulatory requirements they must fulfil to be able to maintain the relationship, and you may need to meet in person. But if you have enjoyed good service it may seem tempting to try and stick with them. However, it’s never satisfactory, as local knowledge is a key factor.
So what are the downsides to being an orphan policyholder, where there’s a contract in existence but no on-going advice?
In many cases, where a bank was the original adviser, you could still be paying charges on your account for a service you are no longer getting.
Also, where there is an investment content – as there is with most pensions, bonds and some life insurance contracts – no attention is being paid to the investment mix and whether it remains relevant. So often people have said to me, “The investment performance was good in the early years but…” Often, the ‘but’ refers to the period during which they have been orphan policyholders, because no-one has reviewed their investment strategy or rebalanced their portfolio.
One thing is certain: it doesn’t really matter how well an investment structure is researched at the outset if it is not reviewed regularly. Some sectors of an investment portfolio will always perform better than others. In time it becomes out of balance. Then it’s a matter of pure luck as to whether it continues to perform overall.
This is more often the case with pension contracts. For some reason – call it human nature – we don’t keep such a close eye on our pension fund performance as we do on direct investments. Maybe that’s because they are more obscure investments which people don’t understand quite as well!
So there are two big downsides to being an orphan: you are paying for a service you are not receiving and are at risk of unbalanced, underperforming investments in the long run.
The way to fix this is to appoint a new adviser, who is regulated in Spain and has the relevant experience to advise you. You can transfer the servicing rights of your contracts to them and, in most cases, the charges can also be redirected. A win-win situation.