Spanish Compliant Investment Bonds, QROPs, SIPPs – do you really know what they’re costing you?

Article 5

John (I’ve changed his name for the sake of this article) wanted a second opinion on an investment plan he had set up when he first moved to Spain 10 years ago. Somehow, despite strong financial markets, John’s portfolio had continuously struggled to achieve good returns.

John was helpful enough to bring along the original advice report his adviser had given him, and all the various bits of paperwork he’d been issued since he started his plan. I could see that he had been tied into a 10-year plan, and there were details stating ongoing product charges of 1.25% plus an admin fee. As my regular readers will know, any kind of tie-in should always be a concern, and from my experience of these products I already knew that a huge amount of initial commission would’ve been paid to the financial adviser for tying the client into this plan. I’d estimate this could have be as high as 8% – this would be an amount paid to client at the very start of the policy, and the tie-in allows the product provider, a Spanish Compliant Investment Bond in this case, to recoup that commission over the next 10 years. However, nowhere in the paperwork did it confirm how much the adviser was actually getting paid for all this.

What I also couldn’t find was specific detailed information relating to his underlying investment funds. These are documents, for example Fact Sheets or Key Investor Information Documents, that detail past performance, fund approach, other details and incredibly importantly; the fees the fund managers take each year.

I noticed from John’s valuations that nearly all his funds were managed by the same fund management group, another element that rung alarm bells for me. One thing we insist on at Chorus is not putting all our client’s eggs in the one basket, and to spread the responsibility of fund management over a number of highly respected, long established fund management groups, preferably with decades of experience and long track records.

It actually took me a fair amount of work to investigate the funds being used. There wasn’t a great deal of information out there about these funds, and in the end I had to contact the client’s product provider to request the details.

When I eventually received the fund Fact Sheets (documents that the client’s adviser should have provided direct to the client) I was pretty amazed by the fees the fund managers were taking. At Chorus Financial, our clients pay ongoing fund fees that range from around 0.22% to perhaps a little over 1% per annum, depending on the specific funds they hold. The funds John held had fees ranging from 2.03% to 2.71% per annum! Not only that, but the funds themselves were decidedly average, often underperforming the specific sector they were in. John insisted that he had never been told about these charges, and had he known he would not have signed up to this plan in the first place.

When we really dug down into his fees it became quickly apparent that he was paying well over 4.5% per year in ongoing charges to be in a portfolio that I would personally never have put a client into. In fact, there wasn’t a single fund he held that would’ve passed our rigorous fund selection process here at Chorus.

Due to the complex way the fees were structured, John had no idea his investment fees were so high. There were only 2 small reassurances I could make. Firstly, he was not alone – many expats in Spain have been set-up with similarly over-priced portfolios as this is widely practised by firms here. Secondly, it’s a very easy problem to solve.

John agreed for Chorus to move him to an equivalent product with substantially lower fees and no tie-in. John now has a diverse portfolio of regulated funds, with a strong track record from well-known investment institutions. His annual ongoing fees have now reduced by more than 2.5%, meaning John will save significant amounts in fees over the coming years, which will have a positive effect on the growth of his plan.

The exact overall fees paid you might pay will depend on your specific circumstances so may vary, but Chorus pride ourselves on fair, transparent and above all, value for money fees.

If you would like to see if a Chorus adviser can help reduce costs and suggest funds that may improve the returns on your existing portfolio, including QROPS, International SIPPs and Spanish Compliant investment Bonds from providers like Lombard, Quilter, SEB and others, please contact Chorus Financial today to book a free, no obligation review on +34 965 641 163, email [email protected] or visit for more information.

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