The biggest risk to your investments and pensions… could it be your financial adviser?


by Sam Kelly DipPFS, EFA, BA (Hons)

Managing Partner

Chorus Financial

Over the last decade Spanish expats have been exposed to some incredibly poor financial advice. In many cases this has led to clients trapped into overpriced, low quality investments, often leading to poor returns or unnecessary losses.

Despite much progress, and indeed Chorus Financial’s efforts to educate the public for many years through articles, seminars, online content and more, toxic financial arrangements persist in Spain. These are generally linked to pension transfer arrangements and advice on Spanish Compliant Investment Bonds. If you ever wonder why I continue to give the same warnings every week, it’s because people are still signing up to these plans without any idea what they’re getting themselves into!

Sadly, what we see all too often is the IFA making a lot of money, whilst the client takes all the risk for little in the way of returns. But how can you prevent this type of thing happening to you?

So, what are the clues? Firstly, don’t assume that just because a company are well-known, or they have a nice office or a fancy suit, they aren’t carrying out actions that would be illegal if they operated in the UK. Many well-known financial services companies serving the British population in Spain still receive undisclosed commissions on investment bonds, and many still have arrangements in place with individual investment providers that artificially raise your costs and lower the quality of your plan.

The first clue is that the advice you are being given includes a tie-in. This inevitably means a commission is being paid and is generally unnecessary. Secondly, the offer of ‘in-house’ or ‘exclusive’ funds should ring alarm bells.

Ensure you fully understand the underlying investments. Not just the bond or pension itself, but the individual funds the IFA is recommending. For this you should have the total costs (TER) of these funds confirmed via what is called a KIID (Key Investor Information Document) plus other information including at least a 5-year record of past performance.

Just by example, we’ve recently had issues obtaining these documents on behalf of a number of clients who came to us with existing plans from a very large and prestigious IFA firm here in Spain. Upon further investigation we discovered that the underlying funds had outrageous fees, between 2-3% per year, and these had not been properly disclosed to their clients.

When we factored in an overpriced bond fee, an admin fees and an adviser fee, this led to total overall charges on the recommendation of around 5%. The clients believed they were only paying around 2%. Sadly, this is incredibly common in Spain.

If your IFA won’t offer you a product without a tie-in, or fully confirm the cost of each and every fund without hesitation, simply walk away. Also ask them to confirm the total annual cost of the advice – i.e. the accumulated % of the bond/platform fee, adviser fee, fund fees and any other costs.

Another common thing we see here is companies not openly confirming how they are regulated. We would expect to see this detailed on websites, email footers and business cards. If this isn’t the case, would you really want to do business with a company who are potentially unregulated, or at least not prepared to be as transparent as possible in terms of exactly how they are regulated?

Lastly, please read all the paperwork! We know there’s generally lots of pages, and it can be awkward, or the adviser simply thrusts the signature pages in front of you and asks you to sign, but please… stop! This is your financial future, and the man or woman sat in front of you could well be a confidence trickster trying to get their hands on your well-earned pension or savings.

At Chorus we email ALL paperwork to clients prior to signing. This means you can fully understand all terms and small print before having the pressure of signing in a meeting.

As someone with many years experience helping Brits with their finances in Spain, my warnings remain the same today as it always has – do not be charmed, do not be misled, do not be pressured, and if you have any doubts then seek a second opinion.

With a whole range of potential products available from SIPPs & QROPs, to Spanish Compliant Investment Bonds from companies like Quilter International, Lombard International, Prudential and SEB, it’s often hard to know just how ‘on your side’ your financial adviser really is.

At Chorus we guarantee no hidden fees or commissions and transparent advice that is always aligned with our client’s needs. For a different kind of financial advice in Spain please contact us on +34 965 641 163, [email protected] or visit for more information.


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