by Sam Kelly DipPFS, EFA, BA (Hons),
Chorus Financial are receiving an increasing number of enquiries from those of you living in Spain looking to move your pensions and investments to a local financial adviser. A number of those enquiries were directly prompted by the UK adviser themselves, who had informed those clients that they could no longer advise them due to Brexit.
There is a lot of confusion in this area so I will do my best to share what we know so far. Before Brexit, the Spanish investment, insurance, and pensions regulators – the DGS and CNMV – allowed UK regulated entities to advise those of us living in Spain through the freedom to provide services regime or by means of an establishment. When Britain left the EU, those rights were removed for UK based firms.
In preparation for Brexit Spain published Article 13 of the Royal Decree Law (which you can read here: http://www.cnmv.es/Portal/Brexit/FAQ-RDL.aspx?lang=en).
Within this, the CNMV have confirmed that, according to Article 13(3) of the RDL, “contracts for the provision of banking, securities, insurance or other financial services, pursuant to which an entity provides services in Spain while domiciled in the United Kingdom”… “will remain valid provisionally, until 30 June 2021, in order to carry out the necessary activities for an orderly termination or transfer of the contracts concluded prior to 1 January 2021”.
In more colloquial terms, this is saying that for any existing business with your UK IFA, they can continue to provide service to you until 30th June 2021. This extension is granted to allow time to either end your relationship, or for your IFA to transfer you to an entity that can provide advice in Spain.
I wanted to further clarify this with the FCA, so sent them some direct questions, and they were kind enough to respond as follows:
“Firms intending to do business with persons resident in the EEA need to ensure they do so consistently with local laws and local regulatory expectations. Whether a firm can provide services to Spanish clients (whether ex-pat or otherwise) is a question of Spanish law.”
With this response the FCA are stating that it is the country where you are resident that sets its rules, which supports the Spanish regulator’s position in terms of advising those of us who live in Spain.
So where does this leave you if you still have a UK IFA? Well, the first place to start is by speaking with them directly. It may be the case that their firm have set up a subsidiary in the EU and that through that entity they are able to continue to advise you here in Spain.
For many of you who will find yourselves looking for a new financial adviser because of these changes there are some steps you can take. The FCA have set incredibly high standards for UK advisers, and this means the advice you will have been receiving over the years will likely have been transparent, appropriate and from a fully qualified adviser. You should expect that standard to continue here in Spain.
In simple terms, transparency means your adviser should go out of their way to fully detail all charges you will be exposed to, and of those charges, exactly how much they will receive. I would expect this to be detailed in both % terms and in monetary values. Remember, many products and funds in Spain still pay advisers non-disclosed commissions, something that was made illegal in the UK many years ago. This can make your overall fees incredibly high. One big clue is that if a product has a tie-in, for example 5, 8 or even 10 years, then it will be paying an initial commission to that adviser, and we’ve seen those as high as 8% of your investment value. You should always be offered an option with no tie-in or exit penalties.
When it comes to qualifications, there are several bodies an adviser in Spain could be qualified from, and all of these have online registers where you can confirm your advisers’ credentials. With myself, as an example, I am both UK and Spanish qualified. You can find me on the UK register at https://www.thepfs.org/membership/member-search/ which covers all those UK qualified advisers registered with the CII and PFS. You can also find me on the Spanish register at https://www.efpa.es/busca-tu-asesor-financiero-certificado. Again, in Spain it is possible for someone to operate as a financial adviser without having any qualifications, so it is important that you confirm the advice you are receiving is from someone who is appropriately qualified. Ask your financial adviser to confirm which register they are on and what formal qualifications they hold so you can verify this independently.
Of course, if you really want to be sure, then speak to a Chorus Financial adviser for a recommendation – this is always free and without pressure or obligation, so you can explore your options and make the best decision for you.