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With care YOU prosper

By Spectrum IFA
This article is published on: 3rd October 2014

I’m getting an increasing number of calls from expats based here in France who are very worried and sometimes completely dismayed by the financial advice they have received elsewhere. Worried by the fact that their investments have decreased in value, and dismayed when they realise that they cannot even withdraw their money or cancel their polices, as parts of the investment are now in funds that have been suspended (that is no-one can either buy them or sell them).

Now I’m not looking to get into any legal wrangle with the company concerned, and it is only one company, but I think this is a suitable time to flag up what is happening in the hope that some of you will avoid falling into this situation in future. I will also add that I am prepared to ‘adopt’ clients in this situation, in order to ensure as fruitful an outcome for the client as possible.

What is happening is not illegal, but it could certainly be regarded as unethical. The clients concerned have either unwittingly or deliberately chosen to put their faith in an adviser who is not regulated in France. This is not illegal, because we are all part of the wonderful organisation that is Europe, and that frees Europeans to ply their trade in other countries within the Euro block. That freedom of trade is not, however, backed up by a freedom of regulation. If you live in France and have cause to complain about advice you have received, the French regulator will show no interest in your case if the adviser is not in his jurisdiction. You will be guided to seek help from the regulator in the country where the adviser is based, and hopefully regulated. Good luck.

There are two main problems that I am seeing at present. The first relates to the quality of funds in which the clients are invested. At The Spectrum IFA Group we have an investment team that spend many hours evaluating hundreds, if not thousands, of funds and produce a recommended list for clients to invest in. There are of course hundreds of thousands of funds available, and we can’t look at them all, so we do allow our clients to choose their own investments if they wish, thereby ignoring our recommendations. All we ask, in this instance, is that you sign a form to accept that the investment was your choice. There are many good funds out there, but there are also some bad ones. All of the (now) clients who have suffered in this way have been put into a single asset class which has had a disastrous time in the past eighteen months. Needless to say, none of the funds involved are on our recommended list.

The second issue centres on a specific type of investment called a structured note. These are often complex derivative products, and the type of note that I am now seeing regularly, certainly falls into that category. So much so, that the product notes that accompany the investment clearly state that this is only for seasoned professional investors, who are willing to accept the potential for serious loss of capital. None of the people I’m taking to fall into that category. The structured note is an interesting concept, and not all of them are overly complicated. You may have seen me write about such a note in the past, and you may have seen such a product at our seminars, offering an excellent 12 month fixed deposit rate alongside a five year deposit where the reward is linked to the performance of the stock exchange index. Not exactly ‘Janet and John’ stuff, but I like to think that I can explain it completely to my clients. And I don’t use it unless I’m completely sure that the client also understands it. I don’t understand the notes I’m seeing recently, and I’m sure the client doesn’t either.

So why sell them? Simply because the companies that make up these products factor in an element of commission to the brokerage that sells the note to the end user, the client. Now I don’t know how closely you look at small print when you read articles from me or Daphne, but if you look at the bottom of this article you will see reference to our client charter at

If you have read the charter, or are just about to do so, you will see or have seen this:

Some investment funds or products within an Insurance policy may generate an additional initial commission. If this is the case, we undertake to rebate this commission to you (in full) by way of increased allocation.

Strangely (not), none of the new clients I’m speaking to seem to have benefitted from this principle. It seems clear to me that funds are being pedalled for the advisers benefit, not the clients. This is a very dangerous practice.

I must stress that no laws have been broken here, and no fraud has taken place. I sell a simple structured note, but I pass on the commission. I even have clients who are invested in the struggling asset class that we have been talking about, but only by their own choice, and for many months now that has been contra to our advice.

Be safe – use locally produced goods, and that includes financial advice.

If you have any questions on this, or any other subject, please don’t hesitate to contact me.

Article by Spectrum IFA

The Spectrum IFA Group is committed to providing a professional financial advice to the expat community in Europe. The Spectrum IFA Group operates in a number of jurisdictions with 12 offices in France, Spain, Italy, Switzerland, Luxembourg, Malta and Portugal with over 50 advisers.

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