Overseas Retirees Warned To Beware Of Unregulated IFAs

by Ulrika Lomas, Tax-news.com, Brussels

06 June 2001

Britons thinking of retiring to Spain have been warned by the UK Financial Services Authority (FSA) not to deal with unregulated expatriate financial advisors, according to a recent report in the Financial Times. The Costa del Sol, with its sunny climate and large expatriate community, is a veritable magnet for British people retiring abroad, and as a result, unscrupulous financial advisors are finding that there are rich pickings to be had.

Many IFAs operating out of Spain's coastal resorts are not registered with the Spanish securities and investments regulator, CNMV (Comision Nacional del Mercado de Valores) to act as investment advisors in the country, which means that their clients have no protection or recourse if they are mis-sold investments or incorrectly advised. A spokeswoman for the FSA explained: 'We don't have any jurisdiction in that situation.' However, she added that: 'If a firm is UK based but has an office in Spain you may be covered.'

The Spanish regulator is equally powerless to help expatriate retirees that have been stung by unauthorised advisors, as they can only assist if it can be shown that their money is being held in a Spanish institution. If this is not the case, then the only other option is to try and claim damages through the Spanish courts.

Although the problems caused by bad advice from unauthorised advisors have not been widely documented in the past, as the advice process itself is not regulated in the same way as it is in many other countries, it has long been common knowedge in the financial services industry that the Spanish coast attracts more than its fair share of rogue advisors. The CNMV advises Britons, and all those thinking of retiring to Spain, to check the credentials of firms before they get involved with them, and not to invest with unauthorised firms 'even though they are run by compatriots.'

However, some IFA firms in the Costa del Sol have objected, claiming that they have repeatedly tried to register, but have been stalled by CNMV officials unsure of whether the business of giving financial advice fall under Spanish legal jurisdiction.

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