Most of the estimated 300,000 British expats living in Spain maintain close financial links with the UK. These ties often include receiving UK pensions, maintaining a property in Britain and having a UK-based independent financial adviser (IFA). However, many of those who live in Spain and currently work with an IFA in the UK have been told that they are no longer welcome as clients. Even if they have been working with them for many years and/or have long-term financial planning strategies in place with them, they’re being routinely dropped, denied advice and told to find another firm. Understandably, this is causing confusion and worry for those affected.
Rule changes, explained
So, why are tens of thousands of expats being abandoned by their UK financial advisers? Well, perhaps unsurprisingly it’s all to do with Brexit. Before Britain left the European Union, UK regulated financial firms were able to advise people in Spain, and across the European Economic Area (EEA), through a system known as ‘passporting’ without the need for additional regulatory clearances. However, since Brexit those passporting rights have been scrapped. The Spanish financial watchdogs, the DGS and the CNMV no longer allow UK-based financial advisers to run operations to advise on pensions, investments and insurance in the country. All entities offering these services have to be fully licensed according to local, Spanish laws and regulatory expectations.
The CNMV published the Royal Decree Law on the issue in which it is stated: “Article 13 of the RDL refers to 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 and authorised or registered by the competent authority of the United Kingdom, and which were concluded prior to 1 January 2021.” There was a transition period that ended on 30 June 2021 in order to give people time to sort out alternative arrangements. But now this date has been and gone, if you live in Spain and are advised by a UK-based adviser, your working relationship with them has to have ended.
Banks close expat accounts
The new Brexit rules, specifically the end of passporting, have also forced many UK banks to close accounts of UK expats based in Europe. Banks like Lloyds and Natwest began to write to their customers in late 2020 to warn them of the changes. Nigel Green, deVere Group’s chief executive and founder, explained why banks have little choice in the matter: “To operate without passporting becomes enormously complex, incredibly time-consuming and very expensive for banks. “This is the reason why they are ditching many of their customers across Europe – even if they have been with them for decades. This has caused considerable disruption for many individuals, families, businesses and other organisations, especially where there are larger deposits, standing orders, regular payments and credit facilities to another bank.”
How to choose a financial adviser in Spain
All the upheaval has left many expats in Spain looking for a new adviser. Like the UK, Spain has regulators who supervise all aspects of the financial advisory industry. In Britain this important work is carried out by the Financial Conduct Authority (FCA). In Spain, the task is carried out by the Comision Nacional del Mercado de Valores, or CNMV. The CNMV maintains a list of financial advisers who are allowed to operate in the country, so you can check out the details of any potential advisers that you are looking into working alongside. Only advisers authorised by the CNMV or Bank of Spain – the country’s central bank – are allowed to provide advice on investments. Remember: if they are not on the register, they are not authorised to give advice. Only go for a properly licensed firm. The watchdog also produces frequent scam alerts focusing on those entities and individuals who are advising clients without the authorisation to do so. Plus, there’s a regularly updated official website for investors that provides breaking news, as well as tips and general info.
Cross-border financial advice
As an expat, your life is likely to be more transient and your financial affairs more internationally-focused than non-expats. For example, you might live for some months of the year in Spain and some in the UK; and/or you could live all year on the Costa del Sol and have a number of UK investment and savings products, have a property in both destinations, with beneficiaries of your estate in Britain, Spain and elsewhere. As each jurisdiction has different rules and regulations, it becomes complex and demands specialist, cross-border advice to make sure you’re compliant and tax efficient. Therefore, it is recommended that you choose to work with a financial advisory firm that is regulated in more than one jurisdiction – indeed, preferably with a global footprint – and one that has expertise and experience in cross border financial advice.
Other things to consider…
You need to be able to trust your adviser implicitly – after all they’re taking care of you and your family’s money, and therefore, life-opportunities. Asking for testimonials from other clients is a great idea. Also, checking that there are no serious registered complaints. They should ask you challenging and in-depth questions to fully understand your medium and long-term financial needs and wants. They should really listen and take detailed notes. Your adviser should offer full disclosure from Day One. They must set out in writing what will be provided and when, cover all expectations of the service and products and disclose the initial (and ongoing) fees. They must also have information and guidelines about any potential conflicts of interest. Further to this point, you should ask if the adviser is independent or restricted. An independent financial adviser will investigate every workable solution on the market that could meet your objectives. A restricted financial adviser will make suggestions from a narrower, more focused number of products and providers.
In conclusion, not all financial advisers are created equal. You should research potential advisers who can help you efficiently and effectively reach your financial goals.