Regulation: A new risk (that’s not so close to home)

With emigration on the rise, more UK advisers than ever before have overseas clients. And Paul Stanfield, chief executive of FEIFA, has it on good authority that the FSA has taken note...

Those of us who have worked in this industry for any amount of time have experienced many business risks. Sometimes we know what the risks are; sometimes they come out of the blue.

Before, during and after a recent meeting I had with the FSA, I became aware of a potential (and growing) risk. And the regulator is already aware of it.

Increased mobility

In the past decade or more we have seen an increasing migration of people across the globe. In the UK this is often highlighted by the sensitive subject of a perceived immigration problem; there is generally far less focus on the rising number of Brits leaving these shores for pastures new, whether temporarily or permanently.

This latter aspect is often far greater in magnitude than many people realise. According to one report, last year alone some 340,000 British nationals left the UK to join the many millions already permanently based abroad, with the vast majority relocating into mainland Europe.

In fact, a recent survey by Standard Life, the results of which were published in the past few weeks, highlighted that three of the top five preferred ‘expat’ locations are in the EU.

So, what is the risk?

Many UK IFAs, understandably, continue to advise clients that move abroad – whether ahead of that move or afterwards, or both. In my experience, they often do this without the requisite knowledge of the taxation systems of the new homeland or the knowledge of which products are appropriate – and compliant.

Again, this is to some degree understandable and usually occurs despite the very best of intentions on the part of the adviser. Generally it happens because UK-style assumptions are made, with regards to the advice given.

Should you be concerned?

Given the amount of existing British expatriates – plus the likelihood that this number will continue to grow – there are now more UK IFAs advising clients abroad than there has been previously.

Thus, much advice is probably provided by advisers to such clients, advice which is not of their usual high standard, for the reasons highlighted earlier. Although the Brit expat population is large, in most cases such clients will only represent a modest proportion of a UK adviser’s client base. They may generally be high net worth individuals, or higher earners at least, but still almost certainly represent only a modest ratio of the IFA’s total revenue. The risk they represent, therefore, may be somewhat disproportionate.

As I mentioned above, the FSA is aware of this risk and, although not high on its priorities at this stage, may wish to look further into this potential issue at some stage in the future.

I am a positive person, so I’ll finish this article in a constructive manner. There are two pieces of good news: firstly, there are some fairly easy and cost-effective ways to alleviate or remove these risks; secondly, next month I will tell you what they are.