Expat advisers have raised “significant concerns” about UK financial knowledge being inappropriately applied overseas.
Speaking to FT Adviser, Christopher Lean, director of Aisa International and James Pearcy-Caldwell, director of network OpesFidelio, shared their concerns of what they have seen in the expat advice market.
Pearcy-Caldwell, said: “I have serious concerns about UK financial knowledge being inappropriately applied overseas, where it simply doesn’t fit.
“This mismatch often leads to egregious outcomes for clients such as avoidable tax liabilities, regulatory breaches, and long-term financial harm.
“I am seeing genuine and avoidable harm caused by non-EU qualified advisers giving UK-oriented advice to clients living long-term in the EU.
“Tax, personalised bonds, tax deferral assumptions, and poor structuring are creating unnecessary problems that could be avoided if more UK advisers worked alongside localised EU advisers.”
Isle of Man insurance bonds
Lean discussed seeing a LinkedIn post about the tax advantages of personalised portfolio bonds (PPB) from places like the Isle of Man and the Channel Islands being sold in the EU to EU residents.
He said he had seen many expats in the Czech Republic, where he is based, being sold these products.
“Insurance bonds are marketed as a valuable UK financial tax planning tool.
“Advisers originating from the UK do not appear to recognise that for their clients tax rules differ from country to country and in many cases insurance bonds not only do not provide any tax benefits but they also run the risk of causing tax problems for the investor,” he warned.
According to Lean, insurance bonds and PPBs sold from the Isle of Man and Channel Islands cannot legally be marketed or sold to EU residents without meeting strict EU regulations.
“Before Brexit, these jurisdictions were treated as third countries for financial services, excluded from the EU single market.
“After Brexit, they lost any indirect access they had, and insurers there must now establish a licensed presence in the EU or operate through an EU intermediary to sell legally.
“Without EU licensing, selling products like PPBs directly to EU residents is illegal, despite some expat financial firms continuing to do so, especially in places like the Czech Republic,” Lean explained.
According to Lean, insurance bonds are often sold in the EU by Insurance Distribution Directive-only regulated advisers, working with UK investment firms.
“The investment firm in the UK cannot provide investment advice to the EU client if introduced by the IDD adviser and the IDD adviser recommending a UK investment firm is, in itself, investment advice for which the IDD adviser has no licence,” he added.
Lean said his firm was working with people that have dealt with UK advisers, who have sold such insurance bonds to clients that moved out of the UK.
The risks of this include a lack of EU consumer protections and no actual tax benefits, as such bonds typically fail to meet local definitions of insurance products, according to Lean.
“The solution lies in EU-localised advice, rooted in local language, tax rules, and customs, working in partnership with UK advisers to deliver the best outcomes for clients,” Pearcy-Caldwell said.
