Questions to Ask Your Financial Adviser

How should clients retain protections and ensure they are being correctly advised?

Author: James Pearcy-Caldwell

Clients are investing and insuring to protect their own future or those of beneficiaries.

The intricate regulations, licences, reporting, and regulatory scrutiny exist to protect investors. Clients are probably unaware that they lose all of these essential protections by choosing an adviser based purely on claims on a website or even within contracts or terms of business which may prove worthless.

Clients need to conduct due diligence on the adviser firm that is offering them advice which invariably means the firm that is actually represented by the adviser sitting in front of them. If the adviser works for Firm A, then the research should be conducted on Firm A. If the adviser says that, actually, the advice on investments is coming from Firm B, then clients should realise that the adviser sitting in front of them should be attached directly to Firm B or the client should seek a separate and clear contract with Firm B and be able to talk to them.

To try to assist, we provide the following simple (not comprehensive) due diligence outline that clients should consider. There may be other questions that should be asked as a result of answers, or indeed, where confusion arises.

Key Questions for Due Diligence

1 Who is the adviser firm that your adviser says they work for?

2 Does that adviser firm appear on your local investment registry? ***

3* Does your adviser appear on the local investment registry, or on the registry in the country where the investment advice is being given from?

4 Does your adviser claim to be an introducer to, or co-operate with an investment firm located in Cyprus, Malta, US or the UK?

5 If so, do you have a specific terms of business or contract with that Cypriot, Maltese, US or the UK firm?

6 If not, are you being told that your adviser or their firm are introducers to the Cypriot, Maltese, US or the UK firm?

7 Have you made separate contact with the Cypriot, Maltese, US or the UK firm and obtained separately in writing that your adviser is a representative of them and is providing investment advice to you?

8 Are being asked to sign any document which says that the IDD adviser has provided no investment advice to you, and / or a document which says you have received advice from the EU investment firm directly (even though you have not other than maybe an investment letter)

9* What are the actual qualifications of your adviser and do they appear on the local register of the country you live in OR do they appear on the register in the country where the investment advice is coming from? **

10 When you have asked your adviser to provide any of this due diligence do they tell you to ignore it, or tell you that all this
information is lies?

11 Has your adviser provided you a “scam” or “fraud” sheet printed by a regulator such as the FCA (in the UK) and said they and their company are “signed up to it” and therefore “approved” in some way.

*(3 and 9) – Advisers are normally listed on the investment register in the country they live in. Alternatively, they could be listed for the company that is providing you the investment advice in the country it is located. However, not all tied-agents of a regulated company appear on some registers. In these cases you should write to the company directly. You should obtain written confirmation from the company that the adviser has qualifications relevant to where he/she is based- not just UK qualifications- and is formally giving investment advice from that company.

** Alternatively, can the adviser put you in contact with the relevant person with the relevant qualifications required by their registry IN WRITING?

*** Any FIRM or company claiming to be passported from another firm or another country always appears on the local register as it is part of the passporting rules. If it does not appear, then it is NOT legally passported which for investment firms simply means they are not registered nor regulated.

Depending on your answers to the above you could be about to receive investment advice from someone who is not qualified, or not regulated, to give you investment advice whether it be in a pension, insurance contract such as a bond, or on a “platform” of direct investments. If you proceed, you are unlikely to have any protection and, in the worse case we have seen, invest in products with high commission that lose you a lot of money with no ability to complain or seek compensation. Examples can be provided and many expatriate “company” failures have occurred leading to the losses of hundreds of millions of pounds of clients’ money

If you answered “No” to questions 2, 3*, 5, 7 OR answered “Yes” to any of the questions 4, 6, 8, 10, 11 YOU NEED TO BE AWARE that you are about to take advice from someone or a firm that is not authorised or operating in a misleading way, probably (but not always) meaning you have NO LEGAL PROTECTION , nor cover.

If you are unable to carry out the due diligence yourself, then please contact a lawyer or someone who can carry out this due diligence for you. Do not believe any “due diligence pack” you are provided by your adviser in isolation. You can independently check their status or ask a lawyer to do so.

One hour of due diligence now can save you years of heartbreak and loss of money. Please do the due diligence.

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