Rogue advisers

Have you ever received cold calls from a “leading financial institution” that tries to sell you some investment or retirement plan? After asking questions about the potential investor’s financial needs or habits and attempting to build rapport, the cold caller sets up a meeting for you with a financial adviser. Then this adviser makes promises about the investments and uses ‘props’, such as expensive documentation, to convince investors of their legitimacy. Their tactics are relatively sophisticated compared to scams such as “wash wash” or emails claiming you’ve won millions.

A true story

In October of last year Carol and Peter, an Australian couple expatriated to South-East Asia, were approached by a financial adviser from a “leading financial institution.” After several meetings they decided to invest US$2,000 per month in an investment plan from a renowned insurance company. They were assured by the financial adviser they could withdraw funds at any time, but were never informed about the investment plan closing costs. All was easy, costless and risk free. Five months later, they decided to withdraw the money already invested, US$10,000, close the investment plan and return to Australia to start a family. The insurance company informed them that they had subscribed into an investment plan that locks-in the first 18 months’ contributions for a period of 15 years, and if they wanted to close the investment plan now they will lose all US$10,000. Carol and Peter tried to contact their financial adviser. He had vanished.

Tests of validity

Each country has different regulations on investment offers and advice. However, irrespective of any regulation, there are four easy rules an expat can follow to avoid being cheated by rogue salesmen posing as financial advisers. First, ask a lot of questions and obtain answers. If the adviser behaves arrogantly and avoids questions, that’s a clear sign you are dealing with a rogue salesman. Second, be suspicious of the words “guarantee” and “risk free.” There are no such things in finance. Third, ask for referrals. What do other clients say? Referrals are other expats living in the same city as you, easily approachable, and that have worked with the adviser for the past two years, at least.

Finally, beware of high-pressure sales people who will assure you that the more you agree to invest, the better. Typically these people have not been in town all that long and talk like they know the financial markets better than George Soros. They assuredly do not have your best interests in mind.

If you are contacted with any investment options or have been a victim in the past and would like some professional advice, please contact us for a free appraisal.

Written by Afonso Vieira, Managing Director of Total Wealth Management