‘Expatville’ Financial Blues

Have you heard of these companies?

If you are or have been an expatriate and lived in Asia, the Middle East or Europe. Now, or over the last twenty years. Then there is a high probability that you would have come across names such as Friends Provident International, Zurich, Royal Skandia, Old Mutual, Quilter, Royal London 360, Hansard, Generali International.

Why would you have heard of these companies?

These financial institutions have been, and, in some cases, still are, providers of insurance-based investment products to the financial broker community or IFAs that serve the previously mentioned geographical areas.

Did you take up a product at any time?

Perhaps you took the advice of a well-meaning financial advisor at some stage and opened up a savings or investment product of some kind. Or you’re still holding and investing in such a policy? It could be a regular savings plan or a lump sum investment, or you may have used one of these companies in some form of pension or pension transfer.

What’s the history?

The broader market of financial advice is ever-evolving, and the frontier-type locations around the world that have been favourite destinations for adventurous ex-pats are becoming more established. More laws and regulations are designed to stabilise the financial services industry and protect the would-be consumer. Here is the pithy part: These financial institutions designed products for the consumer when there were very few regulations protecting the consumer. The type of products they were supplying the marketplace have long since been regulated out of the market in more established first-world jurisdictions. The upshot is that the products are no longer fit for purpose, which is affecting both the institutions that are the ultimate source of the supply and the distributors of the products, the IFAs & certain retail banks.

What’s happening now?

The suppliers and the distributors are getting squeezed, and more transparent regulations, the world economy, and geopolitics are also playing their part. They are finding it tough to the extent that an event horizon has been reached, and many smaller brokerages are going out of business, as their previous business model is no longer sustainable. This coincides with the suppliers of these legacy savings and investment products being acquired by larger companies looking to grab all the lovely ‘invested money’ and promptly profit from it. There is a seismic shift in the financial advice landscape across ‘Expatville.’

How does this affect me?

In a nutshell, not in a good way! When one looks past all the corporate spin, press releases and the ‘this is good for you’ marketing that is being churned out. The following is the reality:

• Clients are being abandoned due to IFAs leaving the industry or being forced to shut up shop. To be clear, if this happens, the supplier of the savings and investment product, as we call them, has no interest in providing advice, guidance or support to the consumer.
• The brokerages are doing their best and trying to service their existing clients. They are finding it extremely challenging due to the consolidation of suppliers and the cost-cutting exercises the new owners are implementing. Such as closing down offices and making staff redundant. This makes it extremely challenging for the broker to get anything done to service their clients holding these legacy products.
• The fees are increasing. At the time of writing this, In the last few months alone, most people holding the majority of these products have been written to and notified of considerable price increases.
• The red tape and arse-protecting exercises the new owners of the institutions are going through is staggering. These days, the starting point is that you virtually have to prove you are NOT Russian. And god forbid you have lived somewhere for less than three months when trying to prove your existence.

The upshot?

Expensive fees

Poor service