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How do Crew Access Good Financial Advice?

Johanna 140

The UK has some of the tightest financial regulations in the world, but the offshore environment still lacks the same level of client protection.

January 2018 saw the introduction of stricter MiFID rules in Europe for investment intermediaries but, offshore, numerous companies still offer high risk, non-compliant products with very high commission structures.

Many superyacht crew have fallen prey to bad financial advice, so it's important to protect yourself by working with an advisor qualified to carry out the required verifications and to offer you suitable investment options.

Having previously worked in the superyacht industry, Financial Adviser Johanna O’Brien from Beacon Global Wealth Management wanted to make it easier for crew to access properly regulated financial advice.

"We recently launched a financial advisory platform especially for yacht crew and we can work with most English speaking nationalities." says Johanna. "A wealth manager should not only help grow your money, they can help plan your financial future, protect your assets and minimize your tax exposure. An ethical IFA plays a pivotal role in how successful someone is later in life, while a dishonest IFA can be the cause of devastating capital losses."

Here Johanna highlights five important points to consider when choosing a financial adviser.

1) Be wary of unregulated and high-risk investments

Before embarking on any investment you should have completed a detailed questionnaire about your financial situation, lifestyle, lifetime goals, and a ‘risk profile’. This will calculate how much risk you wish to take for the return, how long you wish to invest for etc.

This will give your adviser a picture of your overall situation and requirements, and they will know which types of investment are most suitable for you. Some offshore companies may offer investments to inexperienced investors, such as bridging finance, which is for sophisticated financiers only. Such investors are extremely knowledgeable and experienced in the investment market and can make their own informed choices.

Unregulated products marketed as car parks and student accommodation are risky and have traditionally given poor returns, or lead to large losses. Funds recommended should always be fully explained and within your risk tolerance. A successful portfolio should be tailored to the client and diversified across different funds in stocks, bonds, cash, and property, and it can also involve tax incentives depending on the tax wrapper chosen.

Savings Flikr3

2) Check a financial advisor's qualifications

How experienced is your IFA? Is your wealth manager qualified to a level 3 diploma in financial planning, which is the minimum requirement to work offshore? The mandatory obligation by the FCA in the UK is that all advisers are RDR level 4 qualified. Chartered advisers are further qualified and can therefore offer a higher level of expertise.

3) Check a firm’s regulatory status

A well-regulated organization should offer a greater level of retail consumer protection. For example, companies regulated by the FSC in Gibraltar and by the FCA in the UK can provide excellent client security.

4) Are all the fees transparent?  

Many investments have built-in fees that clients are not aware of and these can be high and erode the return. Find out how your IFA is compensated - this should be pre-agreed and detailed in the client agreement. The latter should also detail how often you will meet your adviser, typically once or twice each year unless your situation changes. 

All charges should always be agreed in advance. There are several ways an IFA can be remunerated ranging from a fixed charge, an hourly rate or a percentage of the amount invested. The most common practice is a commission charge upfront and 1-1.5 % per annum based on the assets under management.

5) Is a firm tied, restricted or independent?

Be careful of IFAs who are directly involved in the funds they recommend or those who push you aggressively towards one investment over another. An Independent firm works across the whole of the market and will look at the most suitable products to fit the individual client.

If a company is 'tied' it means they are only offering a limited amount of financial products, while 'restricted' means they offer a smaller choice of products.

Ultimately, incompetent advice generally results in the loss of money, while a skilled adviser can be the key to achieving financial freedom. 

The information in this article is offered as an introduction only and is not intended to be taken as advice. Beacon Global Wealth Management cannot accept responsibility for any losses incurred by acting on the information provided here.

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