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Exposing the carpet baggers

Giving good advice will weed out the carpet baggers, says Guardian WM’s David Howell.

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The intention is to work abroad for a number of years and use their increased finances to pay off their mortgage in the UK, put money away for school fees or build a savings and investment pot that will enable them to achieve a range of lifetime goals and ambitions.

In the Middle East it is possible to benefit from both a good income and a favourable tax regime. This creates a highly potent mix of increased disposable income and an affordable uplift in lifestyle.

One of the syndromes we see quite regularly with expats new to the Middle East is that the combination of a new culture and environment, along with a considerable uplift in disposable wealth, creates a ‘holiday’ period where those ideas of paying off the mortgage or piling the additional cash into long-term investments are put on hold in favour of a temporary ‘spend and enjoy’ lifestyle.

The danger is that this attitude extends beyond the temporary and one, two or even several years down the line the realisation kicks in that they have been working abroad without gaining the benefits they originally intended and the need to have a formal saving or investment plan becomes a pressing reality.

Enter the carpet bagger

This is where the industry can let down the expat investor.

The need for people to get back on financial track can lead to panic purchases and, regrettably, leaves them prey to financial advice carpet baggers.

Unfortunately, despite the considerable efforts of the regulators, some jurisdictions are still seeing carpet baggers jet in, run a seminar or two, make sales, pocket the commission and jet out. This leaves the individuals they have sold to with products that may or may not suit their current requirements and with no ongoing advice or thought or provision for their continuing needs. As a result, a few years down the line those people find they are under invested or worse still badly invested, they have inadequate insurance cover and the money they have put away is nowhere near what they need for the financial goals they have in mind.

For advisers serving clients who are either at the point of panic purchasing in order to get to grips with their finances, or who have been sold to by carpet baggers, the principles and practices upheld by members of the Institute of Financial Planning in the UK provide excellent benchmarks for treating customers fairly.

In particular, I favour the lifestyle planning as expounded by Dr Maria Nemeth. This is the process that takes place prior to financial advice and goes into depth with the client with regard to their values, wishes and desires, needs and goals. It analyses their attitude to money, what it means to them and how it fits in with their ultimate life aims. This can be incredibly insightful for the client, as it can help clarify what they really want to do with their money; for example, do they really want to pay off their mortgage in the UK or maybe keep renting out the property and instead use the money they save to fund a once in a lifetime trip around the world? 

Once the client has established their lifestyle plan, the financial adviser can then tackle the financial planning process. This will look at the client’s assets, incomes, outgoings and create a cashflow model that plots the path the client should take to achieve those goals however far down the line they may be.  

This kind of customer care can only be achieved by a regulated adviser firm that is situated in the jurisdiction and which can have contact with the client not just in the early stages of the process but on an ongoing basis, through regular meetings and financial reviews, to ensure the plans in place are still on track to meet their financial goals.

If regulated, responsible international financial advice firms practice this high quality of service, the carpet baggers that have undermined this industry for so long can be finally exposed for what they are.

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