Expats in Spain warned over unregistered IFAs after collapse of advisory firm

The recent collapse of unregistered Alicante-based Continental Wealth Management in which a high number of expats lost their capital is the tip of a world-wide so-called investment scandal containing untold numbers of similar disasters waiting to happen to expats who’ve trusted an illegal advisor.

It’s a sad truth that wherever there are expats there are financial fraudsters dedicated to ripping off as many people as possible before doing a runner with their cash. Spain is just one such destination, although UK expats may be more vulnerable there as the majority are retirees with savings or hefty pension pots, making them the perfect marks for unscrupulous fraudsters.

The investments offered by illegally-working IFAs are invariably ‘wrapped’ with life insurance or unit-linked policies weighted towards IFAs by huge up-front commissions, high maintenance fees and punitive charges for early redemption of funds invested. At worst, the funds themselves may be ‘toxic’, resulting in total losses.

As with Continental Wealth Management, the vast majority of self-styled independent financial advisors in Spain are not registered with the Spanish authority. In CWM’s case, it was loosely regulated to provide non-investment linked insurance through Germany-based Trafalgar International, also not regulated in Spain. The majority of offshore-based insurance-linked bond providers fall foul of Spanish laws as they have never been regulated, and the Spanish government is now declaring all such products null and void due to the risk of their being misused by dodgy IFAs.

Expats in Spain who are holding such investment-linked life insurance products will be able to get a court ruling forcing the product provider to reimburse premiums in full after deduction of any surrenders already made. Annual legal interest without detraction of commissions charged or fees will also be legally available.

The mis-selling of insurance and financial products is considered automatically illegal if carried out by unregistered IFAs, as is any advice given to potential or established clients. Claimants should make use of specialist lawyers aiming for pension providers, investment funds and insurers.