4 Financial Mistakes to Avoid as an Expat
Below you can find some of the worst financial mistakes you could do as an expat this year.
1) Sure fire investment opportunities
With savings rates low, it’s normal to shop around for higher returns. But whether it’s a great savings rate or a fantastic investment opportunity, if the return is way above what you can get elsewhere then work on the basis there must be a catch. There could be a plausible explanation for higher returns, such as restrictions on the investment period or a more sophisticated investment vehicle – all of which may be fine so long as you fully understand the risks involved. Should something go wrong, are you covered by any compensation scheme? Do your homework on the savings or investment plan, the financial services firm behind it, as well as the individual you are dealing with (more on this in point 4 below). Sticking with investment plans offered by tried and trusted investment firms such as RL360, Prudential International or Friends Life International may not always achieve super soaraway returns, but you will sleep more soundly knowing that plans on offer have been specifically designed to suit expat needs and, most importantly, are highly regulated. Remember, If it’s too good to be true, it generally is.
2) Ignoring your tax reporting obligations
With governments looking to squeeze every ounce of tax from citizens, tax reporting obligations are on the increase. Expats often have to abide by several tax regimes to ensure they fulfil their obligations both locally and in their home country, so it can get quite complex. Whether it’s declaring offshore returns, transferring your pension offshore or shielding assets in a trust, full disclosure is often the best policy if you want to avoid stiff penalties.
3) Making financial decisions without doing your due diligence
This is essential if you have been called out of the blue about an investment opportunity over the phone or been given a recommendation by an acquaintance. In all cases do your due diligence on both the adviser and firm they work for. Take time to step back and review what you are being promised or sold and make sure you are clear on the charges. This is particularly important as the landscape for adviser charging changes. Different rules on how an adviser can charge for his time depends on the country he or she is regulated by. In the UK, advice is now fee-based whereas in other countries it is still possible for advisers to charge commission. Your chosen adviser should be fully transparent on charges you can expect to pay, how you should pay and what, if any, effect it has on your investment returns. Also don’t take credentials on face value. Check on public registers accessible via the local financial regulatory authority, as well as any other regulatory authorities the firm may come under. This will help ensure you have some level of protection and redress should something go wrong. There are an increasing number of firms having their credentials cloned, so pay extra attention to spellings etc. For tips on steering clear of adviser scams, listen to our podcast on How to Trust Your Adviser.
4) Getting star struck!
The practice of using famous names to sell property developments or financial services is a common marketing tool. But don’t let a famous name get in the way of the fundamentals, particularly when it comes to buying property overseas. Do your homework to satisfy yourself it is the right investment for you. Top of the property risk scale are off-plan developments or property clubs using high pressure sales techniques, big price discounts and guaranteed rental income or buy-backs. See our guide to buying property abroad.
