By Sam Kelly, Managing Partner, Chorus Financial.
So, before anyone asks, no I’ve not given up financial services to campaign against the dairy industry! Churning, in financial terms, is when a financial advisor persuades a client to buy or sell funds with the sole intention of generating commissions, rather than acting in the client’s best interests. This unethical practise is illegal in the UK, so why is it so prolific here in Spain?
The problem lies in the fact that in Spain, financial advisors can still receive hidden payments from investment fund providers. I have seen numerous examples here in Spain where companies have found a new fund provider who will pay them a 3-5% ‘entry charge’ when they persuade their clients to invest in that particular fund.
This generates problems in two ways: Firstly, that 3-5% comes right out of the client’s pocket, and is either paid for by reducing the number of units you buy in the fund, or by elevating the fees for a period of time, normally 5 years, in order to recoup that payment. This can leave the client paying catch up from day one.
The other problem, and often even more damage results from this practise, is that funds that an advisor wouldn’t usually recommend - perhaps because they don’t have a strong track-record, are from an unproven fund house, or are poorly regulated – are finding their ways into client’s portfolios, thereby lowering the quality of their investment portfolio.
The funds your advisor chooses for your pension or investment portfolio, should be chosen independently, after rigorous research. The Chorus approach is to favour UK based, FCA regulated funds, from well-known fund houses like Rathbones, Investec, HSBC, BlackRock, Fidelity and Aviva. We will never receive any financial incentive when it comes to choosing funds for a client’s portfolio, so you can be confident that our goals are aligned with yours.
If you think you may have been charged a 3-5% entry charge for an investment fund, or your advisor is making wholesale changes to your portfolio every year or two, then it’s possible they are not acting in your best interests.
Chorus will happily review any portfolio, whether it’s in a QROPS, Spanish Compliant Bond or on a Platform, and let you know within 24 hours if you’ve been a victim of this practice.
Chorus Financial is a trading style of Tourbillon Limited, authorised and regulated by the Financial Services Commission (Gibraltar), Licence Number FSC1118B and registered with the UK FCA as an EEA Authorised firm, reference 539348.