What Do You Need to Consider as a British Expat in Spain When Choosing a Financial Advisor?

When moving to Spain from the UK, an expert financial advisor that focuses on your long term needs and provides customised solutions is essential.

Many of us will need the services of a financial advisory practice at some point in our lives. From managing large investments and savings to life events – such as having children, divorce, retirement and illness – that can profoundly change one’s financial outlook, there are many scenarios in which access to professional financial advice is hugely beneficial.

A financial advisory practice will be able to objectively assess your financial situation and help you decide on the best course forward, sourcing products and services such as pensions, investments and savings that are tailored towards achieving your financial goals.

Financial planning when living in Spain

As a British expat in Spain, whatever your circumstances – retired or working – you will need to factor in both Spanish and UK tax laws into your financial strategy, whether it’s managing your pension income, inheritance tax planning or reducing your overall tax exposure. This can represent a considerable challenge – navigating two different tax systems is a daunting prospect, especially if you’re newly arrived in an unfamiliar country. It’s why many expats either living in Spain or moving to Spain will seek the advice of a qualified financial advisor who has the skills and resources to help them make the best choices and avoid any costly mistakes when it comes to their tax and financial affairs. Simply put, finding a good financial advisor whom you trust is the best way to prosper in a new country.

How to choose the right financial advisor for you when you take up tax residence in Spain

Personal finance can be a complex subject that’s difficult to understand, which is why it’s crucial to pick a competent, qualified financial advisor who can offer tailored financial guidance and expert tax advice, one that will help you make the best decisions. Here's what to consider when making your choice.

Choose a qualified professional

There are many advisors working in the EU without formal or full qualifications, and it’s essential that you use only qualified and properly accredited professionals.

Seek out a financial adviser with a UK level 4 qualification in financial advice or an equivalent qualification from the European Financial Planning Association (EFPA). A properly qualified financial advisor will have a complete understanding of EU directives governing financial advice in Spain – essential for British expats living in the country.

You can and should ask to see a financial advisor’s qualifications directly. Any reputable and licensed professional will be very happy to show you.

Do your research

When making your selection, carefully research all of the financial advisory firms you are considering. Initially, looking online will help you gather information. Search for their company websites to find out more about them and scour Google for reviews – good and bad – of the business. It's also a good idea to see if the firm’s profile on LinkedIn contains testimonials written by clients. Another positive sign is if the company you’re considering has created any articles, blogs or videos that demonstrate their financial expertise and knowledge.

Specialist experience with expat tax in Spain

As a British expat, it is especially important you employ a financial advisory practice with extensive knowledge of Spanish tax laws (including areas such as pensions in Spain and Spain’s wealth tax) and in-depth experience of working with expatriates, as well topics relevant to expat life such as UK domicile, tax residency, cross-border financial advice, visas and estate planning.

Professional associations

As a British expat in Spain, it’s important to look for a financial advisor from a company with strong professional links to prestigious, well-regarded law and accountancy firms – local and/or international. These relationships can reassure clients of the credibility, integrity and quality of a financial advisory firm, and offer access to fruitful connections, networks and resources.

Speak to your shortlist directly

Once you’ve narrowed down the search, contact two or three different financial advisory firms and speak to them directly (ideally face to face in their offices) so you can compare between them. Any you approach should be happy to provide references from previous expat clients.

Communication is key

The way a financial advisor communicates will tell you a lot of what you need to know, including any red flags. They should employ clear and easy to understand language, dealing in precise details rather than vague terms.

Listening skills

Listening is an integral part of effective communication, and a good financial advisor should be paying close attention to what you are saying. Only then will they be able to truly understand your needs when it comes to your financial affairs and investments.

Honesty is paramount

A crucial trait in any financial advisor is honesty. You should feel able to trust that your advisor is honest and that your interests are their chief priority. Ultimately, aside from you and any spouse or partner you may have, the next person who should care most about your money is your financial advisor. If they don’t and make investment decisions based on self-interest or greed, this could have serious financial consequences for your wealth.

A good financial advisor should be straightforward, truthful and reliable. As an expat client, this means paying close attention to how they communicate with you and the information they relay. While an untrustworthy advisor may not necessarily lie outright (although there are some who will), lying by omission or being sparing with the truth are still major red flags. Trust is a crucial commodity, and any financial advisor that abuses it should be avoided.

The more questions, the better

Every expat’s needs will differ. Whether you seek advice about retiring in Spain, pensions in Spain, guidance on inheritance planning or Spain’s wealth tax, every situation is unique. Expect any good financial advisor to ask plenty of questions about yourself and your financial needs and goals – they are required to gather as much information as possible (called a fact find) to create a detailed and thorough analysis of your current financial situation and your attitude to risk. This means they should be very interested in your personal circumstances, rather than simply talking about the products and services that they offer or a single product they would like to sell you, such as a Spanish Compliant Investment Bond.

Thorough analysis of your needs

They should provide an extensive report covering all the topics that you have discussed, alongside a plan with tailored investment recommendations that explain in full the benefits to you and the levels of risk involved. Steer clear of any financial advisor that offers a report that is short on content and detail.

Sales pressure tactics

Steer clear of any financial advisor who uses high-pressure sales tactics (such as being told to commit now before an opportunity disappears) to force you to make a decision more quickly than you feel comfortable with. Any choice is yours and yours alone to make, and if you feel pressured into making a commitment or investment (particularly esoteric investments) it’s a worrying sign that the financial advisor needs the business to happen more than you do (due to obtaining commission, for example).

Language skills

For British expats in Spain, it’s key that a financial advisor (or at least someone in their team) is fluent in Spanish. Interpreting the tax laws of another country via translation could make misunderstandings more likely, so ensure your advisor has the requisite language skills to do the best job possible for you.

What kind of advice do they offer?

Those with tax residence in Spain or moving to Spain should seek a financial advisory firm that adheres to the country’s regulations on investment advice.

In Spain, EU directives such as MiFID II make distinctions between independent and non-independent advice.

Independent financial advisors (IFAs) must follow certain rules to classify their financial advice as ‘independent’. They are typically not allowed to receive inducements and must consider a wide range of financial products when giving advice. This includes different types of products from a variety of providers. They also cannot offer independent advice if they only recommend products issued by their own firm.

Advisors must always inform a client if their advice is independent or not independent.

These rules mean that an independent financial advisor will recommend a wide range of products from a range of providers, offering unbiased and unrestricted advice – the most desirable choice for a client looking for an effective, bespoke service.

For the sale of insurance products (such as critical illness cover, for example), the Insurance Distribution Directive (IDD) sets out parameters to ensure ethical conduct by distributors and protection of a customer’s best interests.

Single product versus whole of market

For expats looking for guidance on tax in Spain, the benefits of an independent financial advisor are especially obvious in a landscape where much of the sector for expat tax advice is dominated by firms providing a one-dimensional service – chiefly by offering the same products to everyone (such as the Spanish Compliant Bond).

Each client is different, with individualised needs, and an expert IFA will focus on delivering the best advice and effective solutions rather than one-size-fits-all remedies.

Be clear on payment

Avoid any nasty surprise charges by clearly establishing how much you will pay before embarking on a course of action. All financial advisory firms must first explain how much their services will cost and establish how you will pay for it. Always ensure all charges are disclosed upfront.

How your financial advisor charges you will affect the service they give you and the recommendations they make.

Generally, it’s better to choose an advisor who charges fees for their investment and wealth management advice rather than one who relies on commission.

The commission model can involve high, opaque costs that commit clients to products for a long time. It’s also a model that does not always sit well with impartial advice. By nature, commission-based advisors cannot offer unbiased advice as they are being financially incentivised to recommend specific products. Fee-based advisors are more likely to work in your interest.

How is your financial advisor paid?

Similar reasoning applies to how your financial advisor is renumerated. It’s important to hire an advisor that is salaried rather than paid by commission, as the latter compromises their ability to offer impartial financial advice. If getting paid is contingent on obtaining sales, you cannot expect a commission-only advisor to be working in your best interests. Before committing, ask your advisor to confirm in writing if they are commission-only renumerated or salaried.

What services are included?

British expats in Spain should obtain clarity on exactly what is included in any financial advice received. Financial advice and wealth management firms can vary in their levels of service and you should ask them to confirm in writing at the outset what they will do for you.

Ask exactly how the relationship with your financial advisory firm will work. Will they take the initiative to contact you with advice or will you have to approach them? How often will you communicate with your advisor, and what methods will be used – phone, face-to-face, video call? Can they adapt to your requirements? How often will you receive reviews of your portfolio? What is the scope and limits of the financial advice you’ll be given?

A good financial advisory practice will include a servicing level agreement with you that they should follow closely.

Delivers on promises

Be wary of advisors that make grand claims for your financial goals and investments. A good financial and wealth management advisor will base their promises on concrete data and realistic parameters and expectations. They should, however, always deliver on whatever they do promise. If they let you down, it’s time to move on.

A financial advisor that works for you

Whether you are already living in Spain or moving to Spain from the UK, ensuring you have a plan in place for your financial future is essential.

At every step in your search for a financial advisor, remind yourself that whoever you select should be fully committed to delivering your financial vision and providing effective, customised solutions. Don’t settle for anything less.

Give us a call today on Tel: +44 207 998 0570 or e-mail enquiries@fwm.gi to book your free, no-obligation consultation.