The true cost of ‘FREE’ financial advice.

By Sam Kelly

Managing Partner & Financial Planner +34 664 398 702

It’s a gimmick we’re well used to here in Spain, and one that had led many in our community down a very dangerous path. We’re all aware of the phrase ‘if it sounds too good to be true’ but sadly when people think they’re getting a bargain, all common sense goes out the window.

So many financial advice firms here essentially try to convince you that they are not charging for their advice, but this could not be further from the truth.

So how does it really work? Well, what you’re being told is free in fact turns out to be a greatly inflated cost to you, which is many cases can run to £10,000s of layered fees per year.

In Spain, as in the UK, an investment bond is a very common investment structure. Bonds can offer tax efficiency, IHT mitigation, ease of annual accounting and other benefits, and there are a number available that have been specifically designed for Brits living in Spain and ratified by the Spanish tax authorities.

These products do not pose a problem in themselves, but the charging structures behind them are often dictated by the financial adviser, rather than the product provider. What this means is you could end up agreeing to a grossly inflated fee payable over 5, 8 or 10 years which facilitates an eye-watering commission paid to your financial adviser on the very first day – we’ve seen these commissions run as high as 8%.

Inevitably, the same advisers who choose to exploit such structures are also likely to be the ones who further exploit you when it comes to the actual investment funds. A bond is effectively a tax wrapper or basket, similar to an ISA. Your adviser’s job, once they’ve put you into this bond, is to choose what funds should fill that basket to achieve your required investment outcomes.

The correct approach to this process is for your adviser to use their experience and expertise to build you a diverse portfolio of high-quality funds, the very best available in the market, offering fair value and the best possible opportunity to help achieve your investing goals.

Sadly, what we see here in Spain is advisers placing you in a handful of ‘exclusive’ or ‘in-house’ funds, that end up paying them even further commissions, as much as 5% more, with greatly increased annual fund charges.

We’ve even seen situations with some of the larger companies where the fund managers, bond providers and financial advice company are so entrenched that their entire offering is essentially ‘in-house’. Clients can find themselves trapped in a low-quality plan costing as much as 5% per annum for a decade or more. Once a client has signed the paperwork there is very little a good IFA can do short of recommending they pay the ridiculously high exit charges and start another plan altogether.

Remember, these arrangements can be sophisticated, often layered and complex, and it can be very hard for an unsuspecting victim to identify what they’re really signing up to and what the real cost of that ‘free’ advice is.

At Chorus, we do offer the initial part of the advice process for free. This is our opportunity to demonstrate why our proposal is ultimately better for you than other firms in the area. We do not believe it is fair to charge a client for the opportunity to compare their options.

When it comes down to our final recommendation, we’ll tell you very clearly about what charges you’ll be paying for each element of the plan should you decide to go ahead. This allows you to make that decision with your eyes fully open. Unlike the majority of companies here, we can offer plans, both pension based and Spanish compliant, with ZERO tie-in and ZERO exit fees from exactly the same providers other firms will try to tie you into for many years.

If you’re considering a pension transfer or a tax efficient investment here in Spain it is essential to compare your options and ensure the advice you receive is transparent, fair and suitable. Please contact me direct on, 0034 664 398 702 or complete the contact form on this page.

Contact Sam Kelly