I felt it prudent to email you with my experience with the above company based in Guernsey, C.I.
Firstly my background. I was an adviser in the UK for over 20 years mostly as an IFA, I spent the first few years working for a medium sized Insurance company. The last 4 years in the UK I was joint Managing Director of a company that specialised in giving advice about Ethical Investments. My specific role was as Compliance Officer looking after up to 5 advisers, over the period we had no upheld complaints. I am obviously fully qualified with the full Financial Planning Certificates along with supervisor status with the FSA. A lot of our clients paid us on a fee basis with commissions rebated, this was our preferred option and in my mind lends to completely unbiased advice.
I retired early to spend time with my wife here in Spain over 2 years ago, however 12 months ago I decided to look to seek work as an adviser in Spain. I live in rural Spain just in the province of Granada and all the positions were on the coast so reluctantly I joined a company in La Cala de Mijas.
I knew a fair amount about taxation in Spain and how it differs from the UK system and I gained more details from the company training. One of the areas that the company aimed at was advice on Spanish IHT, which is the "in thing" on the coast at present. This involved presentations from different providers including NM Rothschild.Appointments were made and I went to see several people armed with my knowledge. I would like to make it clear here that at all presentations it was stated that the schemes they were marketing were non status loans with the collateral being the property and the pursuant investment.
I went to see a client in Competa where an appointment was made for me and explained the differing schemes available and how Spanish IHT worked. I left them with all the information and said I would contact them in a couple of weeks to gauge their reaction. I spoke to them as promised and they asked me for a copy of some stress testing I had shown them, which I duly posted out to them. The stress testing was 4 situations ranging from Optomistic to Catastrophic, the latter being if the fund fell by 50% and house prices fell by 50% after 12 months meaning that the provider would ask for interest payments to be made by the client.I always stressed this to clients as a warning of what could happen.These clients werre intelligent people who were very aware of how all aspects of the plan worked.
The clients contacted me weeks later and said they would like to proceed and complete the application forms. I went back to Competa and completed the forms from Rothschilds and took them back to the office for processing, along with the money for a survey fee of 724 Euros made payable to a large company based in Marbella. This was non refundable as the loan was a non status loan and as long as the valuation stacked up there should be no problem. Three weeks later the client telephoned me to say they had heard nothing from the surveyor about surveying the house, I apologised and my line manager immediately contacted the surveyor who stated he had tried several times to contact the client but to no avail. Within 10 minutes we had contacted the client and arranged a time for the survey for the following week. All the rest of the paperwwork with the details of the client had been couriered to Rothschilds on the same day the application form was completed. The valuation on the house was more than sufficient so apart from a few niggly things that Rothschilds wanted from the client everything seemed in order.
After 5 months from the initial application from being completed Rothschilds declined the loan on the basis that the clients would not, in their opinion, be able to fund the interest if a call was made on them to do this. The client was absolutely furious along with myself, so along with my line manager we tried everything to get them to reconsider, but to no avail. In the end thanks mainly to efforts from the owner of the company I worked for Rothschilds agreed to repay the survey fee back to the clients. The clients then washed their hands off the company.
I had been 5 times( a 4 hour round trip) to see the clients over this period of time and was less than happy at the outcome, if they were going to refuse these clients then they should have done so at a very early stage saving time and expense for all parties. I decided to ask, via email, Rothschilds Compliance office, Mr Bruce Spittal, what the procedure was for complaints in Guernsey, I was fullly aware of the FSA rules but not of the Channel Islands regulator. After 3 weeks and no reply from Mr Spittal I asked the regulator in the Channel Islands what the procedures were and lo and behold I got a response from Mr Spittal, who stated he never received my initial email, starnge it never bounced back. To cut along story short he investigated and found that we were to blame for the situation with the clients as we mainly pushed through the survey and Rothschilds were completely innocent, bizarre in the least as it was only after the client contacted us did we know that no survey had been carried out and the client was 724 Euros worst off. I was then told that there are no arbitration services in the Channel Islands, so therefore Rothschilds investigate themselves with no comeback.
I was so disgusted with this that I left the company and I now have an IBEX agency for general business. I do intend to register with the Spanish regulators and give advice on other areas but mainly on a fee basis with all commissions rebated, this was the main crux of our business in the UK. There is a strong Equity Release market here in Spain and if clients are fully aware of the risks that go with this product and that they could lose their house then I feel it is ok to proceed, unfortunately most advisers I have come across tend not to mention this. In fact one adviser I worked with told me he sold the plans not as a possible advantage to mitigating Spanish IHT but as an investment, what a load of rubbish the costs of setting up these plans are very expensive and there is no way it can be classed as an out and out investment. Furthermore, I personally feel the Spanish tax authorities will clamp down on these plans seeing them as tax evasion as opposed to tax avoidance. The Rothschilds scheme invests the money with a fund run by Barclays International based in the Isle of Man and its main marketing strategy is to offer a guarantee on capital. This guarantee means that it will pay back a minimum of the original capital after a 10 year period. So, if you invest 500,000 Euros, this being 75% of the value of your property, then you are guaranteed to get this back as a minimum after 10 years. However, lets look at a scenario whereby the fund does not grow at all over this period of time, you would get back 500,000 Euros for sure but you would have run up interest payments on the loan taken against the property, lets say at 4% interest only, componded. Even without componding this up you would still owe an extra 200,000 Euros on the original loan. On the other side it may make money and cover the costs of the loan which is what it is intended to do along with alleviating Spanish IHT.
I feel your members should be aware of all this and, in my opinion, to tread carefully if they are looking to deal with Rothschilds especially if they have a small income.
PS All the above is documented at the office in La Cala although Rothschilds still blame the company I worked for the mess that occured.
Sorry for the long email but I feel it is necessary.