Can your financial adviser…advise?


Pelican Consulting are specialist French investment advisers. Here, Managing Director Michael Annett takes a look at freely available information enabling you to check that an adviser can, in fact … advise.

To advise, or not to give advice … ?

Professional and regulated financial advice is always preferable, but how do you know that your adviser is authorised to give you such advice ? Pelican Consulting’s Managing Director, Michael Annett, explains.

We have all read in the press over the last few months of the number of frauds that have taken the financial markets and investors by surprise. These frauds vary in degrees of financial wrong doings, some of which are more likely to affect the average investor than others. So how do you know that the advice you are being given is likely to be correct, or that the adviser is insured against giving you bad advice, should you have to make a claim for the consequences of this inappropriate advice ?

The basic factsIt is for the protection of you, the public, that regulators exist. The regulators require that all financial consultants be regulated in the country in which their business activity is registered and, as a result of this regulation, the adviser will have professional indemnity cover to protect him against any bad advice that he may give. Whilst more and more countries are moving to regulation by examination, there are still countries that function on the basis of regulation by experience, but these countries are more prone to performing regular inspections of the advisers and their businesses, in itself possibly creating a more regulated environment.

However, irrespective of the means by which regulation occurs, the fact remains that it is the Regulator who will authorise the adviser to be able to advise, and also usually to act as an investment broker. In some countries, such as the UK, all regulatory functions are now undertaken by the one Regulator, the Financial Services Authority, but in some other countries regulation is a little more convoluted. France is one such country, as the Regulator, the ‘Autorit� des March�s Financiers’ (AMF) not only splits some regulation according to financial activity, but then also delegates its regulatory powers for financial advisers to one of six otherauthorised associations. As a result, there is, inter alia, one system of regulation for insurance and assurance brokerage, and another for financial advice and intermediary services.

Public accessIn France, the AMF permit access to the files of each adviser and company, these files detailing clearly what activities the adviser is regulated to undertake. In addition, the individual regulatory bodies (for example, ORIAS for insurance and assurance broking, and any one of the six regulatory associations for advice) also provide free access to their members’ listings.

Whilst in the UK if one is regulated for the provision of advice, one is probably also regulated for broking activities : but not so in France. Perhaps confusingly, in France, whilst most ‘financial advisers’ are regulated for insurance and/or assurance broking, not all for these are in fact regulated to give financial or investment advice – despite the fact that they purport to be ‘financial advisers’ – and it is for this reason that it is imperative to check the French national register to see what it is that a ‘financial adviser’ is in factregulated to do.

International contractsIndeed, this verification is all the more relevant when considering the international aspect as registers do exist to check on whether, for example, a foreign assurance company can just sell its services to another country, or whether it has the right to be, and act, in another country. Whilst these options may at first sight appear to be one and the same thing, this is far from being the case as the first option is nothing more than a simple marketing right.

Contrary to this, the right of a foreign assurance company, for example, to be, and act, in, say, France, tends to imply that the contracts of that foreign assurance company will comply with the regulatory requirements of France, and the fiscal and legal aspects too.

However, these rights generally have an impact for the broker, as if the first option, marketing, is being considered, the broker will usually find himself the legal representative of the foreign assurance company for all business he transacts with that foreign company, since that assurance company only has the right to market its products in France – and nothing else. In the same way, for the investor, the contract supplier’s legal base is in another country, due to which the contract will in all probability be written under the regulatory laws of that other country, not those of France : accordingly, how can the investor know that the contract is suitable for them, they being in a different legal and fiscal environment to the contract supplier ? And, if they do have to complain, to which Ombudsman do they address their complaint since only complaints falling under an Ombudsman’s remit can be considered by them, and non-regulated contracts are outside of this remit ? So, as the French Ombudsman can only arbitrate on French contracts from French regulated companies, recommended by French regulated consultants, who is going to arbitrate ? The foreign Ombudsman can’t arbitrate, as the whilst the contracts and contract-supplier might be regulated in their country, as indeed the adviser, the investor isn’t … so who arbitrates ? Is there fact any possibility of arbitration ?

International adviceIn the same way as for the contracts, or the act of broking, the point is valid for advice. Is an adviser from one country permitted to give advice on the financial matters of another country ?

The answer is a resounding ‘no’.

As mentioned above, someone regulated to give, say, French financial advice, on French civil and fiscal issues, concerning French investment contracts, to French residents, is not regulated to give UK financial advice, on UK civil and fiscal issues, concerning UK investment contracts, to UK residents.

Whilst it would be possible for the adviser to be regulated in more than one country if the adviser obtained the appropriate regulatory rights – they would probably still have a problem with not being able to obtain professional indemnity insurance through a complete lack of experience of the foreign countries financial affairs.

So, as it is unlikely to have an adviser from one country regulated to give advice concerning another country, again, if in doubt, and for France, do check the AMF web site ( to see if the foreign adviser is authorised to give advice on French matters and use French regulated products.

Fine, you might say, but what happens if I, a French resident, with French investments, decide to move to the UK ? Who advises me on my French investments now ?

‘Financial passports’Well, welcome the ‘financial passport’.

The ‘financial passport’ is an adviser’s or a broker’s right to be in another country, to advise in that other country … but only on their own home country regulated contracts and financial matters. It is only a right for the adviser/broker to carry out his business activity in another country. It is not the right of that adviser to advise on that other country’s financial matters and contracts.

Indeed, just so as to make the point even clearer, the French provide in article L541-2 of their ‘Code Mon�taire et Financier’ that a financial adviser, regulated in France, should either have his business registered in France, or be a permanent resident of France.

Could it be any clearer ? No. So, if you need financial advice, seek it from a regulated adviser of the country concerned, even if its just to check on the suitability of a contract.

In summary, whatever your country of residency, or intended residency, do make sure that the advice you are being given is from appropriately regulated advisers, regulated to advise you on matters concerning the country you are living in or going to live in.

The information is freely available on the internet, so use it.

Otherwise, its the old adage … � if you fail to plan, you plan to fail �

Michael AnnettPelican ConsultingTel : +33 (0) 4 90 38 66

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