British residents in Cyprus are prey to unscrupulous financial advisers peddling high-risk investment that they lack the expertise or license to be offering.
Cyprus’ large expatriate community is continuing to be targeted by several unlicensed and unregulated international financial advisory companies, the CEO of a local wealth management company has warned.
Woodbrook Group Chief Executive Michael Doherty said his main concern was to raise awareness, so people ask the right questions to those offering them something that sounds too good to be true.
He believes more expatriates may unwittingly be risking their savings because they are receiving advice from unregulated consultants.
“People lose pensions because they are fooled by unlicensed practitioners, we want to make sure people are getting proper advice,” Doherty told the Financial Mirror.
He said the issue was one of making people aware and not self-promotion for his company.
“We need check and balances…these guys are misselling because there are no checks on what they are selling.
“We are not saying give business to us, but we are saying clients should know what they can and can’t buy and know what the risks are,” said Doherty.
He said people are “selling what they like and then leaving”.
Woodbrook estimates that thousands of ex-pats, mainly British nationals, have been badly burned in the past by unregulated and unlicensed operators who sank their savings and pensions into high-risk investments without their clients’ knowledge.
It says several international financial advisory firms on the island are continuing to target expatriates without having a proper license.
“Many of these companies are regulated by the Cyprus Insurance Company Control Service (ICCS) but are offering services that are not covered by their license, including advising on underlying investments on insurance bonds,” said a statement by the group.
Sour Taste
Doherty urged expatriates to be extra-vigilant and to ask their financial consultants some basic but important questions to ensure they are dealing with a fully regulated and compliant company.
“This happens all over Europe, it’s bad in Cyprus but not worse than any other country,” said Doherty.
“A majority of expats have a sour taste from people in the past and I know companies that are doing it,” he added.
Woodbrook Group is regulated by the Cyprus Securities and Exchange Commission (CySEC) and by the ICCS. CySEC recently approved the company’s merger with the Felicitas Management Group.
The merger is part of the Woodbrook's international expansion plan and to ensure a more diverse and enlarged range of services delivered through the enlarged network.
Woodbrook says it safeguards clients’ investments through an “innovative approach” of adopting Model Portfolios, where the combined expert knowledge of a series of trusted fund managers is harnessed to provide a much greater layer of protection to individual investments.
“All our clients, whether they are large corporate investors or retired teachers, know their hard-earned investments are in safe hands,” said Doherty.
“There are still many unregulated companies operating without the correct licensing, and we have heard many stories involving clients who have not seen or heard from their consultant after they placed their initial investment,” he added.
Woodbrook said it will only allow clients to invest in solid and regulated investments that have been agreed by its investment board of qualified financial professionals, accountants and compliance personnel.
“You will not see our clients in funds that promise ridiculously high returns. When it comes to financial planning it is all about a solid return and managed risk, but more important is managing the downturn. We are living in volatile times, so prudent and trusted management is vital."
Woodbrook has three offices on the island, employing 70 staff, with its HQ in Limassol.
“There is no such thing as a bad product, but it is when sold to the wrong people just to get a commission,” said Doherty.
CySEC urges checks
So far this year CySEC has received 172 complaints by investors against companies potentially offering unauthorised investment services.
The provision of investment services is legal, only if conducted by companies that have been authorised by CySEC or the competent Authority of an EU Member State for the provision of those services.
“Therefore, any entities that appear to provide such services without authorisation, are in violation of the legislation and are subject to criminal and administrative sanctions,” CySEC told the Financial Mirror.
To enable investors, CySEC maintains a public register, available on its website, of authorised CIFs and IFs from other EU Member States for which a notification has been submitted to CySEC.
“We encourage investors, before making a decision to receive investment services, to check that the Investment Firm with which they intend to cooperate is on that Register,” said CYSEC.
It has established an electronic system for the submission of complaints against authorized CIFs and non-regulated entities, in order to help investors to do so.
Any claim for compensation against a non-licensed entity providing investment services without due authorization can only be addressed by the courts.
“However, by submitting a complaint to the Cyprus Securities and Exchange Commission they bring the matter to our attention thus enabling us to take the necessary measures to enforce the legislation and warn the public,” said CySEC.
Paphos Q&A
Woodbrook hosted an open Q&A session for existing and new clients in Paphos on Wednesday, it was the first client forum in the area Woodbrook has held since the company's recent merger with the Felicitas Management Group.
Many of the 60-odd who attended the event in the Elysium Hotel were Felicitas clients.
Doherty said most of those who attended had negative experience through dealings with unregulated companies in the past. Many lost a lot of money in the crisis involving unlicensed operators back in 2011 and 2012.
A few former Felicitas clients who attended said they had thought of moving their investments in the wake of the merger, but indicated they were happy to stay with Woodbrook after the presentation.
Woodbrook now plans to host similar seminars on the island over the coming months. One is currently being planned for Limassol, but the date has not yet been finalised.
Questions to ask financial consultants:
· Do you deal with regulated providers?
· Where can I find your license details?
· Where can I find your company’s details on the regulator’s website?
· What are your qualifications and professional background?
· What are your company’s qualification requirements?
· Do you have a complaints policy in place?
· Can I access your company’s policies and procedures online?
