Could This Friends Provident Pension Become A Kayak In A Hurricane?


I’ll call the investor Carl. 

On December 6, 2013, he met a financial advisor who works for the DeVere Group.  He recommended that Carl invest in the Friend’s Provident Premier Advanced offshore pension. (Product guide PDF no longer available? Try here.) 

Investing for retirement is like crossing the Atlantic Ocean in a boat.  Portfolios must be built to weather crazy storms.  That means diversifying a portfolio with exposure to stocks in different geographic regions.  It also means adding bonds as a stabilizer. Carl’s advisor did neither. 

Instead of building a sturdy boat, he pushed Carl off the dock into a kayak with an outboard motor.  The journey might be smooth until he ventures out of the bay.  That’s because the portfolio was really built for Davy Jones’ locker. 

Investors take extra risk when their portfolio’s deviate too much from global capitalization.

Here’s what that means. 

U.S. stocks make up 52 percent of the value of all global stocks.  European stocks make up about 21 percent.  Emerging market stocks make up about 8 percent of the total value of global shares.  A portfolio with neutral global market capitalization risk would have roughly 52 percent U.S. stocks, 21 percent in European stocks, 8 percent in emerging market stocks.

Expats who build portfolios with a home country bias can certainly be forgiven.  After all, a British investor (if they repatriate) will pay future bills in pounds.  A Canadian will pay future bills in Canadian dollars.  That’s why there’s a good argument for British investors, for example, to own a portfolio with the following allocation.

  • 35% British stocks
  • 35% Global stocks (weighted by global capitalization)
  • 30% British bonds

Investors who don’t know where they will retire may wish for something global.  They could simply choose a global stock index and a global bond index.

Carl’s kayak has no such stability. 

His advisor put more than 20 percent of his assets into stocks from Thailand.  Thailand’s global capitalization is less than half of one percent.  That means Carl’s portfolio takes a risk in Thai stocks that’s more than 40 times higher than global capitalization would warrant.

Below, is Business Insider’s map of the world, based on country stock market capitalization.

Canada makes up about 4 percent of global market capitalization.  Can you see how big it is, compared to Thailand?


Global Stock Market Sizes Based On Market Capitalization

market-capitalization Source:  Business Insider


Viewed differently, more than 20 percent of Carl’s retirement money is pegged to the Thai baht. 


Carl is British. 

If he has a bias to any currency, it should be to the British pound.  Note how volatile the Thai baht has been compared to Carl’s home currency.


Thai Baht and The British Pound




Thai stocks also jump around a lot.  Note their volatility compared to that of the global market index.  The blue line represents the past five-year movement of the Thai stock market.  The orange line represents the line of the global stock market.


Thai Stocks Are Volatile

Five Years Ending April 25, 2016thai-stocks-volatile



Here’s a screenshot of Carl’s portfolio.

Carl’s Portfolio

April 2016



The first fund that’s listed above is J47 JP Morgan Thailand.  Carl has $16,537 invested in this fund.  That’s 20.5 percent of Carl’s portfolio total. 

But the kayak’s weight allocation is even worse than it appears.  Check out the fourth fund that’s listed above.  It’s the P66 JP Morgan Eastern Smaller Companies fund.

A full 5.4 percent of that fund is made up of Thai stocks. 


This British investor has no British bonds. 

This British investor has infinitesimal exposure British stocks.  He carries an elephant on the bow of a kayak.

The third listed fund, L18 JPM Global Unconstrained is a global fund.  But it makes up just 19.6 percent of the portfolio’s total value.

Carl’s little Kayak hasn’t lost money.  But it won’t take much to tip it.


Unfortunately, the situation gets worse. 

Carl’s advisor selected the Friends Provident Premier Advance offshore pension. 

There’s only one reason he did that. Such a platform pays a huge commission.

In boating terms, Carl’s advisor prepared the little kayak well ahead of time.  He took some fat drill bits to scuttle holes in the boat.  Such treachery shouldn’t be legal.  Carl just found out.

 “I was told,” he wrote, “that the portfolio would be charged 1.5 percent for the first 18 months.  I’ve since learned that this isn’t true.  I have now found out that the 1.5 percent charge for the first 18 months is a fee that they charge per quarter.  That’s 6 percent per year!” 

Coupled with his mutual fund costs and an additional 1.2 percent annual account charge, Carl will pay about 9.2 percent in annual fees on the $39,114 that he invested over the first year and a half.  These fees will be applied to this $39,114 over the full 25-year duration of the investment term.  In other words, this money won’t likely make money over time.

Anything that he contributes after the 18-month period would attract lower fees.  His mutual fund fees would cost about 2 percent per year.  His annual account charge of 1.2 percent would still apply. 

And he would pay a “Plan Charge” that deducts $6 USD per month. 

All told, he’ll pay more than 3.2 percent in annual fees on the money that he contributes after the first 18 months, and about 9.2 percent per year on the initial 18 months’ contribution.

The advisor lured Carl into the boat with the promise of a $3,531.12 bonus.  But Carl now knows that he pays far too many fees. 

He now has a choice.  He could stay invested in the Friend’s Provident Premier Advanced offshore pension.  Or, he could simply abandon ship.

The advisors who sell these platforms rarely, if ever, discuss the cost of jumping overboard.  Carl contacted his advisor to ask about getting out.


How Much Would Carl Have To Pay To Sell?



Carl signed a 25-year policy.  As such, if his portfolio were valued at $80,000, he would get just $24,090.55 back.  Lucky for Carl, his portfolio did make some money.  All told, he has invested $63,037 of his personal money.  By cancelling the plan, he would lose about $38,946.


But what if he keeps the money in?

If he chooses to do so, Carl must first take control of his portfolio allocation.  He should build a diversified model, instead of a Pad Thai special.

On my blog, I wrote an article titled If You Invested With Friends Provident, Make The Best Of A Bad Situation.  It maps out specific solutions – with specific fund symbols – for investors of different nationalities. However, mathematics suggests that Carl should find a better vessel.


Yes, Friends Provident will drench Carl in fees for jumping overboard.

But over the following 22 years, a better boat would pass his tipsy little kayak.


Let’s assume that Carl keeps his money where it is. 

It’s worth about $80,000.  But a full $39,114 won’t make any money.  That’s the initial 18 months worth of contributions that Carl made to his plan.  It will continue to attract annual fees of 9.2 percent per year.  If the stock and bond markets average less than that, Carl’s initial $39,114 will continue to bleed.

That leaves about $40,000 working for Carl. 

But the fees on this money total about 3.2 percent per year.  Carl invests $26,076 per year ($2,173 per month).  With an investment firm such as AES International, he could have a portfolio of index funds built.  Such a portfolio would cost him about 1.3 percent per year.

If the stock and bond markets averaged 8 percent per year (just as an example) Carl would average 6.7 percent per year with AES International (use the Dubai office only!) after paying total fees of about 1.3 percent.

He would average 4.8 percent per year with his Friends Provident Premier Plan, if the money were responsibly allocated, after paying total annual fees of 3.2 percent.

Alternatively, he could invest on his own, much as I described in my book, The Global Expatriate’s Guide To Investing

If he chooses to do so, he would pay about 0.15 percent in annual fees. 

This would enable him to earn 7.85 percent per year­–as long as his emotions don’t take him down.


How Would The Portfolios Stack Up?


Friends Provident Premier

AES International

DIY (TD Direct International)

Assume Stock And Bond Market Return




Current Portfolio Value That Could Actually Make Money




Fund Fees + Platform Costs

3.2% per year

1.3% per year

0.15% per year

After Fee Return




Amount Invested Annually




Investment Duration Left

22 Years

22 Years

22 Years

Portfolio End Value




 *Note that nearly half of Carl’s total $80,000 wouldn’t make money for Carl.  It attracts fees of 9.2% per year

**The surrender value of Carl’s investments if he cancels the policy

If Carl’s initial contributions generate 9.2 percent per year before fees, Carl could add an additional $40,000 to the Friend’s Provident End Value in 22 years.  That would bring his total to about $1,179,893.  But if the stock and bond markets average 8 percent per year, that initial $40,000 (costing 9.2% per year) would bleed by 1.2 percent per year.  After considering inflation, it would bleed by about 4.2 percent per year (assuming a rate of inflation of 3% per year).

If Carl could suspend payments into his Friends Provident plan indefinitely, he could invest his annual $26,076 into something far more responsible and leave the rest to sit.

But if he can’t suspend his payments forever, he had better bail now. 


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Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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4 Responses

  1. Jolene Cummings says:

    I have an FPI investment set up in Oman a few years ago. Recently I requested a change to the HSBC Amanah Fund. This is Apple, Microsoft, Johnson&Johnson etc. Was this a better move? I feel illiterate and helpless and slightly panicked.

  2. David says:

    Hi Andrew,

    I have property in England that I rent out. I have equity in this property and I am thinking of selling and adding the proceeds to my stocks and bonds allocation. Everyone I speak to is telling me not to sell but living abroad means that when there is a problem with the house or the tenants want to move out it is really difficult to manage, as per an article you wrote about REITS in Nov 2015.

    It would be far easier for me to manage stocks and bonds over a property but would this sale be an error?

    Thank you in advance.

    Best regards,

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