The Investment Traps That Catch British Expats Out

Many British expats earn higher incomes, so they often have more money to invest. However, as an expat, you are no longer part of the familiar UK financial system or its consumer protections.

This can lead to several investment traps that may slowly reduce your wealth. Here are the main ones and, more importantly, how you can avoid them.

Trap 1: offshore investment bonds with buried charges

One of the most common traps for expats is being guided into an offshore investment bond with high, hidden charges. While these products can be useful in some cases, they are often sold to expats not because they are the best fit, but because they pay the salesperson a large upfront commission.

The main issue is the charges, which are stacked in layers that are hard to spot. There may be an establishment fee, ongoing administration charges, fund charges underneath, and, worst of all, early-exit penalties that can lock you in for years, sometimes even a decade.

Each charge may seem small on its own, but together they can quietly take away a significant part of your returns every year.

How to avoid it:

Before you agree to any product, ask for every charge in writing as a single annual percentage. Also, find out what happens if you want to leave early. Finally, ask the most important question, explained in Trap 4: how does the person recommending this product get paid?

Trap 2: assuming your UK tax wrappers still work

Expats often keep paying into or relying on UK tax wrappers that no longer work as they expect. The clearest example is the ISA.

Once you stop being a UK resident, you usually can’t pay into an ISA. Even the money already inside is still tax-free in the UK, but your new country may tax it if it doesn’t recognise the wrapper.

Many people keep using their ISA as if it still works, but abroad, it may have quietly stopped helping. We explain this fully in our article about your ISA and moving abroad.

How to avoid it:

Don’t assume a UK product keeps its benefits once you move abroad. Check how your new country treats each investment, and stop paying into anything you’re no longer eligible for.

Trap 3: currency drag

This trap is subtle because nothing seems wrong until you convert your money. Many expats keep all their savings and investments in one currency—often still in sterling, or sometimes all in their local currency—without really thinking about it.

That’s an accidental gamble: if the currency your money is in weakens against the one you’ll actually spend, your real wealth drops even if your statement balance stays the same.

Over the years, and especially during big one-off conversions, this drag can cost you more than any product fee. The pound’s performance over the past decade shows this in real numbers.

How to avoid it:

Be intentional about which currency your money is in compared to where you’ll spend it, instead of leaving it to chance. We cover this in our article on managing currency exposure.

Trap 4: unregulated or commission-driven "advisers"

This is the big one because it’s behind most of the other traps. Expat hubs are full of people calling themselves financial advisers who aren’t regulated to the standard you’d expect at home, and who get paid by commission on what they sell, not by a fee for advice.

That setup quietly steers every recommendation toward whatever pays the most, which is often the high-charge products from Trap 1.

The danger is worse because of the lack of protection. Advice given to you offshore may not include UK safeguards like the Financial Conduct Authority’s rules, the Financial Ombudsman, or the Financial Services Compensation Scheme that a UK-based client takes for granted. If things go wrong, you may have little recourse.

How to avoid it:

Ask two questions and insist on clear answers. "Are you regulated, and by whom?" Then check it. And "How are you paid: a fee I pay you, or commission from the products you recommend?"

Be especially careful with cold calls, high-pressure "act now" pitches, "exclusive" opportunities, and anything that promises high returns with little or no risk. A genuine adviser will welcome these questions, while a salesperson will try to avoid them.

Trap 5: exotic, "too good to be true" investments

Finally, the most dangerous traps are unregulated or exotic investment schemes such as storage-pod and car-park "opportunities," or unusual pension arrangements promising early access or guaranteed high returns.

These are pushed hard to expats because they’re outside normal regulatory reach, and they range from merely unsuitable to outright fraudulent.

How to avoid it:

Treat any unregulated investment, or anything promising returns that sound too good to be true, as a red flag. If you can’t clearly understand where the return comes from and what the risks are, that’s your answer. To learn more about a tried-and-tested investment strategy, read our article on the 60/40 portfolio.

How to protect yourself, in short

Every trap has the same root cause: being far from UK protections and dealing with incentives that don’t match your own. A few habits can help you avoid them all:

• Check regulation and protection before taking advice or buying anything. Make sure you know what recourse you’d have if something goes wrong.

• Make sure you understand the total charges, in writing, as a single number.

• Know how your adviser is paid. Whether it’s a fee or commission tells you almost everything.

• Be sceptical of anything that’s urgent, exclusive, or "guaranteed".

• Get a second opinion on any big decision. A good adviser will never mind.

None of this means expat investing is a minefield to avoid. Done well, with proper advice, it’s how expats build wealth. It just means you should be as careful about who and what you trust with your money as you are about the money itself.

If you’d like a clear, regulated second opinion on your investments or the advice you’re getting, speak to Holborn Assets.