The Daily Mail website carried an article about an investment scheme offering a potential 40% return on burial plots, which rapidly becomes a cautionary tale about unregulated investments and the strong likelihood of losing your capital. (See the original article here).
There have been many column inches about getting better returns with your money now that the bank rate is at 0.25%, but not many have identified the clear difference between regulated and unregulated investments.
As an IFA, we offer “regulated investments”; these are regulated by the Financial Conduct Authority and are covered by the Financial Services Compensation Scheme, that is funded by a levy on product providers and IFAs like ourselves. If things go badly wrong, say an adviser runs off with your money or a provider goes into liquidation, then you will be compensated by the FSCS.
Unregulated investments like burial plots, eco homes in Brazil, palm oil plantations in the Philippines, airport car parking spaces, carbon credits, and shipping containers are not covered by the rules of the Financial Conduct Authority, not covered by the Financial Services Compensation Scheme and have no soft landing if it all goes wrong.
Anyone can put on a suit and a tie and claim to be a “financial adviser” or a “wealth consultant”; anyone can occupy offices in a trendy neighbourhood and make claims of a 40% return, but will your money still be available to you once you have handed it over to that “very nice man in a good suit”?
The Daily Mail article links the promotors of the burial plot scheme with a previous scheme selling allotment plots to investors who have received little or nothing in return. In the absence of any externally enforced guarantees, prior behaviour is likely to be your best guide to the future outcome of any investment scheme, so I would have grave reservations over the burial plot scheme, (sorry!)
Some IFAs have advised clients to invest into unregulated schemes; the financial ombudsman has sometimes taken the view that the adviser is liable for any losses, so if you must invest in an unregulated scheme, use a regulated IFA and try and sue them after the event. But, please do not ask us, as we will point out the problem and refuse to act.
Only if you have money to burn should you risk an unregulated investment; although the very best can produce generous returns, the majority are cash-poor, (illiquid), in the early years and often include rules that prevent the early repayment of investments. Not all unregulated financial investments are scams, but most big losses will be unregulated investments.
If you would like to know more about how we can help you plan and realise your financial goals then contact us at firstname.lastname@example.org or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.