Ben found an excellent article in Professional Adviser that deserves a much wider audience than just the adviser community. For the curious, the full article is here: Professional Adviser.
For the time poor but otherwise engaged, think about how you would react if you saw a website with a guarantee of a 9% return using hedge funds from a company with the familiar sounding name of “Ledger & Simmons”, with a managing partner called Toby Ledger, who apparently was the London Stock Exchange’s youngest trader and an address in central London.
As a certified cynic*, I would dismiss this all as Internet marketing bullshit, especially as it is not on the Financial Conduct Authority register as a registered firm, despite a UK address, but I was a compliance officer for a long time, so you get used to reading the cues.
So as a member of the public, how do you spot the signs of a likely scam?
1. Extravagant investment return claims; as a general observation there is no such thing as a guaranteed return for anything other than a cash deposit account and 9% is far too much in current market conditions. Any more than 2.5-3.0% should ring alarm bells today.
2. Extravagant product claims; “100% of your pension in your hand”, “full pension release before 55”, “total protection from taxation”; are all as likely to be genuine as a pet unicorn for every home, however much you want it.
3. No formal regulator declarations; the website, letterheads, cards and most other documents should give details of the relevant regulator and a reference number. If you go to the regulator’s website, you should find the same trading name, address and phone number. Anything less is a warning off!
4. Heavy references to foreign investments; most investments established in countries outside the EU have no recourse to the Financial Services Compensation Scheme, (FSCS), if everything goes wrong. If your money goes abroad, then that is probably the last you will see of it.
5. Non-standard investments offered to retail clients; regulated advice, (guaranteed with recourse to the authorities), is limited to retail investment products, like ISAs, unit trusts, investment trusts, investment bonds, personal pensions and similar items. Hedge funds, traded carbon credits and almost all other investment vehicles are considered for “experts only”.
6. A lack of external corroboration; if all you can find is a website, then remember a good looking website can be put up for pennies. You need to look elsewhere for confirmation, so look for the company at Companies House, check the regulators details given, lookup the website URL with WHOIS, google the address to see if it is only serviced offices. You are looking for a depth of information and consistency across a number of different sources. Facebook and Linkedin can also be a useful source of information, but remember that there is little to no verification that anything written there is true.
7. Pushy advisers and a need to do things fast; proper financial advice is considered and rather bureaucratic, so everything done at the double is grounds for concern. Why so fast? Your pension will take years to accumulate, so very short deadlines suggest that something is wrong.
There is a place for risky offshore investments and non-regulated advisers, but not investing up to your “last shirt button” and “buyer beware” need to be written in very large letters in your consciousness.
*Cynicism is not a restricted profession or regulated activity in the UK, anyone can join in. As for my credibility as a cynic, your only guide is the evidence provided by your own eyes and ears.
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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.