I can’t say this more clearly. BE VERY CAREFUL BEFORE CONSIDERING THIS TYPE OF INVESTMENT AND BE SURE TO SEEK PROFESSIONAL ADVICE BEFORE DECIDING TO INVEST.
The first thing that any potential investor should be aware of is that these investments are Unregulated. Very simply, this means that if something goes wrong, you will have very little protection if any and have little recourse to recover your investment. The Financial Services Compensation Scheme will not be able to pay you any compensation in most cases.
If that’s not enough to discourage investors many of them are being promoted by companies and so called “advisers” based both here and abroad, so again, if it goes wrong there are few options open to you.
So what does an Unregulated investment look like?
Typically, the investment will carry no Financial Risk warnings – they have no obligation to do so. They often offer high investment returns and often promise a guaranteed return. Usually when an investment is guaranteed and is substantially better than what can be achieved in a regulated investment, it’s unlikely to work out and could be a fraud.
Unregulated investments are only meant for “sophisticated” investors. In my opinion a “sophisticated” investor would not want to invest in this type of investment. So why are people attracted to them?
Most investors are unaware that some financial promotions in the UK are not regulated. For example, the promotion of SSAS’s (Small Self Administered Schemes) are not regulated. As such all sorts of investments are promoted to be held within them.
Unregulated investments could include investing into residential property, overseas property developments, high interest fixed rate bonds, Storage facility investments, to mention just a few.
The big problem
Most of these investments are illiquid – That means, when you want your money back, you cannot get it. It is often the responsibility of the investor to find a buyer of the investment, which in most cases is impossible.
Secondly, some unregulated investments come with very high annual fees, that are unavoidable.
Every week I receive speculative emails from these companies promoting Unregulated investments that sound wonderfully exciting, promising the earth. I apply a 5 minute rule to new investment propositions. Quite simply if I cannot understand how it works within 5 minutes, then I leave it well alone and certainly wouldn’t advise my clients to invest in it. I’m in good company with this rule by the way. It’s the same investment rule used by Warren Buffett and it’s not done him any great deal of harm over the last 60 years.
So my advices, if it’s not clear already. Please avoid these types of investment as they can serious damage your wealth.
Always ask your adviser if what they are recommending for you is regulated.
Action Call
If you would like to talk to us about your financial plans, contact us to today. We can review your current situation and let you know what options are available to you.
If you would like to talk to about financial planning, please get in touch for a no-obligation meeting. Go to our website www.miadvice.co.uk and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.
Email us at [email protected]
It is advisable to take advice from a professional financial adviser when making major financial planning decisions.
Check out our other recent articles here
This article has been prepared in good faith and based on Midlands Investment Agency’s understanding of the law and interpretation thereof at the time of creation. The contents should not be regarded as specific advice and we always recommend that specific advice is sort from a qualified professional. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.
Martin Dodd author of the Financial Freedom Formula
