I attended a seminar last week, not unusual in itself, professional development and all that but this was different and just a bit shocking…
The subject matter was due diligence and almost all attendees in the room (except for me) were from firms who have been tempted to invest in ultra-high risk unregulated investments with the promise of huge returns for their clients.
We are talking about investing in diamonds, film schemes, carbon credits and forestry plantations. Surely, I thought, no one is that gullible but with interest rates at close to nothing the promise of a double digit return should not be underestimated.
Most of these schemes exist within Self Invested Personal Pensions (SIPPs) where the greater control and freedom of choice is being exploited. Some advisers had even been encouraging investors to move from traditional pensions into these high risk schemes in SIPPs.
The Financial Services Authority (FSA) finally seems to be taking action with an investigation and risk warning that these schemes should only be sold to highly experienced or wealthy investors – I dont agree, in my opinion they should not be sold at all.
The FSA has issued a particular warning in relation to Harlequin Property. This scheme has sold thousands of properties in Caribbean resorts and the FSA has warned advisers to establish exactly how customers funds will be used. A simple company search in the UK and combined with a look at their accounts should have rung enough alarm bells for any prudent adviser to steer well clear.
SIPP investors must proceed with caution; they have become an easy target for the unscrupulous. At a time when thorough due diligence combined with a robust advisory process has produced high single digit returns for low risk clients, using financially stable discretionary investment managers, I simply dont see any sense in looking any further on behalf of our clients.
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