It has been a summer in which we haven’t been short of sporting splendour. Euro 2024. The Olympics in Paris. And the T20 World Cup, to name a few. This Friday is no different, and for many even more special – because this weekend, the Premier League is back.
At a time when the majority of us are concerned with a rise in the cost of living, consideration for those who earn a considerable amount from doing something they love is perhaps not high on most people’s agenda. However, the last decade has seen a rise in unauthorised investment schemes which target not only those who earn the most, but those hoping to save for the future.
In January 2015 high profile names such as Jimmy Bullard and Robbie Keane were just two of an estimated 100 footballers involved in a £30 million Ponzi scheme. They were promised returns of up to 20% per month when, in reality, existing members were being paid (for a while) with funds collected from new investors. Whilst expecting such returns may seem naïve this was later followed by a High Court battle whereby ex-footballers turned media stars claimed they were poorly advised in relation to film schemes designed to avoid tax, and overseas property developments. Perhaps of more surprise was that they’d been aggressively promoted by a number of high-net worth banks and reputable financial institutions. So, to rather misquote the late, great George Best: “Where did it all go wrong?”
In the UK when it comes to investments there are those (in rather simplistic terms) which are ‘regulated’ and those which are ‘unregulated’. Accordingly, the Financial Conduct Authority (FCA) is the regulatory body for financial services in the UK, which includes oversight of advice and promotion of investment products, and the actual investment products themselves. In their own terminology the FCA wants financial markets to be “honest, fair and effective so consumers get a fair deal.” The FCA maintains a register of those who adhere to their principles and rules (currently around 51,000 businesses) of which Quilter Cheviot is one.
The unregulated option…
Let’s turn now to those investments which are classified as ‘unregulated’. Whilst the FCA has stated that they should not be promoted to the general public, they can be offered to a certain clientele (such as. certified high-net worth or sophisticated investors). However, such individuals may still not necessarily fully appreciate the risks associated with the investment, and those classifications do not provide immunity to old fashioned sales tactics and unconscious bias. It should also be noted that to be classified as ‘sophisticated’ is via a process of self-certification with no process of formal due diligence carried out to justify such a label. Sadly, this has left many cashing in pensions, raiding life savings, and even refinancing their homes to participate in these schemes.
There has been a definite upswing in the number of ‘get rich quick’ scams, with a clear correlation to the rise in social media. It does not take too much research to find an influencer who attributes their glamorous lifestyle to a certain investment strategy which will, undoubtedly, be ‘unregulated’. This guarantee of lucrative returns naturally seems attractive versus the highly regulated alternatives. However, schemes which involve cryptocurrency and overseas property development usually involve an agent or ‘introducer’, and their commissions can reach an incredible 20% of the initial outlay. It’s also worth highlighting that such investments are usually classified as ‘niche’ by the FCA and do not qualify for the protection afforded by the Financial Services Compensation Scheme (FSCS) which can provide compensation cover of up to £85,000.
What can be done?
Here at Quilter Cheviot, we look after more than 36,000 private clients and our funds under management recently passed, we pride ourselves on delivering a bespoke and tailored approach which is designed to meet our clients’ evolving circumstances. Almost half our business has come via financial advisers, and we fundamentally believe in a collaborative approach to help individuals achieve their investment goals. And, of equal importance, is our firm belief in those asset classes which are regulated. So, whether you kick a ball in front of thousands, or just your children, we aim to create a plan which gives you access to some of the world’s best companies, and a financially sound future.