I get a lot of emails each day. Plenty of these are from fund managers seeking to promote their latest offering.
Some of these investment emails are subtle reminders of expertise, describing the latest House View of the fund manager or inviting me to join a conference call.
Others are blatant adverts featuring the latest performance figures, discounts on charges or news of awards.
When these come from established and reputable fund managers who are authorised and regulated by the Financial Services Authority they get read and filed in an investment email folder for future reference.
And then there are the other investment emails that land in my inbox each day.
These come from unregulated fund promoters, typically based overseas, that need to use UK authorised and regulated IFAs as a conduit to access UK investors.
Because they cannot promote their unregulated funds directly to the public in the UK, they need to convince IFAs to recommend them on their behalf.
These emails vary from the worrying to the outright scary. They either get deleted or, in the case of the worst examples, they are put into my ‘rubbish investments’ folder.
An email that has come through in the last ten minutes in a case in point.
SIPP approved green investment with 20% returns
It came from a Gmail email account – the first sign that raised my suspicions. The email itself was singing the virtues of an ‘ethical’ investment in ‘green oil’.
We have blogged about green oil before, so rather than writing again about the specific risks of this (very) alternative investment, some of the other email contents are worth pointing out.
The subject line of the email was “SIPP approved green investment with 20% returns”. Every rational investor knows that, in the current economic environment, the only way to get a 20% annual return on an investment is to take an incredibly high level of risk.
There is a clear and unbreakable link between risk to capital and the potential for reward. If as an investor you want the potential for higher returns, you have to accept a higher risk to your investment capital. Even then, there is no guarantee that these returns will materialise.
The mention of the ‘SIPP approved’ nature of this investment is also a worry.
We are concerned that some offshore investment schemes are being promoted primarily to SIPP investors because this provides an easier route to accessing cash for investment.
Trying to convince an investor to part with money from their bank account tends to require a more convincing argument than focusing on the less tangible contents of a pension fund. If offshore investment scheme promoters view SIPP money as ‘easy’ money, any mention of ‘SIPP approved’ in an investment promotion like this should raise suspicions.
Whilst identifying some investment promotions as ‘rubbish’ is simple (if you know what you are looking for), there is a good chance that a small number of IFAs are receiving these and then recommending them to their clients.
There are several possible reasons for this happening, including a desire to recommend something special to clients in the absence of the potential for strong returns from conventional assets or the availability of a more opaque commission structure from unregulated investments.
Unregulated and overseas investment schemes are not suitable for the overwhelming majority of retail investors in the UK. We find that even our high net worth and sophisticated investor clients have no need to expose even a small part of their wealth to the various risks associated with these schemes.
By sticking to conventional investment schemes, based in the UK and authorised by the FSA, UK investors can receive the maximum level of available protection in terms of the advice they receive and the assets in which they invest. They miss out on nothing by not accessing overseas unregulated investment schemes.
Unless something changes dramatically in the nature of investment advice in the UK, emails like that described above will continue to be deleted or filed in my ‘rubbish investments’ folder.
Photo credit: Flickr/net_efekt
