An unregulated introducer has come under fire again for repeatedly promising “guaranteed” returns on investments.
Money Marketing reported on promotions from Success Investment Group last year that “assured” returns of 10 per cent on investments in care home rooms.
Since then, Money Marketing has noted at least two further promises of “guaranteed” returns on a number of promotions, the latest coming last month. Two relate to property investments in Liverpool and Newcastle.
Success also promotes a number of other esoteric investments including truffle farms, hydroponics and cryptocurrency, with projected returns often said to be above 15 per cent.
Success is run by Andrew Pritchard, who was formerly a financial adviser at Cornwall-based firm G&W 5 Ltd. The FCA cancelled G&W 5’s permissions in 2010 after the firm lost a Financial Ombudsman Service case against it but failed to pay the compensation due, and failed to have approved persons in senior positions when directors stepped down from their roles.
Pritchard also has previous directorships listed at two horse betting syndicates – The Winners Advantage and MyBet4U – and a number of other credit unions and investment schemes in the South West including Kernow Loans Ltd and Cornish Debt Solutions.
Success Investments appears to operate out of a virtual office space on Regent Street, London, and lists just one testimonial on its website: from former drummer in pop band Marmalade Alan Whitehead.
Penney, Ruddy and Winter financial planner David Penney says: “The schemes appear to be offering a guaranteed or assured return ranging from 8 per cent per annum upwards with a guaranteed return of capital at the end of a fixed term. However, there is no information on the basis of these guarantees. What does the guarantee consist of? There is no mention of any insurance or means of underpinning the guarantee if the company becomes insolvent.
“If these are guaranteed financial products, why are they being promoted by an unregulated firm? I would encourage people to avoid these schemes at all costs.”
Pritchard says developers are using “guaranteed” structures for property deals to make them more attractive, and Success conducts due diligence on the financial backing these have.
He says: “Over the past few years, commercial and residential property developers have realised that investors have an appetite for a strong yielding investment over one that has just the potential to deliver capital growth with lower yields.
“Therefore, some developers have structured property deals with guaranteed yields in the short term (typically one or two years) by offering investors contractual developer guarantees to motivate them into purchasing their units as opposed to developments that do not offer these developer guarantees.
“At Success, we review many developments and the ones that offer these developer guarantees of early yields must have a supporting balance sheet to underpin their guarantees.”
After Money Marketing highlighted the promotions involving promises of guaranteed returns to Success, they have been removed from the firm’s website.
The FCA’s conduct of business rules state that a product should only be described with terms like “guaranteed” or “secure” if this is a “fair, clear and not misleading” description of it.
The firm must also communicate “all of the information necessary, and present that information with sufficient clarity and prominence, to make the use of that term fair, clear and not misleading”.
While these rules apply only to regulated firms, advisers would also have to make sure that any communications from unauthorised introducers like Success, and relied upon by their clients, met those standards.
The FCA confirmed to Money Marketing it would not have jurisdiction over promotions made by unregulated firms, however.
Juno Moneta Capital Management financial planner Andrew Boyt says: “The ethical dilemma for most advisers is the use of the word ‘guaranteed’, which is problematic in respect of any investment in real assets.
“We have seen the turmoil caused in all asset classes by the financial crisis in 2008. Property was not insulated from that event, nor would it be should it happen again.
“Any paper guarantees are only as strong as the guarantor. Armed with that knowledge, would it be right to promote such an investment to unsophisticated investors by having the word ‘guaranteed’ in bold letters all over the promotional material?
“My instinct would be not to do so.”