Whatever acronyms they now go by, there is no disguising the fact that unregulated investment schemes are a murky business.
Taking a closer look at some of these schemes this week hammers home why so many consumers are distrustful of the financial services industry. It is a toxic mix of fat commissions, over-complicated products and overly optimistic returns that have led a minority of advisers to missell these high-risk plans.
There have been schemes investing in environmentally-friendly farm machinery that did not make any money and ones that invested in UK film companies that did not even make any films. There have been tax rebates that have been clawed back by HM Revenue & Customs and investors who have ended up owing four times what they originally invested.
And while advisers were not supposed to promote such schemes to retail investors, this has not stopped some flogging them to pensioners and those on state benefits. It is shocking to note the FCA reckons only one out of four of these advised sales is “suitable”.
But what really sticks in my craw is that those who have mis-sold these schemes in the first place are now getting a second bite of the cherry by pursuing mis-selling claims on behalf of investors – for a fee, of course.
One example is Rebus Investment Solutions, a claims management company that specialises in this area. It will not surprise readers to learn that its business development manager was effectively banned by the FSA last year after giving “misleading statements” about unregulated investment schemes.
Of course, there is a reason why people say poachers make the best gamekeepers: they are in a good position to identify and advise those who have been sold these complex schemes. But it rankles that investors who have been shortchanged once are now being asked to pay a further £1,500 for this specialist help, as well as lose a further 20 per cent of any redress won.
Still, despite the regulator’s best efforts to stop advisers promoting these scheme, it seems some will simply try to bypass advisers completely and sell directly to investors.
Just 24 hours after the latest FCA clampdown, I received an invite to learn more about the “exciting” investment opportunities one scheme was offering, which “promised” returns of 20 per cent a year.
As this scheme invests solely in social housing in Brazil, this fact-finding mission included an all-expenses paid trip to the country to see how the property market was booming ahead of next year’s World Cup and forthcoming Olympic Games.
The minimum investment is £23,000 and, as with any other overseas property investment, I assume there will be extensive gearing and currency risk. Not the kind of investment a national newspaper should be promoting.
It seems the problems created by UCIS or NPMIFs will not be disappearing any time soon.
Emma Simon is deputy personal finance editor at the Telegraph Media Group