Nick Bamford: Advisers damaged by endless stream of scams

Nick Bamford MM 700

Like you, I get dozens of emails each day where the obvious action is to hit the delete button. This morning, however, I received an email that caught my eye. Here is part of the (unedited) content:

“I read on the internet that your company is active as a fund and investment company. Our company has a mandate to sell wind and photovoltaic projects in Romania (over 2.300 megawatt), return on equity between 15 and 18 per cent. We are looking for investors.”

I fully understand that there will be legitimate organisations seeking to raise equity capital. However, this does not seem to me to be the way to go about it. What I am most conscious of are the scams taking place currently. It got me thinking about a horrible experience one of my clients is going through.

He has been sold a pile of Ucis rubbish and stands to lose a significant part of his wealth as a result. More worrying is this rubbish has been sold to him by an authorised and regulated adviser, and I suspect the rest of us are going to have to pay for it via a future Financial Services Compensation Scheme levy.

It is almost as if it has become mandatory for advisers to sell Ucis products to people simply because they are so-called high-net-worth/sophisticated investors.

My client expressed the situation succinctly when he said: “These schemes are simply a device for turning my money into someone else’s money”. Indeed, I could not have put it better myself.

He has two property “investments”: one in a German nursing home and one in a German shopping mall. Both are entirely illiquid and worth a lot less than was initially invested. He also has an investment in an energy scheme based in Poland that looks like the one thing that is missing is any energy.

Furthermore, he was advised to make a futile investment in a new business venture of a relative of his adviser, which is now, perhaps unsurprisingly, worth nothing at all.

To top this all off he was also advised to invest in another collective investment scheme, the purpose of which was to identify and raise from the seabed sunken galleons containing treasure. I kid you not.

This man is not a stupid one by any stretch. He trusted his adviser and was with him for many years. He always thought the adviser was working in his best interests. Unfortunately, it turned out that could not have been further from the truth.

Why, when there are so many authorised and regulated funds with total transparency, are UK consumers still being sold these illiquid, opaque funds? As advisers, we all want to be trusted. However, every step forward achieved by doing something good is negated by five steps back when a consumer is “scammed” by these kinds of investment schemes. When, if ever, will it stop?

Nick Bamford is executive director at Informed Choice