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TCFP32: Oxymoronic sophistry

by | Aug 3, 2018 | General News, Investment News

I spend a little time each week surveying the wild and wacky investment opportunities that come my way.

The vast majority of it is complete crxp but, having got friendly with my thesaurus, I will now be referring to it as oxymoronic sophistry.

Knowing the calibre of the people behind these “investments” I have no doubt that oxymoronic sophistry will be taken as compliment. Whilst entertaining for me, there is a sinister side to this for you.

Not everyone has the protection of a trusted adviser to help them steer clear of these “investments” which very often promise “uncorrelated returns” (as if you should care) or “sure fire double digit returns” (dear Lord) or “capital protection” (which only a Government that prints its own money can provide, and then, only sketchily).

Regrettably, far too many people don’t understand or know to ask about these promises and simply take them as read.

And before they know it, their money is tied up in a Cape Verde holiday home, a Papua New Guinean forest, Brazilian social housing or a soon-to-be vineyard (aka a field). There are even relatively sensible looking UK-based efforts like student accommodation.

Soon enough, unforeseen “problems” arise and that leads to investors being unable to withdraw their money. Before long, the investment is insolvent, and the money lost for good. Well, to the poor investor at least. If you look closely you’ll notice that everyone else involved has done rather nicely thank you. Almost exactly to the tune of the amount of money invested…

But now it gets really dark and horrible.

It transpires that the investment wasn’t regulated so there’s no immediate route for recourse. A lucky few, who invested via an idiot adviser, can claim on the compensation scheme.

And so, in the last two years, the compensation scheme has paid about £200m+ to the victims of these “investments”.

Hurrah, you might think. But please don’t. Who do you think, dear reader, funds the compensation scheme?

That’s right – the compensation scheme is funded by all adviser firms. The good ones have to pay for the bad ones. And those levies are a growing cost of doing business and are reflected in the fees we charge you.

The authorities have steadfastly refused to ban investing in these unregulated investments. They could do so easily. There are plenty of investments that are not allowable in pension and ISAs, domestic property for example.

Instead there’s a regime of checks and qualifications that should mean that only the richest of the rich are eligible to invest. But they know that’s not what’s happening and have £200m of evidence to prove it.

They’re not even fiddling while Rome burns.

Oxymoronic sophistry indeed.

future proofing your finances

advice@twonclosefp.co.uk

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