ORDINARY investors are at risk of being left unprotected and out of pocket because they’re diving into products touted by unauthorised firms.
The dangers of doing business with unregulated companies selling plans in the UK have been highlighted by the City watchdog amid reports that investment cold-calls are on the rise.
One Scotland on Sunday reader, Robert Wilson of Edinburgh, was recently on the receiving end of an unsolicited call from a firm promising an investment return of 9.25 per cent.
But on investigating the firm offering the plan – Anglo Wealth – Wilson discovered that it had been the subject of a warning issued by the Financial Conduct Authority (FCA). The regulator said it believed that Anglo Wealth had been “providing financial services or products in the UK without our authorisation”, adding that investors should be “especially wary of dealing with this unauthorised firm”.
The risks of investing through an unauthorised firm lie partly in the loss of protection. When an investor takes out a product from an unauthorised firm they don’t have the right to make a complaint against it if something goes wrong or if they are a victim of mis-selling, the Financial Ombudsman Service (FOS) confirmed. The same applies to the Financial Services Compensation Scheme. “I wanted to pursue this, not just for my sake but because there are lots of victims of high-risk investments who have lost substantial amounts of money and got into a lot of trouble,” said Wilson, who is retired.
“I have no appetite for risk and I have been a victim of cold-calling before when I was conned into investing in carbon credits.”
Anglo Wealth claims it is backed by insurers including Columbus Life in an arrangement that protects investor capital.
“It was a very polished presentation,” said Wilson. “There are directors on the board with very impressive backgrounds and it’s difficult to believe that they would be involved if it were a scam.”
Asset Life now appears to be the vehicle offering the fixed income plan, rather than Anglo Wealth. Asset Life is also unauthorised, again leaving investors short of protection. But Terence Mitchell, a director of both Anglo Wealth and Asset Life, claimed it had secured a Section 21 sign-off, which exempts unauthorised individuals or firms from rules banning them from promoting investment products in the UK.
And despite the FCA warning, Mitchell insisted that Anglo Wealth had done nothing wrong. “They put that warning up there because, at the time, they didn’t know what Anglo Wealth was or what it was doing,” he said. “Once they are satisfied – and they will be – there will be no more calls to keep that warning in place.”
The sales literature for the fixed-income plan compares it with regulated cash-based products. Yet while the product is described as a loan the investment provides “access to a broad range of opportunities” including currencies, commodities and equities that are normally available only to institutions.
Investors wanting to cash in the plan before the three-year term ends face hefty penalties – 30 per cent of their capital if they do so after one year, 20 per cent after two years and 10 per cent in the final year. If you’re on the receiving end of a cold call regarding an investment plan and you’re unsure whether to proceed, bear in mind that “unsolicited real-time promotions” are banned by the FCA.
If you want to check on the company and find out if it’s regulated you can search for the name at www.fca.org.uk/register, which lists firms and individuals authorised by the City watchdog to do business in the UK and undertake regulated activities. Call the FCA’s consumer helpline on 0800 111 6768 if the company claims to be authorised but doesn’t appear on the register. If it isn’t authorised, steer well clear.
Alan Steel, chairman of Alan Steel Asset Management in Linlithgow, said: “In over 40 years of giving investment advice I have found that when something is too good to be true, does not stand up to scrutiny and has to use flowery language in the selling process you should avoid it completely,” he said.