Business beaver

When I was first asked to contribute to this column, my immediate reaction was panic. What interesting things can an Independent Financial Adviser possibly have to say? I then looked back at the last few working days and quickly came to realise that in actual fact there isn’t enough space in the column to fit everything in.

I will however mention an interesting conversation I had with a client of mine who lives in Spain. She is a lovely lady, and we manage a portfolio of investments for her, nothing complicated, just a simple portfolio for a cautious investor. However, she recently telephoned me to say that she had just committed to an investment in Spain, as recommended by her friend, and wanted my opinion. Why do clients always phone after the event? It would be much easier if they contacted me beforehand.

The investment in question seemed quite interesting. It involved a company that I had never heard of, and who deal only with clients by invitation! Apparently, they are authorised by the Financial Services Authority however I’ve been unable to trace details on the FSA’s website. Little alarm bells are starting to ring at this point. The investment, according to my client, is in money markets and guarantees an income of 9% p.a. Excellent you might think. For me, the alarm bells are ringing a little louder now. And the best bit? My client’s friend put £40,000 into the investment last month and it has, apparently, already grown by £7,500. That’s a monthly return of 18.75%, as well as a guaranteed income of 9% p.a., and all of this from low risk money markets! The alarm bells have certainly now moved on from ‘gentle ringing’ to the combined sounds of Big Ben and Westminster Abbey.

Thankfully my client only committed £1,000. But that is not the point. It is still £1,000 of her retirement funds that she cannot afford to lose. My initial reaction is that this is a classic case of preying on vulnerable individuals at a time when they are likely to overreact with investment decisions. The current economic situation has made most investors nervous but we have seen a raft of dubious so-called ‘investments’ emerge. We all need to be careful at the moment. Don’t make snap decisions on any investment issues and before talking to your investment adviser. And, most importantly, if it sounds ‘too good to be true’ then it probably is.

Sticking to these simple rules should mean that we avoid all the ‘sharks’ that are out there. As for my client, the investment cancellation request is on its way!

This article originally appeared in the May 2008 edition of Wiltshire Business

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