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Unregulated and Non Mainstream Investments

March 14, 2019

Have you been persuaded to buy unregulated or non-mainstream funds?

Sales of unregulated collective investments have soared in recent years as some advisers have sought to provide alternatives to conventional investment funds. These funds cover a wide range of investment areas such as overseas property, forestry, student accommodation and life settlements. Although these areas are legitimate the UK regulator, for one, has expressed grave concerns that these types of investment have been oversold to private investors, who are usually unaware of the risks involved.

There have been several scandals involving life settlement funds and more recently LM Investments a scheme investing in Australian property markets has gone into liquidation to the tune of several hundred million Euros. Another fund which was based in the Cayman Islands, Axiom Legal Financing, was placed into liquidation following allegations of fraud and mismanagement whilst Brandeaux one of the largest property funds investing in student accommodation has a £900 million fund under suspension whilst trying to dispose of assets. Some investors have been waiting over two years to exit these suspended funds.

Advisers quite often do not understand some of these types of funds and there can sometimes be a lack of visibility and liquidity with unrealistic return expectations. There may be a place for this type of fund within the portfolio of a high net worth sophisticated investor but that is about it.

So what are the reasons that these types of products have been oversold here in Spain, particularly to unsuspecting QROPS clients. We guess the answer lies in the lack of regulatory enforcement and downright greed of some advisers who ignore client needs in favour of the extra commissions and fees these types of products generally offer. Who in their right mind would advise a pension client to invest 100% of their retirement fund into illiquid or higher risk products and yet we come across this scenario on a regular basis. Clients whose pension funds have been decimated because their advisers ignored good practice and chose greed above all else or quite simply were totally ignorant of the risks associated with this type of investment.

Why would an adviser recommend for example, an unknown unregulated fund based in the Cayman Islands against a Blackrock or a Jupiter or a Fidelity fund? Why would a financial adviser not assess a client’s risk tolerance before recommending a large part of a portfolio be put into this type of fund? Shouldn’t pension trustees accept some responsibility also, aren’t they supposed to approve the investment recommendations made by an adviser for a QROPS retirement plan?

And then we find firms unwilling to accept responsibility for the actions of their advisers making it as difficult as possible for clients to seek redress, hiding behind a network arrangement or some other structure to try and deflect criticism or legal challenge.

If you have suffered from this type of pensions misselling within your retirement plans we suggest you speak to one of our expert financial planners. They may be able to help you in your search for compensation and help salvage whatever remains of your pension fund for your future benefit. For a full review contact 900 102 374 or email enquiries@fiduciarywealth.gi.