BLOG: Don’t be fooled by marketing speak
With financial services products and investment markets seemingly becoming more complex day by day many investors have turned to alternative investments to hold through their pension plans (SIPPs) in the hope of catching the next ‘ big thing’.
There are numerous firms promoting these alternative investments which can include:
• Bamboo plantations
• Renewable energy funds
• Carbon credits
• Off plan hotel rooms
• Fractional ownership of storage units
Sadly some of these investments have failed spectacularly with several of them making headlines in the financial publications in recent months.
The industry regulator, the Financial Conduct Authority (FCA) has published guidelines preventing the promotion of some of these investments established as Unregulated Collective Investment Scheme other than to qualifying experienced investors, but many of the investments are not covered by the guidelines and continue to be promoted to the public in general.
We would recommend caution when considering these investments. Since they are not regulated the accuracy of claims made in any marketing literature should be independently verified before being believed. A term often used by investment promoters is ‘SIPP approved’ and we should consider this term further since it does not provide the reassurance it projects.
The FCA, which regulates SIPP providers does not endorse or approve any investment as suitable for SIPPs, nor will HMRC provide any such approval checks.
There is no centralised body representing the SIPP industry that approves an investment as being capable of being held in a SIPP. In fact acceptance of an investment is entirely at the discretion of each individual SIPP provider and this will only be after it has carried out its own due diligence on the investment itself. Each SIPP provider will have its own processes and some firms due diligence might be in more depth than others. Thus the marketing term of ‘SIPP approved’ simply means that one SIPP provider has agreed to accept the asset.
When considering any such investment, an individual should ask for written confirmation from the party which has given the ‘approval’ and check the wording carefully. Confirming the asset can be held is far from an endorsement or approval. They should also check with other SIPP providers as to whether the investment would be accepted by many rather than a single SIPP.
In summary, the onus is very much on the investor to satisfy themselves that they are comfortable with the investment rather than rely upon meaningless marketing statements that are designed to provide comfort which carry no weight or substance at all.
Martin Tilley is director of technical services at Dentons Pension Management Limited