Safety first? When it comes to investment, how often is peace of mind overlooked, asks Richard Harvey?

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A few months back, a new movie came out called “The Shallows”, which features a terrified swimmer stranded on a sandbank being eyed hungrily by a circling shark. And the tide’s coming in…

Ever since UK interest rates have declined from ‘interesting’ to ‘you’re-having-a-laugh’, investors have been rummaging around the internet for schemes which promise a livelier return.

The trouble is that many of these schemes are promoted by the financial world’s equivalent of the Great White.


While the voice of reason whispers in their ear, “if it looks too good to be true, it almost certainly is”, domestic pressures may demand that investors at least put some of their money into plans promising to outperform the market.

Going for broke

In the case of Channel Islands-based Providence Global, it was a juicy 7.5% if you bought a bond linked to the company’s worldwide financial activities. An earlier bond, offering 8.25%, apparently hoovered up £5m from 500 investors.


In September, it was announced that Providence Global had gone into liquidation. It is not yet known how many investors have seen their savings wiped out, because the scheme was not covered by the Financial Services Compensation Scheme.

Whilst it is earnestly to be hoped that no IFA put client money into Providence Global, we must give the FSCS their due, they have long warned that they will not stump up if one of these get-rich-quicker wheezes goes down the tubes.

I have a chum whose IFA put about a third of his pension pot into four unregulated collective investment schemes, admittedly before the FSCS announced its clampdown.


He’s still waiting to see if any of them will deliver any kind of return at all, and has been warned that one of them – in which £10,000 of his savings was invested – has about as much chance of making money as Sir Philip Green has of being named Philanthropist of the Year. Not least because Grant Thornton are now involved trying to establish if there’s anything in the till, apart from a dead moth and a rather large IOU.

Most clients are pragmatic however, and understand that IFAs in their quest for better-than-market returns within clients’ portfolios may look to be bold and creative.

Risk Management


Certainly, my current IFA has been absolutely explicit in what I can expect, on the basis of my attitude to risk. This was revealed in the laborious form which I completed, explaining my current circumstances, almost down to my inside leg measurement and what I like on my toast in the mornings. But I’m sure that readers will know all too well about these tolerance to risk assessments for sure.

If it’s too good to be true, it probably is

Highlighting the Providence Global debacle, Anne Ashworth, the personal finance editor of The Times, suggests that maybe the FSCS should be given a larger promotional budget to shout out: “If it looks to good to be true, then it probably is”. But that would generate plenty of discussion about where that extra budget would come from.


And it’s also incumbent on IFAs to deliver the same message to their clients, accepting that many (most?) already do.

The vast majority of savers and investors can be put firmly into the “unsophisticated” box when it comes to understanding even the basics of investment. But, equally, most of them also don’t expect their IFAs to perform miracles.

Simply keeping their savings safe, ensuring they can sleep at night and achieve their goals in life will do nicely.















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