Dobson Hodge No Comments

Pension and investment scams

In their own blog, The Pensions Regulator (TPR) has set out some food for thought with regard to the ban on pension cold calling (and the scams which are associated).

Such issues were well publicised in recent months with the ‘Jetski ScamSmart advert’ from the Regulator and the Financial Conduct Authority (FCA) warning how your pension could end up funding the lavish lifestyle of someone else.

Key points from TPR’s blog are that “The arrival of the ban should bring clarity for consumers that if the phone rings and the caller asks unsolicited questions about their pension, it is an attempt to steal their savings” (and) “if they are in any doubt whatsoever, they should simply hang up”.

Wise words!

There are other resources to which they refer – fca.org.uk/scamsmart for example will give guidance, warning signs of scams as well as detail on how you can check on the authenticity of schemes.

Where an enquiry raises concerns, contact can be made with Action Fraud on 0300 1232040 or via www.actionfraud.police.uk

Scammers don’t come with a siren nor do they explain what they are doing is fraudulent. What they offer will seem very logical and feasible but may involve weird and wonderful investments (with very feasible reasons why they are a good idea), moving the funds offshore or potentially needing to set up a business so that a specialist pension can be arranged.

As they say, “Buyer Beware”.

Ultimately, no cold calls should now arise (however there are many who say the ban doesn’t go far enough).

If, however, you unexpectedly receive a call about your pension (or any other investment for that matter), seeking a second opinion whilst also using the above resources should ensure that any traps are unsuccessful and you keep hold of the funds you’ve spent time saving.

 

Article written by Paul Stocks (@paul_stocks_ifa), Financial Services Director and Independent Financial Adviser

Dobson Hodge No Comments

Our thoughts on the pension cold calling ban.

Today saw the introduction of a cold calling ban in relation to pensions (as outlined at www.bbc.co.uk/news/business-46799038)

Pension cold calling has been common place for a number of years: prior to the introduction of pension freedoms in 2015 this invariably focused on ‘pension unlocking’ – where people were offered the ability to ‘cash in’ their pension or to get ‘cash back’ – typically using weird and wonderful investments whilst being unaware of the significant tax penalties in doing so.

Since pension freedoms came into effect in 2015, assets in pensions haven’t needed to be ‘unlocked’ for the sums involved to be accessed and therefore attention seems to have turned to using the funds to invest in similar weird and wonderful (typically unregulated) investments and whilst the tax penalties may not apply, the risk of losses and fraud do.

Given that the majority of regulated financial advisers would not use unregulated investments, investors are typically introduced to such investments via unregulated advisers who use cold calling to engage with potential ‘investors’.

There are many examples of investors losing their funds either due to fraud or because the investments have not behaved as expected.

This legislation therefore serves to draw a line in the sand whereby making a cold call is now an offence and potentially subject to a £500,000 fine.

As Tom Selby (AJ Bell) states in the BBC article “Prohibiting cold-calling is only part of the solution and will by no means eradicate the threat of scam activity altogether. Pensions remain a juicy target for fraudsters and some will inevitably look to circumvent the ban or simply ignore it altogether.” He goes on to suggest “anyone who (receives) a call out of the blue about pensions to simply hang up the phone.”

Whilst this therefore may not be sufficient deterrent for those who are engaged in any fraudulent activity, it will hopefully enable investors to realise that if they are ‘cold called’, rules are being breached and therefore they are hopefully wary and on guard and that ‘hanging up’ may well be sensible.

 

Article written by Paul Stocks (@paul_stocks_ifa), Financial Services Director and Independent Financial Adviser

Dobson Hodge No Comments

Investment beliefs pt 1 – The dangers of a lack of patience

Warren Buffet is generally seen as a very astute investor but his investment philosophy is relatively simple and a quote attributed to him is perhaps something many should heed – “The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient”.

Until relatively recently, the FTSE 100 had peaked in December 1999 and whilst it nearly breached 7000 points intra-day, its closing high stood at 6930 on the eve of the new millennium.

Since then, there have seen significant investment market headwinds – the dotcom bubble burst, the ‘second gulf war’ took place, the credit crunch arrived and the ‘great recession’ in 2008 soon followed and as a result, investment returns have been heavily dependent on their timing and whether you bought on a low or a high.

Investing is a long term process which involves stepping out from the security of cash and holding an asset which can go up and down in value with the aim that the risk taken will result in higher rewards – whether it be gilts (Government debt), Property (residential or commercial), bonds (corporate debt), or equities (company shares) – no investment is ultimately guaranteed and at the time an investment is made, there is no way of confidently knowing whether you are buying at a good or bad time.

Investment markets are fluid – absorbing huge amounts of information and converting that into an expectation which in turn drives investment values however sentiment will result in excessive highs (bubbles) and lows.

Those who invested at the ‘bottom of the market’ only know that with hindsight – likewise the same also applies to those who invested at the top and whilst both may have made ‘the right’ investment decision, external factors no one can ultimately influence will have an impact – however, the longer the investment is held the less important the timing generally becomes.

A very simple investment philosophy is to buy low and sell high – doing so returns a profit – and yet, time and again people will speak to us about a ‘no fail’ investment they are seeking our views on – often something which sounds too good to be true which has recently made lots of money and they want to get a piece of the action.

When things then don’t go to plan, they often panic, sell and regret investing in the first place.

Essentially, buying high and selling low.

Investing requires conviction and a belief and, in our view, completely differs from speculation. Speculating is taking a punt and trying to second guess something. It’s not an approach we feel will predictably build financial wealth.

Investing on the other hand is stepping away from the security of cash and seeking greater longer term returns due to the fundamental nature of financial markets – risk should be rewarded (as, if it isn’t, why would capital markets take the risk).

If an investment is sensible and appropriate but the markets turn against the investor – it doesn’t mean that the investment is no longer sensible and appropriate – it is more likely that short term noise is drowning out the fundamentals of investments and it is also reasonably likely that, given time, things will revert to type – the danger is that, by then, some may have ditched their investment and destroyed some of their capital in the process – potentially being one of those who have transferred their wealth to the likes of Warren Buffet.

As investment advisers, we take significant steps to ensure any investment risk taken is appropriate – both in terms of being able to take the risk and the risk levels being appropriate for the individual.

By managing the risk and ensuring the client has a pragmatic view of the investment process, we aim to ensure that clients don’t buy high and sell low and that, over time, they are the beneficiaries of our patience and that their wealth, as a result, benefits.

We don’t profess to know which way markets are heading and whether now is a good time to invest; what we do understand, however, is that ensuring any risk being taken is appropriate and that, given time, good investments will typically behave as expected even if, initially, things work against the investor.

So the next time patience wears thin, consider seeking advice before selling an investment as it might be that the investment is perfectly acceptable and suitable, and that you are running the risk of buying high and selling low.