If it looks too good to be true...

Matthew Harrington
Financial Planning

It is fair to say that 2020 has been quite an extraordinary year in many ways, presenting new challenges for people from all walks of life.


For investors and savers, that challenge is currently finding suitable options to provide a return on their money. At one end of the scale, with the Bank of England reducing the base rate to 0.10%, interest rates on deposit accounts are not overly attractive, whilst at the other; stock markets have been very volatile through the year to date.

Because of this, some investors may start to cast their net wider in the hope of finding products offering a higher level of return. Some of the types of products that we have seen in recent years attempting to attract investors with promises of high annual returns are investments in hotels or student accommodation, storage pods, leisure developments, parking schemes or forestry.

Whilst the returns may seem attractive, often these products are high risk and unregulated, which means that if things go wrong, it can be very difficult to get your money back. Remember, if it looks too good to be true, it probably is.

For those comfortable with investing directly, there are some things you can do to help protect yourself;

  • For any savings account or investment product, always ensure that either the Financial Conduct Authority (FCA), or Prudential Regulation Authority (PRA) regulates it.
  • You should also check that any product is covered under the Financial Services Compensation Scheme (FSCS). If it is unclear, ask the product provider, speak to your adviser, or contact the FSCS directly.
  • When it comes to the FSCS, make sure you are clear on the compensation levels applicable to the product in question and what you may be entitled to if things don’t go to plan.
  • Understand the cost and charges that you are paying. Are there any upfront fees? What is the annual cost and how do they apply? Is there a penalty for withdrawing your money early?
  • Is there a cancellation period? If you change your mind, or have a change in circumstances, is there a window in which you can withdraw your money?

Bodies such as the FCA, PRA and FSCS are there to protect investors and maintain high standards across the industry.

For those who prefer the reassurance of professional advice, as independent financial advisers who are authorised and regulated by the FCA, we can help guide you in your investment decisions. Our aim is to understand your investment goals, research and explore the whole of the market, and provide a recommendation tailored to your objectives – and of course, all in line with the points noted above. 

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