Detective: Top 5 'get rich quick' cons you need to avoid

Pensioners have greater share of UK wealth than under-45s, study shows | The Independent

Unscrupulous financial advisors are putting tens of thousands of people’s life savings at risk by encouraging them to invest in 'get rich quick' schemes.

The worrying rise in savers being conned out of their pension pots comes after the government introduced reforms giving people more freedom over their retirement cash.

Innocent savers are being preyed on by cold callers and unregulated 'financial gurus' claiming to make their money grow faster in dodgy investments in everything from self-storage units to overseas hotel projects.

The Pensions Detective has now shared her top tips for avoiding the pitfalls of some of the most common ‘pension freedom’ investments and some of the tricks used to part people with their hard earned cash.

Cordula Lenehan, 49, head of ACL Consultancy , is involved in recovering over Sh200million in mis-sold investments a year.

She earned her nickname by recovering millions for her clients over the years and has run her no win/no fee business based in the north west of England for the past seven years.

She revealed most of her work comes from recovering money for people who have been advised to transfer their pensions into a SIPP - a Self-Invested Personal Pension or Family Pension Trust.

She said: “Investment firms or unregulated individuals act as introducers; they contact investors, often by cold calling, asking them to transfer their pensions.

“The pitch is a promise of a free pension review; they provide lovely shining brochures and have bounds of charisma. However, they then pass on the investment details to an official Independent Financial Advisers themselves and invest your money often at high risk so they can gain more commission.

"But if the investment goes belly up, they make a massive effort to hold your hand and assure you all is well, but rarely do they hang around and face the music when matters become terminal."

She explained that since the government changed the pension rules many people, typically between the ages of 35 and 65, from all walks of life are being affected by bad investments.

The Pensions Detective has highlighted five of the most common bad investment offers that will likely end in tears:

1. Overseas hotels

"The promise is to own a share in a luxury hotel that’s full for 90 percent of the year and provides investors with 10 percent annual return. Glossy brochures are sent with pictures of sun kissed beaches and palm tree-lined streets.

"The reality is the hotels are years off being built, hampered by planning regulations and matched investment or the promised income is diminished by management and SIPP charges.

“While it sounds like a fun investment, it’s very difficult to keep track of progress because the resort will be thousands of miles away. Contracts are almost always written in a foreign language and should you want to contest, you are at the mercy of an overseas legal system which can be incredibly complicated and very expensive.”

Her tip: Beware if your contract comes in a foreign language and the scheme is overseas.

2. Investing in America

"Wow. In the last year, we have seen an increase of 25 percent in claims relating to Invest US. It is an affordable housing project in the USA which is massively overstated by investment firms because of the commission they get on the back of it.

“In general people believe bricks and mortar are safe so it’s easy to mislead and people are told the US government back it but it is just a sale’s pitch. The scheme has featured on ITV’s Tonight and there are many published reports about investors losing their savings on it.”

Her tip: Stay clear if there may be an investigation or media story about the investment.

3. Wine and agricultural crops

“Another one that looks great in the brochure is wine. You are told you are going to own a hectare in a vineyard in top region in Spain and the wine will be produced and stored in a controlled environment, you are assured as it matures so will your investment.

"But what is not stated are variables such as poor weather, we are talking about live crops so there is always a strong chance a harvest can falter. You have to invest for six or eight years, with the promise bigger returns will be made over eight years. A lot of the investment firms want you to invest in the eight year scheme as they know it’s over the six year time limit you have for making a claim against them.”

Her tip: Check the firm on the FCA register as fraudsters quite often brand themselves as Wealth Management or Financial Services firms.

4. Self-storage units

"The Serious Fraud Office has launched a wide-ranging investigation into the sale of storage "pods" which has put over £120m of investors' money at risk The investments involve purchasing self-storage containers and then renting them out. They became ‘the’ trendy investment a few years ago, and yet we still see firms pushing them as great investment, sometimes saying they are backed by the HMRC. Always avoid as returns are way, way too unpredictable or none existent."

Her tip: Warning bells should ring if you have been cold-called by an investment firm.

5. Green energy

Mrs Lenehan said: “This appeals to people because it’s environmentally friendly. Firms are clever at planting seeds about green fuels being this great alternative to crude oil but you can’t physically monitor it. Firms jump on the back of the government’s green energy pushes and people often say: “right, where do I sign up?” But there’s rarely a link between government policies and the high-risk investments made by these firms."

Her tip: Double check if you have received correspondence or annual updates and statements which you don’t understand and valuation of your investment is not going up – or it’s going down.

She added: "Many people don’t understand the difference between regulated and unregulated financial advisers. Unregulated firms call themselves ‘wealth managers’ and that they work in ‘financial services’ so it’s easy to be taken in.

“It’s heart-breaking speaking with people when they realise their hard-earned money has been wasted through dodgy investments. Please get your investment checked even if you are out of the six years!

“We assess our clients’ claims before we pursue their financial advisers and have a near 98% success rate. Because most of our clients are from normal backgrounds they don’t have pots of cash for legal fees so we offer a no win, no fee arrangements.

“Before anyone invests they need to make sure they speak with a regulated financial adviser who understands where their money is going.

Only take risks you can afford to lose and act only on written accommodation. Never agree to anything on your doorstep, don’t engage with a cold call. Using an unregulated firm rather than a regulated financial adviser is like playing the lottery with your pension.”