AVOID MINI BOND SCAMS

TODAY’S BLOG

AVOID MINI BOND SCAMS

Following on from my piece about cash management services I mentioned the problem of a growing number of scams. Cash savers looking for better rates of interest are regularly duped into believing that rates of 4% or more are currently achieved for cash. THIS IS NOT POSSIBLE for deposit accounts UK Banks or Building Societies when the Bank of England rate is 0.1%. Of course a few years ago such rates were common, but not since the credit crunch. So be warned that something that says it is the equivalent of cash when it is nothing of the sort. Genuine interest rates will not be much better than the Bank of England rate – perhaps 2% more, but very little else.

Accounts offering “interest” of more than this are not genuine cash. They could be legitimate, but not cash. The rise of peer-to-peer lending is often a touted as an alternative to a regular bank. There might be some good ones (they may be) but on the whole this is a new business taking your deposit and lending it out to other businesses or individuals at a higher rate than they pay back to you. No different from a traditional Bank, except that a traditional Bank has been doing this for years and has learned the hard way that lending needs to be done carefully… and whilst I am no fan of Banks, just think about who might borrow from such a lender… someone that cannot, for whatever reason borrow from a high street bank. Hey presto, higher risk of default.

MINI BOND SCAM

Mini Bonds are yet another layer of this, except they dont have to relend the money to legitimate borrowers (people trying to fund their business or enterprise where a mainstream bank won’t play ball). They can lend the money to anyone, sadly often to the Directors of the company running the mini-Bond. Thousands of savers have got into problems with these mini-bonds. Tempted by higher rates of “interest” which was then passed on to some pretty despicable humans. These were banned in January, but this month made permanent after mini-bond firm London Capital & Finance collapsed with £237m of savers’ money.

WHAT IS A MINI BOND?

There is no legal definition of what a mini-bond is in the UK. Most companies that have offered them, including London Capital & Finance, borrow money from ordinary savers, promising them a fixed return well above the rate available on most standard saving products. The mini-bond firm is then largely free to do what it wants with the money. Many have lent investors’ cash to third party companies (which sometimes has the same directors), bought other risky investments such as race horses or wine, or funded property construction. A number of companies that raised money in this way have collapsed with millions of pounds of savers’ money unaccounted for. The FCA claims that mini-bonds are not within its remit, while criminal investigations for fraud are rare and prosecutions even rarer. As a result, investors generally have no protection if things go wrong, and fraudsters can operate with little fear that they will be punished.

ONLINE ACCOUNTABILITY

One of the many problems with google and facebook is that they carry advertising and seem unwilling or unable to vet adverts for authenticity, though I find this very hard to believe as whenever I have attempted to run even the tiniest marketing initiative on Facebook, my “advert” has to get “approved” before it can run. So… no I don’t believe that more cannot be done. Anyway, savers who are not as sophisticated as the scammers invariably google interest rates and are faced with adverts offering higher rates… what’s not to like? Well just the fact that risk isn’t really explained and its all framed to look, smell, sound and taste like any other Bank. You need to know the real risks that you are taking. A mini-bond is a great way to part with your cash on a permanent basis, something that the stock market does not do until Armageddon (as you will not get to a £zero value if you have invested in an index unless everything is worth nothing – and I can only imagine one scenario where that could occur… the sort of scenario where a Blofeld Bond-like villain (hence the cat picture…) is holding the world to ransom, or the actual obliteration of everything we know. If this ever happens, you won’t be worried about your ISA or pension.

In the meantime, please beware of scams, watch out for the villains, they are rarely as easy to spot as Mr Blofeld. This reminds me of an element of my work which is to act as a type of bouncer to your finances. Some have asked me about my photo, suggesting I look a little “mean” (perhaps they meant grumpy). It is deliberate – anyone that has engaged with me knows that I am having a little joke. As a bouncer, or gate-keeper part of my role is to ward off those trying to part you from your money. Its meant to be a little amusing, (ok not hilarious) whilst holding a very valid truth – that I am on your team as a defence against the rubbish that inevitably comes in your direction, its not if, but when…

As for the calibre of the villains, well the fictional ones are best left to the likes of 007, those that are actual criminals, well… I have to leave them to the authorities whilst doing what I can to prevent them coming anywhere near you.

As for Mr Bond, from the perspective of 2020 there are many aspects of 007 that hang heavily today. A friend of mine recently mentioned that he had rewatched the entire Bond collection with his children, he reappraised his favourite Bond and saw the films in a different light. When it comes to cash accounts, please appraise with care – make sure you know your Bonds from your Mini-Bonds. Here’s a trailer for 007 in “You Only Live Twice” (1967) who, let’s face it, has probably lived more than twice already.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

Spectre in Bond?

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Spectre in Bond?

As a financial planner, I’m told that I’m meant to know a thing or two about the “Bond market”….I am sure that you will have seen some of the marketing about the new James Bond film “Spectre”. As I write, the film has grossed over £48m in its opening weekend. James Bond has been one of those familiar features of British culture, with strong themes of Queen and country… notably drawn upon in the London 2012 Olympic opening ceremony.

Despite this Bond is a character that has required considerable updating, partly due to the technology employed and partly due to changing attitudes in a more enlightened society. Here is the trailer for Spectre.

The struggle is a familiar and shared one, yet such attitudes are deeply embedded in culture. The recent film “Suffragette” whilst shocking to some extent by todays standards, the more shocking details appear in the final end credits which reveal the year in which different countries gave women the vote.

Ladies and Gentlemen… not boys and girls

Anyway, back to Bond, despite the suggestion that this Bond is rather different, sadly it is simply rather disappointing. Perhaps I have become more critical, but I found myself feeling completely disconnected from the initial opening action scene a fight and flight pursuit in Mexico. This feeling persisted throughout, akin to a formula much like painting by numbers, whilst piecing together a finished product, felt disjointed and somewhat fraudulent. There is some dreadful dialogue and utterly unbelievable explosive consequences, of course.

However most disappointingly was the hype around the appearance of Monica Bellucci as the oldest actress to play a “Bond girl” Lucia, who was 50 when the film was made. Disappointing on several counts, that the term girl is continued to be used to describe a woman, (or is Bond a boy?). That she is in the film for probably no more than 2 minutes, her role is entirely superficial for moving the plot along. Strikingly, her character serves merely to play the stereotype damsel in distress that takes a split second for Bond to reassure and to lead to bed. Ultimately Bond’s next conquest is the much younger Madeleine Swann, played by Lea Seydoux (29 during the shoot).

Whilst the rest of the world is moving towards more equal rights and attitudes about gender, Bond remains clearly confused, we get to peak into his flat, which appears to reflect a man without any significant connections, whilst frequenting a world of high living, the reality at home is rather different.

Given this, I am left feeling that Bond has been dealt the inevitable blow of consumerism dictating art… as is increasingly becoming commonplace. It would seem that there is now very little attempt to be subtle about product placement, with the film serving more as a long advert (and long it is at 2 hours 28 minutes). The question that we are left to reflect on is what does it say about us if we want to be Bond? as GQ seem to think many men would wish. Despite being all the action, there is some incredibly lazy thinking.

So with that in mind, here is a video I came across about how expensive it is to live like Bond… should you wish to do so.

Dominic Thomas
Solomons IFA