Timely warning on investment from LCB (Vinothèque)

Timely and very useful warning from Jane Renwick, general manager of Vinothèque – the fine wine storage division of London City Bond, highlighting some potential dangers of wine investment:

 

Dear customer

Over the past few weeks it has come to our attention that numerous companies are cold calling our private customers using underhand tactics to buy or sell wines.  May we strongly suggest that you take some time to read information that is supplied by Jim Budd, to ensure that these are legitimate companies at http://investdrinks-blog.blogspot.co.uk/.

You may also wish to peruse the below points:

Investment Fraud

This information has been produced to provide hints to avoid falling victim to investment fraud. Please take a little time to read through.
 

• Out of the blue – Remember that authorised investment firms and brokers do not use cold-calling as a sales technique, so if you receive an unsolicited telephone call from a person or organisation you do not know, offering you an investment opportunity, take extra care.
   
• No thanks – You can avoid many unsolicited telephone calls by registering your phone number with the Telephone Preference Service (TPS). The TPS is the official central opt out register for people who do not want to receive unsolicited sales and marketing calls. This is free to do by calling 0845 070 0707 or online at www.tpsonline.org.uk
   
• Now or never – The salesman (they often call themselves ‘’Brokers’’ or ‘’Portfolio Managers’’) may put you under pressure to make a quick decision to invest – for instance ‘’this is the last available and if you don’t buy today it will be gone tomorrow’’. Don’t be forced into making rash decisions. Take your time to think it through, speak with your family, an independent financial advisor or a similar independent professional. It is probably better to lose an opportunity than to lose your money.
   
• All that glistens – The commodities offered in investment scams are often unusual – plots of land, fine wine, carbon credits, coloured diamonds, rare earth metals, or gold-mining to name but a few. Unlike quoted stocks and shares, it can be difficult to find out the underlying value of such commodities. Should you be temped by such an offer, make sure you really know the true value of what you are considering buying – don’t take the salesman’s word for it.
   
• Risk and return – The general rule with investments is that the higher the return offered, the higher the risk of losing your money. High return investments with minimal associated risk do not exist. Don’t be impressed if the salesman tells you how much money you would have made if you had bought shares in Microsoft or Google when they first came to the market – you won’t be buying these shares after all.
   
• No way out – Ask about the exit strategy – how can you realise your investment and receive your return? Will a national housing developer really want to buy your small plot of land in the middle of a field in Kent? Will a multinational microchip manufacturer really want to buy your 1kg of Gadolinium? As with any capital investment, you can only make a profit if you sell on for more than you bought in – ask yourself where the market is.
   
• A racing cert – If the commodity is such a certainty to show a profit in a relatively short timescale, ask yourself why a company would want to sell it to you. Surely they would hold on to it and keep all the profit themselves? I would.
   
• Too good to be true – If it looks too good to be true it probably is. Professional investors don’t get it right all the time and the risks to the armchair investor are greater still. Hedge funds may be able to afford losses on some of their more exotic investments, but can you?

Should you require assistance please contact a member of our Customer Services team on 0843 659 3617 or vtcustomerservices@lcb.co.uk who will be more than happy to help you in any way they can.

Kind regards

Jane Renwick

General Manager

Wine Investment Association: why I can no longer support this initiative

WIA – not currently fit for purpose or deserving investors' support

I was aksed today my view on the recently launched WIA and its Code of Practice.  

The WIA and its ‘Code of Practice’ purportedly aims to satisfy a public demand for 'higher professional standards in the promotion of fine wine as an investment asset class..' Unfortunately it does nothing of the kind.

I am very disappointed that the WIA  have decided to permit cold calling despite the clear view of the FSA (Financial Services Authority). Equally I'm disappointed that National Fraud Intelligence Bureau is apparently prepared to offer support to the WIA that allows cold calling for investment purposes. See news story in Harpers (8.2.2013). This is especially surprising as a search on cold calls the National Fraud Intelligence Bureau website – http://www.actionfraud.police.uk/ produces 16 entries. Here to give a flavour are the first two:

‘Cold calling and high pressure sale tactics were put into play to target and then bully people into buying into their scheme. ‘

http://www.actionfraud.police.uk/land-banking-fraudsters-jailed-dec12.

Share sale and investment fraud
Share sale, boiler room, hedge fund or bond fraud involves bogus stockbrokers, usually based overseas, cold calling people to pressure them into buying shares that promise high returns. In reality, the shares are either worthless or non-existent.

You are usually contacted out of the blue by a professional-sounding stockbroker who offers you investment opportunities that seem too good to be true. You are also promised free research reports, special discounts and ‘secret’ stock tips.

In reality, the fraudsters are cold calling as many people as possible, persuading them to invest in shares that are either non-existent, or so worthless they are impossible to sell.

http://www.actionfraud.police.uk/fraud-az-sharesale-fraud

It is interesting and very revealing to compare the FSA's definition of acceptable cold calling with that adopted by the WIA:

FSA:
'FSA: One-minute guide - Cold calling
Cold calling can expose consumers to high-pressure sales tactics which mean they can end up with an inappropriate or over-expensive product or service.
 

Our investment and mortgage financial promotion rules therefore ban cold calling (which is called unsolicited real-time promotions in our Handbook and legislation) unless certain conditions are met.

How do we define cold calling?
Cold calling is where a financial promotion is made during any dealings with a customer, which the customer did not begin.
 

However customers can be approached if they expressly request it. Failing to tick a box to say that they do not want to be contacted, or relying on standard terms that you may contact them again is not sufficient to allow you to cold call a customer.
What are the specific rules for investment business?
Investment rules allow for three scenarios where cold calls could be made:

the promotion is to an existing customer who anticipates receiving a cold call;

(The other two scenarios are not relevant here.)'

WIA definition of cold calling:
'The Association defines a cold-contact as a telephone call (or other communication) made to a private individual where there has been no previous communication with that individual, and where the individual has not provided his telephone number and/or given prior permission for the telephone call.'

Significantly different! The WIA's definition is a charter to pester people who have expressed no interest whatsoever in wine investment with the elderly and vulnerable being protected as the calls will be recorded!! 

The WIA claims in its ‘Aims of The Association’: 

‘1. To seek to safeguard the general public against fraud, malpractice and misrepresentation.5. To encourage high ethical standards of competitive practice amongst wine investment businesses.

6. To do such things as are necessary or expedient to sustain or raise the status of wine investment and the Members of the Association.’

If the WIA were serious about these three laudable aims they would have banned cold calling as they were urged to do so during their consultation period. Cold calling for investment purposes is both malpractice and is per se a high-pressure sales tactic. The companies who have signed up to the WIA have chosen to ignore the clear guidance given by the FSA for their own narrow commercial advantage. Claims of 'Higher professional standards' are pure window dressing. 

Although I have previously welcomed the initiative in principle, I will not support an association that ‘purports’ to protect the public yet allows its members to cold call. In my experience, shared by the FSA, the vast majority of investors who have been scammed or persuaded to buy unsuitable or overpriced wine investments have been lured by an initial cold call. 

Until the WIA comes into line with the FSA on cold calling I cannot support this initiative. I see no reason why the public should have any confidence in the WIA as it currently stands.

I am, however, in favour of a self-regulatory body for wine investment if it can provide confidence to the public that it is safe to invest with a member of WIA as well as providing protection for legitimate companies offering wine investment. Unfortunately the WIA is currently a wasted opportunity. 

Two articles on Cold Calling:
Jancis Robinson MW:  Cold Calling – a serious warning 

Tom Lewis: The Cambridge Wine Blogger: Cold Calling and the Data Protection Act 1998

Worldwide Wealth Collections

Fine investigation by the Mirror into the cold calling practices of Worldwide Wealth Collections includes recorded phone conversation from one of the company's closers. See here. From the tone of the conversation I fancy the company might well be better called – Worldwide Wallet Thinning Operations Ltd.