With interest rates looking likely to remain at historic lows for the foreseeable future, we are seeing an increasing number of people looking elsewhere for better rates of return on their investments. But knowing where to look can be difficult, especially with the plethora of different options available.
Our relationship managers are regularly asked about risks and rightly so. While we do not give financial advice, our consultants are always completely transparent about the risks in our investment opportunities, in order to allow all prospective investors to make an informed decision that suits their investing needs.
Regardless of whether you’re looking for an investment with modest interest, or something with greater potential for reward, here are five basic principles that we believe are important to consider.
- Understand the risks: There are, unfortunately, no guarantees when it comes to investing. Anyone promising you “guaranteed” returns or claiming that your money is “100% safe” or “fully insured” should be avoided. With all investments, your capital is at risk, and any responsible company should outline those risks for you in detail before you make your investment.
- Understand the company or investment: Since the 2008 financial crisis, we have seen huge growth in the ‘alternative finance’ sector, which emerged to fill the SME (small- and medium-sized enterprises) lending void left by the banks. It is important is that you do your own due diligence on the specific company or investment and make sure you understand how they are going to be able to pay your returns and your capital back.
- Corporate responsibility: We believe you should always check the FCA register (https://register.fca.org.uk/) to make sure the company you’re dealing with is listed there and therefore adhering to regulation governing this sector.
- Responsible practices: We believe you should always be wary if you are contacted out of the blue with a ‘cold call’ about investments.
- Your investment decision: Finally, and perhaps most importantly, do not be bowed by pressure from a salesperson. You should feel completely comfortable with your investment decision, and be able to make that decision in your own time, asking as many questions as you feel necessary.
Once you are happy with the company you are dealing with, you can then assess the individual investment opportunity on its own merits. We strongly believe that investors should not take any risks that they do not understand. You should read the offering document in full before making an investment and if you are unsure about anything please seek advice from a regulated advisor.
Please be aware that as with any investment product there are risks and these investments are not covered by the FSCS. The past performance is not a guarantee of future performance. Your capital is at risk and returns are not guaranteed, rather they are dependent on the success of the company, and security measures are not a guarantee of repayment. This investment is not readily realisable, and you should be prepared to hold it for the full investment term. You can read more about the general risks of investment on our website and should refer to the offering document for risks specific to this investment. With IFISA investments tax rules apply and are dependent on your individual circumstances.