Can money really grow on trees?
“I received a telephone call out of the blue from a young man at a UK-based broker who told me about an ethical investment opportunity in a teak plantation project – in Costa Rica.
I know that forestry has outperformed other asset classes so I listened to what he had to say. But I know it’s an unregulated investment and so I’m nervous to part with my cash — the minimum investment is £10,000 and the chap suggested I would be wise to invest £20,000 to start with.
Am I being over cautious? I’ve had a look at the website of the broker and it looks very professional.”
Anonymous
Holly says
You are right to be nervous. Receiving an unsolicited call should always trigger alarm bells, for a start. Broadly speaking, investing in forestry is a high-risk investment and buying a forest yourself will typically set you back hundreds of thousands. However, the company you were approached by — Living Investments UK — offers a scheme that allows investors to pool their money with the minimum investment generally ranging from £10,000 to £30,000. These schemes are unregulated.
The company, run by one individual named Nick Durrant, isn’t regulated by the Financial Conduct Authority (FCA). The website, which is full of typos, encourages investors to transfer their pensions into a Self-invested personal pension (Sipp) so they can invest their retirement savings into this unregulated and illiquid scheme — a big fat no-no. We placed numerous calls to Living Investments, which were answered by a call-answering service and none were ever returned.
My advice is to steer clear of any unregulated scheme and never transfer your pension into a Sipp to invest in unregulated investments. You should always seek professional advice, but never take it from advisers who have been introduced by the investment scheme.
As for investing in forestry, it’s true that the argument for investing is compelling as overall demand for timber is unlikely to decrease significantly any time soon. Returns are supposed to come from capital appreciation in the value of the land (including the trees on it), and any income produced by felling the trees for timber. Clearly, both of these factors are affected by the timber price. It’s a very long-term investment. Further, it’s a very illiquid investment.
You didn’t mention any fees – I wonder if you were told about them. There are usually administration fees and almost certainly maintenance fees. As with other unregulated schemes, forestry investment is also susceptible to scams — which I suspect this could be.
Compounding the problem of these scams is that you don’t know it’s a scam until years later. Regular, fake, updates are sent with numbers that show your investment is growing. It’s only when you try to access your money and suddenly find phone calls and letters go unanswered — and you have no way of getting your money back. The adage If in doubt, don’t might serve you well here.
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Do you have an investment or financial question for Holly? Send your questions to [email protected].
