Fortune & Freedom claims you will take back control of your money and your life. But in reality all that happens is you lose control of your inbox…
There are different views about learning from our mistakes as we go through life. One school of thought is that learning from one’s own mistakes is the best way forward. Another view is that it’s always better to learn from the mistakes of others.
The latter is relevant here. When investing for the future with your hard-earned cash, it’s wise to heed the experience of others, especially if you’re ever tempted, even for a second, to sign up to Nigel Farage’s Fortune and Freedom newsletter (F&F).
Firstly, take a glance at the reviews left on Trust Pilot for Southbank Investment Research, F&F’s publisher. This tells you exactly what happens when you sign up to the free email newsletter.
In a nutshell, you get a free, not very informative email. However, your inbox then immediately comes under siege with further offers, several times a day, promising even greater insights… but only if you pay for additional subscriptions.
Granted, there are a few positive reviews here too. But it’s hard not to notice that one or two use remarkably similar language… that could, of course, be a coincidence. Or maybe not.
Secondly, when you consider the cost of the additional subscriptions for the full F&F experience and the populist appeal it’s clearly trying to cash in on, the company behind should be doing very nicely out of it indeed.
Unfortunately, the most recent accounts from Companies House are for 2019 so they don’t show the full extent of the Farage effect — maybe that explains why Southbank Investment Research (SIR) incurred a loss of £1.1m (2018 £1.3m) despite a turnover of £4.2m.
By any standard, that’s an unfortunate trading position to be in and something SIR is surely hoping the new contributor (Farage) will be able to help turn around.
How long is a piece of string?
The gap between turnover and losses seems vast, so we decided to do a bit more digging. The first thing we found is SIR has deferred income of £1.9m on its balance sheet. That means it is yet to deliver services worth £1.9m to people.
Explainer: when companies receive money upfront for annual subscriptions, they spread the income over the 12 months of the year. This is called deferred income— it means that the income only gets charged to the P&L account when the monthly service has been delivered and not before. Until then, it sits on the balance sheet as a debt. This is a good way of managing cash flow — and a brilliant way of managing your corporation tax — you only pay tax on the bit that has actually been delivered.
The problem is that Southbank Investment Research defers its income over 10 years which, according to the many accountants we’ve spoken to, is highly unusual. Southbank obviously believes that it might be challenged on this because it specifically references it in its accounts.
We were intrigued. The Southbank Investment Research website is long on hardsell and short on detail. To get information on the subscription packages you have to phone, so we got various people to do some mystery shopping for us and get to the bottom of what exactly is on offer.
Gift of the gab
Susie, the lovely Irish lady who answered the phone (all lines lead to Ireland), recommended the UK Independent Personal Wealth subscription as a follow-up to the Fortune & Freedom newsletter. Gary made the same recommendation (our mystery shoppers only ever got through to Susie and Gary, so there was much speculation — married? students? who knows).
An annual subscription is usually £199, although they have special offers at the moment of standard (£79), premium (£99), or deluxe (£129), the pricing varies depending on the number of so-called bonus reports and books by unknown writers that are thown in. The annual subscriptions are here (right at the bottom of the hardsell).
But back to the lifetime offers. Regardless of the newsletter you choose (and there are plenty), you will be offered either an annual or a lifetime subscription. The lifetime subscription is £396. And it gets better, for that price you even get a legacy subscription so that your lifetime subscription can be passed on to your descendants. For free!
But let’s look at the commercials again. £396 is basically the price of two annual subscriptions (£199). Or three annual deluxe subscriptions at best. So stretching this lifetime subscription income over 10 years is really, really stretching the boundaries of deferred income and good accounting practice. They even reinforce it in the hardsell.
Oh what a tangled web we weave…
So we’ve established that Southbank Investment Research is stretching what is no more than two years’ subscription income into 10 years’ income, which is highly unusual. That allows them to show a huge amount of income as a debt on the balance sheet, keeping them permanently in the red and therefore paying no corporation tax. That’s not very helpful to the UK economy, Nige.
But the ultimate owners of the business have taken further steps to make sure that any earnings that might incur taxes are funnelled elsewhere and out of the UK economy altogether, as the following snippet from its accounts shows.
Nige, what the hell is going on? I thought we were taking back control from Europe?
If you have ever used the business set-up online service for Cyprus, you will be familiar with the very helpful chat bot telling you that Cyprus has both one of the lowest corporate tax rates in the European Union (EU) as well as an attractive tax regime — dividend income, profits from overseas permanent establishments and sale of securities as well as international transactions are exempt from tax.
Apparently, the chat bot continues, the country also has the lowest crime rate in Europe and the weather is lovely too, so there you go.
(Don’t) take my advice…
Anyway, back to the advice on how to take control of your finances. Be careful here, because although Southbank Investment Research is regulated by the Financial Conduct Authority (FCA), not all the publications are. This rather convenient difference is explained below.
There are various warnings throughout their publications and newsletters. The UK Independent Wealth newsletter, which is the newsletter Susie and Gary recommended, is a regulated product, but crucially it doesn’t constitute a personal recommendation — even though it hits your personal inbox.
It’s also worth pointing out that the editors of these newsletters may have an interest in recommendations they make. What that boils down to is that they’ll benefit directly when you buy the stocks, shares, cryptocurrencies etc that they recommend.
How they benefit isn’t clear, but they might be paid to promote certain stocks and shares, or they may be invested themselves so that if you invest, and stocks rise, they also benefit. We’ll try to find out more about this point in later blogs.
The same difference between Southbank Investment Research and publications also creates a very important distinction in relation to the Ombudsman Service and Financial Services Compensation Scheme. These are the bodies that deal with customer complaints and provide investor protection respectively, as explained here.
That said, there is material here that is clearly of value to some subscribers. Likewise, the common sense guidance on understanding your finances and cutting out waste from your outgoings is practical and structured.
However, in the section on cutting said waste from the outgoings, the option to sell the barely used sports car suggests this is focused to a very narrow demographic. Likewise being told to get rid of unnecessary insurance cover is something that should be treated with a great deal of caution as well.
The final point to make here (if you are still considering using this route to take control of your finances) is around the assets they promote. It’s reassuring to see that crypto-currencies appear to have suddenly become a lot less prominent. However, commodities, especially gold — ‘everyone should own at least some gold and direct equities’ — are still prominent.
No mention either, mark you, of the tax benefits of holding equities in any form of a tax wrapper such as an ISA or a pension. Granted, there is clear flagging that some of these equities will be more speculative, but this simply highlights the fact that they are very high risk indeed.
So if you still want to take control of your finances, there are ways of investing wisely that carry far less risk, along with the added benefit that you will also keep control of what lands in your inbox!