Last year I counted over £1 billion in losses from unregulated investments marketed in the UK that went bust in 2019.
And the scary thing is that this was without a global financial crash.
Some unregulated investments hilariously put the blame on Brexit despite their assets being outside the UK – which meant Brexit should have made it easier to repay their Sterling-denominated debts with their overseas earnings.
The sad reality is that one of the consequences of coronavirus is likely to be a spate of further collapses in the unregulated investment world, as new investment dries up and already-shaky schemes exploit Covid as the perfect excuse to shutter their windows and disappear with what’s left.
The only question is whether 2019 was already the storm or just the canary in the coalmine.
It is also possible we may see schemes play for time by suspending withdrawals but dangling the carrot of future resumption. With the courts currently paralysed by lockdown, it will take a while for any disgruntled investors to enforce their debt (which always takes a long time anyway).
And while coronavirus may sound the death knell for old schemes, it will also be the starting gun for the next wave. Life goes on and there will still be a steady stream of inexperienced investors with windfalls to invest – such as pension lump sums, inheritances, and insurance payouts.
They are currently being told by all and sundry – including the mainstream media – that mainstream investments are scary and lost hundreds of billions during the corona crash (losses that don’t actually exist except for people foolish or imprudent enough to cash in at the bottom of the market). There will also be those who cashed in their pensions or investments in the stampede, and are now looking for some kind of magic solution to recover their self-inflicted losses. They are all being lined up for the wolves.
The only question left is to see what people come up with as the new magic “coronavirus-proof” “assured” “uncorrelated to the stockmarket” that delivers 8% per year, year in year out. In the early 2010s it was carbon credits, in the mid-2010s it was property development, in the Roaring Twenties it will be… answers on a postcard, or a Google ad.
We have seen it all before. Yet the UK Government, despite having recently proven itself capable of shutting down the entire country and all social contact at the drop of a pin, continues to refuse to take the simple, practical and already tried-and-tested measures that would significantly reduce losses to unregulated investments.
The indefatigable Mark Taber has already reported on some of the more blatant scammers exploting coronavirus in their advertising (from which Google continues to rake money with no noticeable compunction), as have Professional Adviser and the Mirror.