Investments such as Ethical Forestry and Global Plantations have dominated the financial headlines for all the wrong reasons, as many have been involved in mis-selling scandals. We discuss the realities of forestry schemes.
What is a forestry scheme?
A forestry scheme is a type of investment, usually a self-invested personal pension (SIPP). The investor pays for a patch of land, usually overseas, where trees are grown. Once the trees are large enough, they are harvested and replanted, and the profits go back to the investor.
Are forestry schemes risky?
Like all SIPPs, a level of risk is always involved when investing. However, forestry schemes can be particularly risky as they rely on so many uncontrollable factors to be successful.
For example, the Ethical Forestry scandal caused a stir when the Costa Rican plantation was hit by a hurricane and all investments were lost. Many investors were simply unaware that hurricanes are common in the area and that they could affect their investment.
Read more: Ethical Forestry
Natural resources such as wood are open to the elements, making them susceptible to termites and rot. Weather and soil can also hinder growth, resulting in lower profits.
Why did the schemes cause a scandal?
The scheme caused a scandal because many hard-working people lost their life savings. They had invested in the schemes because they were guaranteed high profits from financial advisers, without being made aware of the level of risk involved. As a result, this amounted to financial mis-selling, as our clients would not have transferred their pension from a safer scheme if the facts were clear.
What constitutes mis-selling?
As well as misleading clients on the level of risk, many sales techniques used by these advisers are regarded as mis-selling. For example, if the adviser claims to have been unaware of the level of risk, it shows a clear lack of due diligence on their behalf, something which falls under their duty of care to a client.
Other instances of mis-selling include hidden costs and expenses, no clarity on how the investment impacts tax, or investments set up as tax avoidance schemes.
If you invested without being made aware of the risks to your money, or you feel you may have been misled into parting with your hard-earned cash, get in touch to see how our expert team can help.