Mini-Bonds: Why Has the FCA Taken So Long?

Editor's Views: Regulator steps in to halt mini-bond sales seven months after the collapse of LCF, but those running bogus schemes won't stop promoting them

Holly Black 29 November, 2019 | 10:06AM
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It’s been seven months since 11,000 investors lost £236 million in the collapse of London Capital & Finance.

Too Little, Too Late

The company was offering so-called mini bonds, investment products offering bumper returns, which many individuals mistakenly believed to be savings accounts protected by the Government.

The FCA has been lauded for eschewing the usual lengthy consultation and review. So “significant” are its concerns, apparently, that it has used “temporary product intervention” to ban the sale of these mini-bonds… but only for a year.

I dread to think how long this would have taken had the FCA’s concerns been slightly lower on the scale than “significant”.

Seven months! And in the meantime, we’ve seen the collapse of Asset Life, which had the savings of 500 investors who were promised returns of 8.75%, and the end of Grand Designs’ Kevin McCloud’s eco-housing bonds, which took some £2.4 million from investors after promising returns of 9% a year. Even Chilango's Burrito Bond (8% interest) is now apparently in doubt.

These were the hard-earned savings of inexperienced individuals suckered in by tricksy advertising and the lure of an account that would beat inflation – something almost impossible to find on the high street. 

To be clear: many of these products are legit, but that doesn't necessarily make them appropriate investments for the man on the street. But some are just plain bogus. 

Why has it taken the regulator so long to act? 

You can say that these savers should have known better - “if it looks to good to be true… yadda yadda yadda” - but in many cases these mini-bonds are badged up as being “guaranteed”, “government-approved” and “Isa eligible” – they are marketed at the inexperienced who are sick and tired of earning nothing from their money in the bank.

And the trouble is, many of the companies touting these products won’t care about the FCA’s ban. Has the pension cold-calling ban stopped scammers targeting people’s life savings? No. And this ban won’t stop these products coming up at the top of the search engine when I look for “top savings rates”.

Bye Bye, Help to Buy

Tomorrow marks the end of the Help to Buy Isa. You might have missed the quiet shelving of the savings account, which launched less than four years ago.

These accounts came about in December 2015 as a way to help struggling savers on to the housing ladder – anyone aged 16 or over could open an account, save £3,000 a year, and would get a 25% top-up from the Government at the point they bought their first home.

Since launch, an incredible 260,000 properties have been bought using a Help to Buy Isa, with almost 340,000 Government bonuses claimed. That has, of course, come at a cost – of around £320 million to the Government, to be precise - and quickly the Help to Buy Isa started to be phased out in favour of the Lifetime Isa, which can be used to save towards a property or towards retirement. It’s more flexible, sure, and you can save more at £4,000 a year, but take-up has been pretty limited.

The popularity of the Help to Buy Isa was a result of it doing exactly what it said on the tin, a feat that few investment and savings products manage. The investment goal and the parameters were clear and easy to understand. The trouble with a Lifetime Isa, conversely, is that the end goal is incredibly vague. 

Of course, those who already have one of these accounts can keep saving into it (make sure you claim your bonus by December 1 2030 though!), but I think it’s a real loss to young people who need something to strive for and a tangible goal if they are going to be convinced to start investing.

Theme or Fad?

I read this week about the launch of a new tracker fund, focusing on “food tech”. This is one of the fastest growing sectors in the world and includes food delivery companies such as Just Eat and Grub Hub, vegan food specialist Beyond Meat, and even well-known brands such as Danone.

It’s a pretty captivating theme to follow and it’s a case in point of why thematic investing is often such a popular format – it’s such a simple and targeted way to express your belief in the trends you think will disrupt and dominate.

The real trick, of course, is separating theme from fad. Thematic funds can let you invest in everything from robotics to timber, water to gender diversity – these may all be interesting, and many may be worthy, but not all will make great investments.


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Holly Black  is Senior Editor,


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