Don’t invest unless you’re prepared to lose all your money. These are high-risk investments and you are unlikely to be protected if something goes wrong.
Risk summary for non-readily realisable securities which are shares:
Last updated: 19 October 2022
Estimated reading time: 2 minutes
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
1. You could lose all the money you invest.
If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
2. You are unlikely to be protected if something goes wrong.
The business offering this investment is not regulated by the FCA. Protection from the Financial Services Compensation Scheme (FSCS) only considers claims against failed regulated firms. Learn more about FSCS protection here. https://www.fscs.org.uk/what-we-cover/investments/
Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here. https://www.financial-ombudsman.org.uk/consumers
3. You won’t get your money back quickly.
Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
4. Don’t put all your eggs in one basket
Putting all your money into a single business or type of investment, for example, is risky. Spreading your money across different investments makes you less dependent on anyone to do well.
A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Read more about it here. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
5. The value of your investment can be reduced.
The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
Please find the PDF version here.
Sponsored EISA Adviser Survey 2022
Calling UK Financial Advisers – we are once again running our sponsored EISA annual adviser survey, to hear your opinions on SEIS. As a thank you for completing this survey, we will be randomly picking one winner who will receive a FREE course license for the new Intelligent Partnership EIS & SEIS Accreditation – worth £195 and up to 5 hours CPD with annual renewal.
After the results of last year’s survey, we provided further education and resources around SEIS investment – as it was clear from the findings that advisers wanted more. We released our simple Investors Guide to SEIS, which advisers can download for free and even pass on to clients. As well as partnering with Intelligent Partnership to release 3 brand new SEIS modules for their EIS accreditation. Which is now a complete SEIS & EIS course for advisers.
We would greatly appreciate it if you could take 5 minutes to tell us your thoughts, so we can continue to support advisers in offering SEIS.
Take the survey here – Adviser Survey 2022
Here are the findings of our recent survey to UK Financial Advisers. Where we sought to find out the barriers preventing them from investing their clients into SEIS.