Victims of investment scams for valuables, including Scotch, gold, wine, and art and antiques, often find themselves in dire financial straits.
Interest rates on widely accessible cash savings are very close to zero, making it simpler than ever for con artists to lure in the unsuspecting with promises of high single-digit returns.
But how can regular people learn to recognize a fake investment offer from a real one?
This book aims to educate those interested in investing in Scotch whisky to learn what questions they should be asking an investment provider and how to identify red flags.
1. “Guaranteed” profits
It’s not the rate of return that should raise red flags, but the promise of ‘guarantee.’ In today’s volatile financial markets, not even cash in the bank is safe. That’s why there’s deposit insurance from the FDIC and the Financial Crimes Enforcement Network (FinCEN), so depositors may receive back some of their money if their bank goes under. If someone promises you guaranteed earnings, run the other way.
2. Forcing you to give over your contact information
Trustworthy businesses will have all the details you need readily available on their website. Consider whether you’re prepared to be inundated with sales pitches before giving out your personal information in exchange for access to essential information like product availability, pricing, and business leadership.
3. Rushing you to invest
If you fall for a scam and give up your phone number, you may expect to get a barrage of calls from people trying to pressure you into buying anything immediately. All too frequently, con artists will use the tried-and-true “boiler room” sales technique to convince victims to part with their money.
There should also be no rush to make a purchase because Scotch whisky needs many years to fully develop its flavor. Take your time with something before giving it careful consideration. The contents of a cask will stay relatively high for a few weeks. If the seller claims they won’t have any more to sell, it raises serious questions about the sustainability and dependability of their operation.
4. Does your whisky investment require supervision?
The aging of whiskies, like the aging of other physical assets, is not subject to financial regulation because it is already controlled by specific property laws, such as the Sale of Goods in the UK. Keep an eye out for any company or plan that promotes their whisky as a safe investment since it is not. Perhaps at first glance, but how does it compare to other options?
Though, there is one rule that truly matters. The government is understandably concerned about the whereabouts and care of the maturing Scotch since it represents a sizeable chunk of potential tax income. Only individuals awarded a license by HMRC under the Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR) are legally allowed to store and handle Scotch whisky. At the same time, it ages outside VAT and Duty’s scope.
5. How long has the business been in operation?
One bright spot is that it’s trivially simple to verify a company’s longevity by visiting Companies House, a government agency that provides this information for free. You may learn about the company’s history by researching its board of directors. Did they work out well in the long run? Or have they repeatedly tried new approaches, only to have the business fail each time?
6. Basic details do not make sense
All legitimate businesses will provide their company registration number on their website and contact and physical address information for company leadership. These particulars must then correspond with those listed by Companies House.
Be wary if there is little information available from Companies House, including an overview, filing history, or details on the people involved. Take a broader perspective and look beyond it, too. A quick online search on LinkedIn or elsewhere is all it takes to learn about a firm or an individual’s background.
7. Remember the cost!
Our team spent some time on Google and Facebook seeking comparable businesses to ours that provide “whisky investing” as part of our investigation for this write-up.
We found a wide variety of companies, but after implementing the straightforward strategies outlined here, we quickly eliminated most of them. All but one of the 16 firms we looked into in deeper depth did not make their stock prices and list of available shares publicly available on their website.
Any prospective investor should wonder what’s happening because of this lack of disclosure. These fundamentals are crucial if you’re studying and evaluating a potential opportunity.
If they have a variety of whiskies, why not display them to you? Is it because they cannot maintain a steady connection with the Scotch industry to purchase more stock in the future and resell it to you?
More importantly, why not be transparent about the fees associated with buying and selling casks? Is it because each customer receives a unique pricing quotation based on information gleaned from the high-pressure sales call they receive?
Scams involving whisky investments, like those involving wine, rare coins, fine art, or other ‘collectibles,’ always boil down to overcharging the victim. If you overpay by two, three, or even four times the item’s fair market worth, you’ll only recoup your investment if you make a profit.