I’ve been approached by a friend of a friend who is a financial adviser. When I told him I have a Self-Invested Personal Pension with a mix of investment types, including some higher risk investments, he told me he has the perfect scheme for me to invest in. It is a collective investment scheme that is putting its money into land for UK housing developments. The adviser says I stand to make about a 20 per cent return on my money. Do you think this sounds like a good investment?

Carl Lamb responds

Collective investment schemes are funds that will involve several people putting money into them. The fund manager will then invest the pooled money. There are many schemes of this type available to UK investors, but they should only be considered if the scheme is a regulated scheme, so either authorised by the Financial Conduct Authority (FCA), if a UK scheme, or recognised by the FCA if not a UK scheme. Even if the scheme meets this requirement, it will only be suitable for certain more sophisticated investors and may not be suitable for your pension investments.

There are also many unregulated collective investment schemes. These are not suitable for most UK individual investors. In fact, the FCA has banned the promotion of such schemes to the general public. The scheme you describe may well be an unregulated scheme so please be very wary. If you want to discuss this further with the financial adviser, I suggest you first check his entry on the FCA register at https://register.fca.org.uk. If he is on the register, then ask him if his proposal is for a regulated or unregulated scheme.

Even if the adviser is on the register and it is a regulated scheme, I’m concerned that he has proposed this solution to you without a full analysis of your financial circumstances. He should be formally asking you to engage him as your adviser and going through a detailed process that is laid down by the FCA before attempting to make any kind of recommendation. My advice is to walk away and to seek financial advice from a fully regulated independent financial adviser. You can then ensure your pension investments are suitable for you both in terms of the risk level of your pension portfolio and of its ability to achieve the goals you have identified.

Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.