The intimate who turned inmate: A financial horror story of a couple who trusted their investments to a friend

Click to follow
The Independent Online
IT IS the ultimate financial nightmare. You invest all your money with a financial adviser who is also a close friend. You mortgage your home to invest even more money. You suggest to your mother she puts her life savings with the same adviser.

And then you discover - too late - that the adviser was not authorised to hold clients' money.

You and your family have lost hundreds of thousands of pounds and your close friend is in jail.

To make matters even worse, the Securities and Investments Board, the chief investment regulator, is making big noises about prompt compensation to people who have been incorrectly advised to transfer out of their company pension schemes.

You are therefore faced with a wait of months, if not years, for compensation that will be thousands of pounds short of your losses.

It is a scenario that seems too awful to be true. But it is all too real for Philip and Antonia Newbiggin of Surrey.

Mr Newbiggin had a close friend called Kenneth Renton. They had known each other for about 13 years and played tennis every week.

Their wives were friends, their children were friends. It was a relationship of ultimate trust.

Mr Renton was a financial adviser and a non-executive director of Mount Charlotte Investments, a large hotels group. Mr and Mrs Newbiggin had no experience of investments, so it was only natural they turned to him for guidance.

In 1982 they gave Mr Renton pounds 20,000 to invest. As they earned more money over the years they passed it to him.

There was very little paperwork to support the transactions. But they were not worried. After all, Mr Renton was a good friend.

Meanwhile, Mr Newbiggin had recommended to his mother, who is 76, that she put her life savings of pounds 430,000 with Mr Renton.

In 1989 Mr Renton suggested the couple mortgage their house in order to put money into an investment scheme.

Mrs Newbiggin says: 'I was not keen because it was the family home. But Ken said I was being terribly selfish and unfair to my husband and the children. He won me over.

'The mortgage was to be for just two years. At the end of that time it would be paid off and we would have a profit, less his commission.'

When they agreed to the scheme they had a mortgage of pounds 27,000. The mortgage shot up to pounds 230,000 and the monthly repayments to pounds 3,000. They gave the bulk of the money from the mortgage to Mr Renton to invest.

At the end of the two-year term Mr Renton told them there was 'a great opportunity not to be missed' - an issue of shares by Mount Charlotte.

But in April 1992 the bubble burst and the Newbiggins' life came tumbling down.

The share flotation had never taken place. They had mortgaged their home with nothing to show for it. In fact, the couple and their mother have lost the bulk of the money they have invested - hundreds of thousands of pounds.

'We have had to rent out our home to try to pay the mortgage, as we are stuck in the negative equity trap,' Mr Newbiggin said. 'I am 50 and my wife is 49, and I will now have to work until the day I die. We have to worry about every penny.'

The couple had always been reassured by the fact that Mr Renton's company was a member of Fimbra, the authorised body for financial intermediaries.

It was only too late that they discovered that there are different categories of authorisation. He was not authorised to hold clients' money.

Their only hope of compensation lies with the Investors' Compensation Scheme, a fund of last resort operated by the Securities and Investments Board.

Receiving money from the scheme can be like getting blood out of a stone. There is a long list of qualifying conditions that you have to meet. Then, you have to wait for the claim to be processed.

In any event, there is a maximum pay-out of pounds 48,000 per individual.

Mr Renton's investment empire fell apart in April 1992. He is in prison. But the ICS is unable to give any indication to the 60 investors who put their money with him as to when any claims will be paid.

A spokesman for the ICS said: 'We could not have acted any quicker. It is only in the last month that we have had all the papers.'

Meanwhile, there are lessons to be learned for all investors. There are no friends in business. Treat a friend like any other adviser and always ask for all the paperwork.

Check with the Securities and Investments Board whether an adviser is authorised, and the exact nature of the authorisation.

Always find out, before you invest, what compensation scheme your investment will be covered by. Be aware of its ceiling. Do not mortgage your home to invest money.

And finally, never put all your eggs in one basket.

Comments