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 2023 | Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk!

What are the key risks?

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.

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 via the following URL link: 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 via this URL link.

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.

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 here

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. If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

Please find the PDF version here.

Advisers

Established in 2013, Fuel Ventures, through its related funds have invested over £180 million for circa 160 S/EIS companies and has become a market leading early stage investor in the UK.

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The funds invest in companies at an early stage and work closely with founders providing hands-on support and a collaborative ecosystem.

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Client planning opportunities

Tax efficient products can help a range of clients with meeting their financial goals. The examples below outline some different scenarios that you may want to consider when advising clients on how to make use of the available tax reliefs.

Clients who need a solution for inheritance tax
Clients with a power of attorney in place and who want to plan for IHT
Clients who plan to sell or have sold their business in the last 3 years
Clients with a significant income tax liability
Clients who have maxed out their ISA & Pension annual allowance
Clients likely to exceed the lifetime pension allowance
Landlords interested in investing rental income for retirement
Business owners who want to extract profits tax efficiently
Experienced investors who want to diversify and target capital growth

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To discuss any of these case studies in more detail, please get in touch with the Fuel Ventures team.

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