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Fine Wine Investment Scams - Don’t be a victim

Fine wine investment scams typically go something like this…

An elderly gentleman answers a cold call from a charming individual who immediately starts barking on about how he could make huge financial gains on a low-risk alternative investment, he plays down the performance of traditional investment vehicles but promises substantial returns from the lucrative world of fine wine investment.

Sceptical at first, but the caller is persistent, using emotional blackmail and guarantees of making huge returns on his initial investment, the elderly gentleman becomes enticed by the prospect and parts with £1,000s from his retirement fund, buying several cases of premium wine.

A few months later, the elderly gentleman decides to check in on his wine investment’s performance, only to find out the company no longer exists. Luckily for him, the wines he invested in were held in his own bonded warehouse account, and he had full ownership.

Despite this, after sourcing multiple wine valuations from reputable wine merchants and auction houses, it soon became clear that the price he paid for his wines was severely exaggerated and he had in fact fallen victim to a wine investment scam.

Sound familiar?

Unfortunately, for many, this story is too familiar, and for us at JF Tobias, it’s one we hear from our clients all too often.

Our Advice to Avoid Fine Wine Scams

Due to the nature of our business and the services we provide (buying and valuing wine), our team have increasingly received calls and emails from an alarming number of people who have unfortunately been caught out by a wine investment scam.

Obviously for our clients this is a distressing and life-changing situation, and the toughest part for us is having to break the news to them that the wines they bought or invested in have not increased in value to the extent they were promised, and that they were also excessively overcharged by the company they bought them from in the first place. Ultimately, they have lost £1,000s and feel completely humiliated.

We have also started to notice an increase in fine wine scams targeting investors who already own fine wine. This type of wine scam works in two ways, one by the scammers requesting that the stock owners transfer their wines into scammers bonded warehouse account, however, the owner never receives payment and now the wines are no longer under their ownership. The other is when sourcing quotations to sell their wines, the scammers convince the individual to accept a much lower offer for their wines than what they’re actually worth, ultimately losing even more of their wine investment.

It is from hearing these unfortunate and unacceptable stories from our clients that have motivated this resource, and hopefully, the experience we’ve gained from helping them has enabled us to provide you with the following tips that will hopefully prevent others from falling victim to a wine investment scam.

Cold Calling

Cold calling has unfortunately become an everyday annoyance, which most of us know how to deal with – by hanging up. However, most fine wine scams come from cold callers who have become extremely skilled in keeping potential victims on the line, only to eventually persuade them to part with their savings.

There are many different tactics a cold caller and a scammer will try to use, consisting of a mix of psychological and emotional tactics, and outright lies. So, if you do receive an unsolicited cold call then you should instantly be wary. Our stance on cold calling is to either hang up or if you do get engaged in a conversation, don’t buy into a wine investment until you’ve done your own research.

Other than that, you could challenge them and ask these two questions, to which they’ll more than likely hang up for you:

  1. Where did you get my details?
  2. When and where did I give my permission for you to contact me?

As always with these sorts of approaches, if it sounds too good to be true, then it probably is. So, if in doubt, hang up immediately. It is also worth noting that wine investments are not regulated, meaning you won’t be able to claim compensation from a UK regulatory authority if you do get caught out.

Check the company’s and employee’s details

If you’re considering investing in wine, or you’ve been engaged by some wine investment companies, then be sure to do your due diligence on them and the individual you’re dealing with, before going ahead with the investment.

Many wine investment scams have professional looking websites; however, it is relatively cheap and easy to develop a website so don’t be fooled by appearances. The following checks can be done to minimise risk:

  • Check to see if their website is professional.
    • On the surface, it may look good, but if you start to notice spelling mistakes and incorrect wine references or names, then investigate the company a bit more.
  • Check their website, and a search engine for a permanent address and telephone number.
    • Be wary of PO Box addresses, or if you call them and are put through to a call centre and not the business in question.
  • Search for them on the Companies House register (https://www.gov.uk/get-information-about-a-company)
    • Not only will this confirm that they are a registered company, but you can also find out further details about the company.
  • Look to see if they have any legitimate testimonials, preferably on an independent site like; Trustpilot, Feefo, Which?, Yelp, Google Reviews etc.
  • Check to see if the company is listed on Jim Budd’s website – especially the section on ‘I wouldn’t buy wine from these companies. 
    • Jim Budd is a wine expert/blogger who offers advice and names and shames companies who use suspicious and forceful tactics, or those that have been proven to be fraudulent or prosecuted.

 

It is also not unheard of that wine investment cold callers have associated themselves with, or working for well-known wine merchants, so it’s worth checking the individual’s credentials online (on their website or LinkedIn etc), or calling the merchant first hand asking to speak to the individual. This will quickly confirm whether they are associated with the company or not. Usually, a reputable company will never use cold calls or high-pressure sales tactics to sell you wine.

If you’re still not convinced then you could check out the address personally, and request to come by for a face-to-face meeting.

Check the wines and vintages

Most people who have been caught out by a wine investment scam don’t actually know anything about fine wine, that’s not to say those who do have wine knowledge or experience haven’t been caught out either, but those without are much easier targets.

Scammers will often pitch wines for an investment of good drinking quality, but they are not actually considered as investment grade wines by the industry. They will also exaggerate the prices of the wines to further line their pockets, but also as a tactic to convince you of their high demand and quality. Once again, doing your own research is key:

  • Investment Grade Wines

    If the wines are of investment grade quality then they should be listed on a Liv-Ex index. These indices list what are widely considered as investment grade wines, so if they’re not listed then we’d recommend avoiding them.

    • Liv-Ex also can provide some transparency to market prices, however, it is worth noting that these are wine trade prices and not retail (consumer) prices.
  • Check consumer prices

    To check the current retail price of a wine, you can either search for it on Wine-Searcher, which will list all the wine merchants who have the wine in stock and the price they are selling it for. This process can be time-consuming, a little confusing, and lists a variety of prices. For simplicity, transparency and ease, you can also use our online Wine Valuation and Quotation Tool, which takes live market data to provide you with a single accurate value.

  • Checking Wine Vintages

    Checking vintages for specific wines and regions requires a bit of independent research. The best way to do this is to visit a wine expert or a wine critic’s website/blog. Being independent of a retailer or wine merchant, their advice and analysis on the vintage quality should be objective.

  • Provenance, storage and condition

    Before committing to buy wine stock from any wine investment company you should inquire about the provenance of the wine, where it has been stored and request condition reports of the wine. Speaking to their wine storage providers could also work as another method to check out their credentials, and how they conduct their business.

Selling a wine investment or collection

Whether you’ve fallen victim to a wine investment scam or not, caution should also be applied when it comes to selling your wine. As mentioned above, we’ve had clients who have unfortunately been caught out by transferring or selling wine to individuals or companies who have no intention of paying for them. Once the wines have landed in their bonded warehouse account they now assume ownership of the wines. So, you should never sign over your wine (or any other investment) to another party without first checking they are authentic.

We have also come across clients who have lost out on £1,000s by not shopping around for quotations for their wine. As a business who purchases wine from private collectors or investors, we always advise our clients to compare our offers against other merchants or brokers. We aim to be highly competitive and as transparent as possible, therefore our online Wine Valuation and Quotation Tool is completely free to use, and displays the final amount a client would receive, which includes all commissions and logistical costs.

Note: The information in this article or any response to comments should not be regarded as financial advice and is based on our understanding as of February 2017. This article is offered as guidance only, and we recommend that you do your own research on top of our suggestions.

Further to this, if you have been affected by a wine investment scam you should immediately report it to Action Fraud by calling 0300 123 2040.

 

Further Resources on Avoiding Fine Wine Investment Scams

WSTA – https://www.investinginfinewines.co.uk/

ScamSmart – https://www.fca.org.uk/scamsmart

Action Fraud – https://www.actionfraud.police.uk/news/wine-investment-fraud-dont-let-your-investment-go-sour-apr16

MET Police – https://content.met.police.uk/Article/Investing-in-fine-wine/1400013278591/1400013278591

Jim Budd – https://investdrinks-blog.blogspot.co.uk/p/i-wouldnt-buy-wine-from-these-companies.html

The Author

Craig Buckland

Craig Buckland

Marketing Manager