WELLESLEY SAVING 7% 5 year BONDS

Coultrm

Please advise at 7% interest for a 5year fixed bond, is it too good to be true, or are there any dangers?

jimjames

Not sure what you are referring to - can you provide a link?

But at that rate it isn't a savings account and your money will be at risk if the firm can't pay up. It isn't going to be FSCS protected either.

Your choice if you want the risk. Or you could use share/bond based investments that have similar or lower risks.

ManofLeisure_2

OP, this product isn't covered by FSCS - so your capital is at risk.

bowlhead99

Wellesley are a peer to peer lender https://www.wellesley.co.uk/invest-now/

You are right jimjames it's not a savings account, it's an investment bond. You are making a loan to the company and if they grow their business successfully rather than fail due to poor business decisions, increased competition and a changing marketplace, they will be able to pay you back the principal in five years.

coultrm wrote: »

or are there any dangers?

Well, there's the danger that you don't get your money back. Interbank rates on cash overnight (LIBOR) is in the 0.4-0.5% range. Government bond yield for 5 years is 1.86%. If they are offering something approaching 4x what you can get on the low risk bond market, you are not taking low risk. As they are happy to point out themselves:

Before you subscribe for any Wellesley Savings Bond you should make sure that you fully understand the risks which are set out in the Invitation Document and you should determine whether the investment is suitable for you on the basis of all the information contained in the Invitation Document. In the event that the Company becomes insolvent, you may lose some or all of your investment. If you are in any doubt about the contents of the Invitation Document or the action you should take, you are strongly recommended to consult a professional financial advisor.

dunstonh

Its not actually an investment bond either. Although strictly speaking, investment bonds are not bonds either but another that incorrectly uses the term "bond" for marketing reasons.

Curse of the word bond!!!

bowlhead99

Ah yes, I didn't at all mean an investment bond in the 'wrapper that retail customers might put some funds into for tax planning' sense of the word, more a 'corporate bond that you hold as an investment' Except unlike many corporate bonds there will not be a reasonably liquid market in which to sell it when you no longer want it.

But either way, it's an investment rather than a savings deposit. So for them to give their product a title of 'savings bond' is not really going to help potential customers know what they're getting into. It is 'an opportunity to invest in Wellesley Finance plc' which I suppose is technically like saying a savings bond from Nationwide is an opportunity to invest in Nationwide but the reality is that Nationwide's version is a cash deposit with FSCS protection up to the deposit limits, and this is quite clearly, not.

alanq

Recent Daily Telegraph article re Wellesley 7% bonds.

http://www.telegraph.co.uk/finance/personalfinance/investing/bonds/11005195/What-lies-behind-this-eye-catching-7pc-savings-bond.html

IronWolf

It appears that in this instance the term 'bond' has actually been used correctly. This is a loan to a company

Trouble is a lot of people dont know what a bond actually is.

dunstonh

IronWolf wrote: »

It appears that in this instance the term 'bond' has actually been used correctly. This is a loan to a company

Trouble is a lot of people dont know what a bond actually is.

Bond is so misused and these corporate bonds being promoted as savings bonds is getting a bit naughty. About time the FCA stepped in as it has insisted in a number of other areas that unregulated products should not be promoted to retail consumers.

jamesd

The Wellesley product is a mini-corporate bond issued by a peer to peer lender. It is not a savings bond, in spite of them choosing to use that in the name, which implies that like savings bonds it does have FSCS protection. It is not an investment bond. It is not a term deposit account. It has no FSCS protection at all. If the company goes bust you could well lose all of your money. It does not have the protection of the security for the loans in the peer to peer lending business, that security is only for the peer to peer lending itself. It is not possible to exit the investment early.

jamesd

If you want both higher interest and more safety, wiith security for the loan but still no FSCS protection, you might take a look at Ablrate loans. Still early days for them but they have an interesting product.