So, any mug – sorry, that was a slip of the key; I should have said “investor” – who decides to “invest” in £50,000 of super 2011 Bordeaux (presumably bought at the best possible prices by the Cult team), has to write a cheque for £57,500 to include Cult’s 15% charge.
Then, assuming that the wine does not disappear (as has happened in so many other cases) all the “investor” has to do is sit back for “3-5 years” apparently, and watch its value rise. Or not. Cult’s claim is that it generously declines to share in any profit an investor might make. Another view is that their business model allows them to make considerable amounts of money from every customer irrespective of the success or failure of the investment.
A bar that’s simply frequented by male customers and female escorts can claim that it’s at least one step away from any involvement with prostitution. When the bar provides the female company, however, that claim looks a little less convincing.
It is time to call a spade a spade and for this business to be properly regulated. Especially if, as has been claimed, investors in fine wine have lost £100m through dodgy firms over the last few years. Cult Wines may be a perfectly solid business with an upfront commission model that I – and others – happen to dislike. Vinance, on the other hand, had a pedigree that should have frightened off anyone who was aware of it. The UK FSA is currently addressing the issue of Fine WIne Funds, but not the sale of individual cases. Maybe Britain’s legitimate companies might care to address the issue rather more forcibly than they have done up until now. It’s time for them to publicly admit that investing in wine is a very different business from buying it to drink. That acknowledgment may be hastened quite soon, I suspect, when the UK tax authorities take a long hard look at the money they are losing from its current ambiguous capitals gains tax status.
Next week sees the opening of a consultancy process regarding the creation of a Wine Investment Association – WIA – spearheaded by Peter Shakeshaft of Vin-X. Mr Shakeshaft proposes that companies offering wine investment should be monitored by an independent body and thus carry the equivalent of a seal of approval. Among the issues to be covered will be cold-calling and the accuracy of information provided to potential customers. Some support from established wine merchants has apparently been received, though it will be interesting to see whether firms like Berry Bros and Corney & Barrow choose to join. I wonder if any will be deterred by Mr Shakeshaft having been described as a “controversial financier” in the London Standard.
Mr Shakeshaft disagrees with me over my dislike of upfront payments and suggests that regulation of aspects like this would make it difficult for some wine investment companies to survive. (According to a Motley Fool post, he had similar feelings about FSA regulation of stockbrokers).
He does not seem to be a fan of Jim Budd. His view might be explained by some of the comments Budd has made on his site about him.